The legal marijuana industry is already the fastest growing industry in the United States. The revenue projections from both the growing and selling of cannabis, and from the ancillary industry, are truly staggering, and even conservative projections predict that the legal marijuana industry will be valued in the tens of billions of dollars within the next five years.
The truth, however, is that this industry’s potential, even when compared to some of the great industry explosions in history, is undervalued. Although the “gold rush” and “oil boom” are commonly referenced as comparative markets, none of those industries currently match the immediate growth potential of the legal marijuana market. Given the convergence of medical marijuana, recreational marijuana, and technology we haven’t scratched the surface of how large this “green boom” is going to be.
Consider these facts.
One: Legal cannabis is headed in two different directions, each with the potential to be multi-billion dollar industries. Comparisons to alcohol after Prohibition forget that, unlike alcohol, marijuana has very real application in medicine. Pharmaceutical companies are already preparing for the inevitable consolidation that will take place once the federal prohibition on marijuana is lifted. The amount of money that will be made from the medical side of cannabis – research and development of new strains and treatments, new delivery mechanisms, extractions of certain components – might very well dwarf the amount of money made from the regulated adult use market.
And adult use will be a massive market. In 2014 legal marijuana sales in Colorado doubled in the first year of expansion from medical-only to full adult use. It is possible, if not likely, that marijuana will be fully legalized throughout the entire west coast by the end of 2016. California and Nevada are almost certainly passing such bills in 2016, with states like Arizona, New Mexico, and Montana considering laws as well. On the east coast, Vermont, Rhode Island, and Maine will have full legalization bills on the books in the next two years with much of the rest of the northeast corridor following suit soon after.
Two: The federal prohibition on marijuana is ending much quicker than even the most ardent supporters anticipated. Rand Paul, who yesterday announced his candidacy for President of the United States, is the sponsor of a bill to legalize medical marijuana. This makes the legalization of cannabis a legitimate election issue, and not one that a viable candidate can readily oppose. Not when swing states like Ohio, Pennsylvania, and Florida are set to pass comprehensive cannabis laws, and a recent Quinnipiac poll in these states showed over 75% support for medical marijuana. Several other swing states – Colorado, Nevada, Washington – already have recreational or medical laws on the books, and even Ted Cruz and Jeb Bush have both stated that they would not interfere with state marijuana programs.
Three: Underlying both the recreational and medical marijuana markets is the fast-growing ancillary and technology market. This market (often referred to as the “pick and shovel” market) is growing just as quickly as marijuana itself. As state laws are passed and prohibition is lifted, new startups are working quickly to fill the vast infrastructure gap left by marijuana’s former illegal status. These firms are offering cutting edge solutions in a landscape with no entrenched leaders, and together these they could develop into yet another billion-dollar industry.
The legal marijuana market grew by an astounding 74% in 2014, and with legal expansion on the way in many parts of the country that growth is likely to continue. We are receiving funding requests from every imaginable sector – cultivation centers and dispensaries, research labs, pharmaceutical companies, software developers, and the like – as entrepreneurs pair with established business professionals to capitalize on the astonishing opportunity the legal marijuana market presents. In the industry we like to talk about the boom of recent years as a “green rush” but the coming months will show that we haven’t seen anything yet.