Why green is the new gold in California?

FEBRUARY 7, 2017 - On November 8th of 2016, when Prop 64 passed -- legalizing recreational marijuana, I thought this was primarily a victory for people who smoke weed. I realized it was also good news for people who sell weed, and for people who would see their weed convictions overturned.

After spending the past couple of months asking questions, I realized the Adult Use of Marijuana Act could even potentially transform the economy of California.

Ngaio Bealum, a comedian and cannabis connoisseur who writes about weed reminded me, “...there’s packaging, there’s marketing, there’s websites, there’s apps, there’s delivery services, there’s this, there’s that, there’s security, there’s accounting. There’s all these different things that go around.”

To try understand where this movement is headed, I spent weeks knocking on dispensary doors, convincing growers to speak on camera, calling different law enforcement agencies and lobbyists and asking just about anyone who had something to say about weed. I'm still struggling with growers' lack of trust and overall skepticism.

Mrs. Jeanne M. Sullivan, a venture capital investor I met at the Arcview conference in LA, said we’re at the first inning. But the business, “is not for everyone, you do have to have a real desire to play a game that could bring upside.” She said that tech and weed have a lot in common due to all the unknown, the chaos but also the potential for success in investment.

Just like in tech, you have to come in with a good idea, get in early, and be nimble. “We bootstrapped everything. It’s like, if we don’t get it up and running now then we miss the boat,” said Nina Parks, co-founder of Mirage.

I met Nina in San Francisco, where her company is headquartered. Mirage is a delivery service that was born from a weed runner dream. Malcolm, Nina’s brother, got caught transporting weed in Texas and New York. Nina and Malcolm’s best friend and associate Rich took over the business. Malcolm is back, but he’s concerned that big money will drown out the small growers and sellers who built the industry in the state.

The three drew parallels between the gentrification they saw growing up in the city and what’s happening in the weed world.

Malcolm says, “everybody who built this pie, meaning everybody up north that ever got raided and asked to register their plants and then they came and cut them down anyway; anyone that they kicked down their doors, stuck an M16 in their child’s face, you know what I mean? Or their grandma’s face. There’s no justice for them. And if they got arrested and they got a felony, and they’re like me, the state has reserved the right to deny them access to this business. That’s reality. It’s hostile.”

Mirage has scaled its business through tech. In particular, using Meadow, which powers dispensaries and delivery services, connecting them with patients and soon recreational users. Meadow was one of the first cannabis startups to receive venture capital funding through Y Combinator.

For David Hua, Meadow’s co-founder, “the first challenge was getting over the stigma of, ‘Hey, I want to get into the cannabis industry’ and my friends are going to be ok with it and my family is going to be ok with it.”

That stigma, may not last too long in this booming business. That became clear to me when I attended an Arcview Group conference in Los Angeles. It felt like an early Techcrunch for weed.  

There was a Shark Tank style pitch forum, product displays and non-stop networking. One of those shark investors who is also a cannabis entrepreneur, Daniel Yazbeck said, “When looking at companies to invest in, obviously it’s management team because they have to be able to recover under extreme scenarios which you don’t expect to happen.”

That venture capital approach and the ambition of the new industry players have created animosity among the old establishment in the state, according to Philip Northcutt a consultant for growers and real estate brokers who specializes in land for growing weed. He said, “the growers are going to have to adapt. I think one way to adapt is to partner with those people and say, ‘I’m a grower, and I have knowledge about this. You have money and business experience, let’s start a company.’”

He added, “It’s not a question, like in the old days, of ‘Could you get away with it?.' The question’s going to be in the future, ‘Who are you going to sell it to if nobody will buy it from you?’”

There are still more questions than answers when it comes to how this industry will unravel once recreational weed starts getting sold next year, but at this point, it’s clear that the industry is serious and it’s here to stay.