Wednesday, October 20, 2021

Potpreneurs! Here Is How To Setup A Marijuana Business In U.S.

Recently, New York became the 15th state in the U.S.A to give a formal order in favor of legalized possession of marijuana for recreational use. Anyone above the age of 21 has now the statutory right to consume up to three ounces of the “drug”. New York’s Governor Andrew Cuomo penned down the Marijuana Taxation and Regulation Act into the law a few days after the legislature’s approval. 

Other states where cannabis is already legalized are- Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington.

This will subsequently lead to the opening up of significant avenues in the commercialization of marijuana and many “Marijuana startups” are likely to emerge as a result. However, cannabis regulation can be a very complicated space. Knowing and understanding the industry is vital to building a successful Marijuana startup if you plan to open a dispensary or obtain a cultivation license or even run an ancillary business.

Already questions like ‘how to start my own cannabis business’ are popping up everywhere. And therefore, we have created an elaborated guide on becoming a potpreneur.

ALSO READ: Everything you need to know about investing in marijuana stocks

What impact will marijuana legalization have?

Once the industry is in its full flight, it is expected to realize tax revenue up to more than $350 million annually for the state of New York itself. The division of this tax revenue will further be channeled into social equity funds, schools, and drug literacy and treatment. With a tax rate of 14% on the sale of Marijuana, 9% is expected to go to the state while 4% to the town, the remaining to the country.

The legal Marijuana market is also expected to grow to $40 billion by the end of the year, a significant increase from the figures in 2017. However, this transition from the black market into the mainstream one is likely to be stunted. After all, building an industry out of a formerly illegal marketplace takes a lot of groundwork.

Nevertheless, the industry has managed to attract many entrepreneurs. And after the recent news about the legalization of marijuana in New York, there is a wave of euphoria among the investors and businessmen who also happen to be aficionados.

Emergence of a new market– Potpreneurs

Investors have also taken a significant interest of late in the cannabis industry. Peter Thiel, the co-founder of PayPal, was one of the first institutional investors to channel funds into the legal marijuana market. Besides, numerous venture funding institutions have turned to Marijuana startups and entrepreneurs, rapidly becoming known as “potpreneurs”. 

Leafly is a Marijuana startup that allows users to review and accordingly rate the different kinds of specialized cannabis strains. It started out in 2010 and has gone onto receive large investments from multiple sources, Privateer Holdings being one of the major investors. Weedmaps is another app that lets users locate medical marijuana dispensaries.

Many private equity and venture capital firms have suggested that upliftment of federal prohibition on the drug will lead to immense growth prospects. In that collective breath, these firms have intently channeled their resources into the industry making certain prelim investments. 

How to start your own cannabis business?

The cannabis market, as suggested earlier, can prove to be quite a tricky field for both investors and entrepreneurs. Licenses and permits play a huge role in the success of an early-stage business. Further, a new startup must keep its operations in line with the outlined policies and framework provided by the state.

Yet another constraint is banking. Many institutions are skeptical to lend funds to cannabis-related startups as it serves as a possible risk to them. 

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Once established, however, startups can progress in the same direction as modern-day companies. As mentioned earlier, many venture capitalists are sprightly jumping on the Marijuana startup bandwagon and can be a reliable source for the expansion of the business. According to experts, speculation in Marijuana ancillary businesses has gained maximum traction and many homegrown startups have managed to flourish as a result.

Setting up an ancillary business with a decent USP will not just prove to be a breakthrough in the market but will also attract major players in the private equity and venture capital space. As profits increase, these startups can expect to create and broaden the horizons of the nascent marijuana market. 

These Are Your Avenues To Fund Marijuana Startups

There is no dearth of investors and funding to start a marijuana business in the U.S. After the legalization, the covert Mary Jane aficionados are emerging in public, ready to invest a big amount in the new industry. If your idea of starting a cannabis business always came down to how will you fund it, it shouldn’t be really big a problem.

The highlight of this list is none other than Calvin Broadus, famously know as Snoop Dogg. The rapper is now the director of Casa Verde Capital which a venture capital fund that provides funding for cannabis startups.

Other emerging and leading funding platforms for entrepreneurs looking for resources to fund their cannabis business are Diamond Business Loans, GoKapital, Casa Verde, Small Business Funding, GUD Capital, etc.

Siddharth Kulkarni
Siddharth is an incoming FMV Analyst and B.Com Hons graduate from Delhi University. Siddharth holds several positions of authority at a college level at various societies namely The Young Entrepreneurs Society and The Hult Prize. He is an enterprising youngster who is passionate about learning and growing as a person with each successive day. He is a hardworking and self-confident individual who possesses zeal and grit and loves to work with details. Being a sportsperson as well as an academic achiever, he love to surround himself with healthy competition.






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