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Smoke Signals 11/18-11/25 

Marijuana's gold rush moment

Entrepreneurs, investors, and big businesses are starting to ask, is cannabis the next internet? The question, of course, has little to do with the internet. The essence of the question is this: Can we make a tremendous amount of money selling cannabis to people?

And the answer seems to be a resounding "Yes." Troy Dayton, the chief executive of ArcView, a cannabis business investment group, calls the cannabis industry the "fastest-growing new industry around." ArcView estimates that the legal cannabis industry generated $2.4 billion in sales in 2014, which is a 74 percent increase from 2013. Dayton estimates that the industry will continue to grow by double-digit percentage points until at least 2020.

Right now, the focus of big-money investors is California. The Golden State has the largest economy of any U.S. state, with a GDP equivalent of about $1.9 trillion, per capita income of nearly $39,000, and a 2014 growth rate of 2.8 percent. To say California is a big economy is truly an understatement. California has an economic output comparable to that of major international economies such as Canada, Australia, and India.When—it no longer seems like an if—California legalizes recreational cannabis, the legal market will more than double in size.

"This is already the fastest-growing industry in America, and when these new markets come on line, the impact will be huge," says Dayton. Big money, much of it from Silicon Valley, has already begun to flow into cannabis businesses.

And that is at least partly why the cannabis gold rush actually is a little bit like the internet. Big-money cannabis investors aren't just seeing dollar signs, they are also seeing a new type of consumer experience. Just as the internet changed the way we create and consume media, many cannabis entrepreneurs and emerging cannabis businesses are seeking to change the way we buy and enjoy cannabis.

The perception that cannabis is a niche product for a particular demographic—"stoners" (with all the attendant negative stereotypes)—is changing. "What we see is moms, dads, professionals, old people, everyone wanting access to cannabis," says Mark Hadfield, founder of a techy California cannabis company called HelloMD.

One of the best, and certainly the biggest, examples of this new cannabis business is Privateer Holdings. Privateer is based in Seattle and owns several cannabis businesses. Earlier this year, Privateer received a multimillion-dollar investment from Founder's Fund, a venture capital firm co-founded by the prolific billionaire investor Peter Thiel. Privateer has now raised nearly $100 million in capital to fund its future plans.

Brendan Kennedy, chief executive of Privateer, explains that many existing cannabis brands "tended to embrace the clichés of the industry." But Privateer "quickly realized that this is no longer, and hasn't been for years, a countercultural product." And that realization gives Privateer its goal: To be the "Coca-Cola" of cannabis.

Given its current wealth and holdings, and its access to capital, that goal seems to be within reach for Privateer. And with so much competition in the industry, from billionaires to Bend's mom-and-pop businesses, it seems that Americans are in for a transformational change in the way we enjoy our cannabis.


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