By EILENE ZIMMERMAN<TIME class=dateline datetime="2014-08-06">AUG. 6, 2014</TIME>
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<!-- close shareTools --> When Garett Fortune’s brother was found to have cancer in early 2013, it was so advanced that all he could do was to try to live out the remainder of his life in as little pain and discomfort as possible. That meant taking about 30 pills a day, Mr. Fortune said — until his brother tried marijuana.
“I saw him go from 30 pills a day to almost zero,” he said. “It helped his appetite and the nausea. He had a way better quality of life at the end than he would have without the cannabis. It made me a proponent of the industry.”
It also gave Mr. Fortune the idea for a business. With more states legalizing marijuana for medical uses — and, in Colorado and Washington, recreational ones — Mr. Fortune identified one of the industry’s challenges: packaging. The old standby, the resealable plastic bag, was not sufficiently effective, especially for a regulated industry, and Mr. Fortune already owned OdorNo, a company that made odor-proof bags for human and animal waste.
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<FIGCAPTION class=caption itemprop="caption description">Garett Fortune said his FunkSac bags had attracted hundreds of thousands of orders from marijuana cultivators, dispensaries and wholesalers. Credit David Maxwell for The New York Times </FIGCAPTION></FIGURE>
In May he licensed out production and distribution of OdorNo, and he and his team began building FunkSac in Denver. Although FunkSac bags are awaiting government approval, Mr. Fortune said he had hundreds of thousands of orders from cultivators, dispensaries and wholesalers. The company plans to begin delivering them this month and estimates it will have first-year revenue of about $2 million.
Mr. Fortune said he had been contacted by dispensaries in 17 of the 22 states where medical marijuana was legal. “Right now,” he said, “it’s like drinking from a fire hose.”
To many, today’s cannabis industry resembles a modern-day Gold Rush. Troy Dayton, co-founder and chief executive of the ArcView Group in San Francisco, a network of 250 high-net-worth investors that backs cannabis start-ups, said more than 30 early-stage companies contact it every week. In the last year, he said, the group sent about $12 million in funding to 14 companies.
The size of the legal cannabis industry in the United States, measured by sales of the plant, was $1.5 billion in 2013, according to ArcView, which projects it will reach $2.6 billion in 2014 and $10 billion by 2018 — figures that do not include the growing numbers of ancillary businesses. The entire industry is dominated by small businesses, Mr. Dayton said, both because it is so new and because marijuana’s legality remains murky. Banks, for example, have been reluctant to take deposits or make loans to dispensaries because the drug is still illegal under federal law.
“You can’t have a national business,” Mr. Dayton said, because the laws vary by state. Opportunities for small businesses also exist because the stigma associated with the industry has discouraged bigger companies from getting involved. “You can’t find another industry growing at this clip that doesn’t have any major players,” he said. “That gives the little guy a chance to make a run at this.”
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That potential has spawned a wide array of cannabis start-ups — many incorporating novel technologies. Potbotics in New York City has raised almost $3 million from friends and family and has three cannabis-related products in the works, including a “virtual budtender” known as Potbot that it expects to be available for sale next year. A budtender is a dispensary worker who is knowledgeable about and sells marijuana; Potbot is a robot with a tablet-size monitor that is meant to replace the budtender.
The plan is to place Potbot robots in dispensaries and medical facilities where marijuana patients can ask questions and get information. “Dispensary budtenders almost always have an agenda — they are trying to sell what they have most in their stock,” said David Goldstein, a founder of the company, which was started in October. “We created a software and technology platform that is able to talk to patients and educate them about what strains are actually best for their ailments.”
<FIGURE role=group aria-label=media id=media-100000003041948 class="media photo embedded has-adjacency layout-small-horizontal media-100000003041948 ratio-tall" itemid="http://static01.nyt.com/images/2014/08/07/business/07sbiz-pic2/07sbiz-pic2-master315.jpg" itemtype="http://schema.org/ImageObject" itemscope="" itemprop="associatedMedia" data-media-action="modal">Photo
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<FIGCAPTION class=caption itemprop="caption description">The bags made by Mr. Fortune's company are designed to be odor-proof and child-resistant. Credit David Maxwell for The New York Times </FIGCAPTION></FIGURE>
A San Diego start-up, Herbalizer, makes a small, sleek vaporizer with a heating system that took three years and two engineers to develop. Its co-founder and chief executive, Josh Young, previously designed advanced NASA computer systems and military programs; Bob Pratt, a co-founder and the chief technology officer, was a designer of stealth bomber radar systems. And yet, Mr. Young said, the technology behind the Herbalizer “has been the greatest challenge of our lives.”
The vaporizer heats up in seconds and uses a 32-megahertz processor, a 300-watt halogen bulb and a temperature sensor to release active compounds in the plant selectively, without creating smoke. Ninety percent of Herbalizer’s customers use it for marijuana, Mr. Young said, although drug paraphernalia laws prevent the device from being marketed for that purpose (it is sold instead for use with herbs like peppermint and lavender). The company expects first-year revenue of more than $2 million.
Fund-raising has been tricky for Herbalizer and similar companies. Traditional investors remain leery, said Christian Groh, a partner and the chief operations officer at Privateer Holdings, a private equity firm in Seattle that invests in cannabis start-ups. “In the U.S., marijuana remains a Schedule I narcotic, so you still have this outlaw mentality within the community,” he said. “I know there’s a lot of exuberance now, but I don’t think we’re at the point where we’ll see real institutional money or a Fortune 500 company making a play in this space. Not yet.”
In 2011, Privateer bought Leafly, a Seattle start-up that provides consumer ratings and reviews of marijuana strains, dispensaries and recreational shops. Most dispensaries carry 20 to 50 strains, Mr. Groh said, and the lack of standardization and consistency is a big issue. Leafly has about 80,000 reviews in its system.
“That information has to come from the community right now, because there is no WebMD for marijuana,” said Cy Scott, one of Leafly’s founders. The company also offers tools for dispensaries that let them manage inventory, update menus online and respond to reviews. Dispensaries and recreational shops pay a monthly subscription fee of $200 to $2,000 a month, said Mr. Scott, who expects revenue this year of $3.6 million.
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SpeedWeed, a Los Angeles delivery service, allows customers to place an order online or by phone and have it delivered — depending on traffic — within 45 minutes. Although there are hundreds of marijuana delivery services in Los Angeles, AJ Gentile, a founder, said SpeedWeed was the largest. “Delivery services here are typically guys driving around in their car with a big box of weed,” he said.
Mr. Gentile said that SpeedWeed worked only with cultivators its legal team had vetted and that along with its delivery service, it planned to sell proprietary software to dispensaries nationwide. He estimated that the company had 20,000 legal customers and that revenue would double this year, up from $1.7 million in 2013.
Biological Advantage, founded in April, has a system of products it plans to introduce this month that are applied to a marijuana plant’s soil and leaves to enhance photosynthesis. The company’s chief executive, John Kempf, is also founder of Advancing Eco Agriculture, a crop-nutrition consulting company he started that has invested $400,000 in Biological Advantage.
Mr. Kempf said his companies were a bit ahead of the game, anticipating what the market would need. “Growers aren’t yet looking at nutrition as a means for improving the medicinal concentrations in plants,” he said. “But they will.”
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<!-- close shareTools --> When Garett Fortune’s brother was found to have cancer in early 2013, it was so advanced that all he could do was to try to live out the remainder of his life in as little pain and discomfort as possible. That meant taking about 30 pills a day, Mr. Fortune said — until his brother tried marijuana.
“I saw him go from 30 pills a day to almost zero,” he said. “It helped his appetite and the nausea. He had a way better quality of life at the end than he would have without the cannabis. It made me a proponent of the industry.”
It also gave Mr. Fortune the idea for a business. With more states legalizing marijuana for medical uses — and, in Colorado and Washington, recreational ones — Mr. Fortune identified one of the industry’s challenges: packaging. The old standby, the resealable plastic bag, was not sufficiently effective, especially for a regulated industry, and Mr. Fortune already owned OdorNo, a company that made odor-proof bags for human and animal waste.
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- <ARTICLE class="story theme-summary"> You’re the Boss Blog: A Co-Working Space for Cannabis Start-Ups<TIME class=dateline datetime="2014-08-06">AUG. 6, 2014</TIME>
</ARTICLE>
<FIGURE role=group aria-label=media id=media-100000003041945 class="media photo embedded has-adjacency has-lede-adjacency layout-small-vertical media-100000003041945" itemid="http://static01.nyt.com/images/2014/08/07/business/07sbiz-pic1/07sbiz-pic1-master180.jpg" itemtype="http://schema.org/ImageObject" itemscope="" itemprop="associatedMedia" data-media-action="modal">Photo
<META content=258 itemprop="height"> <META content=180 itemprop="width">
<FIGCAPTION class=caption itemprop="caption description">Garett Fortune said his FunkSac bags had attracted hundreds of thousands of orders from marijuana cultivators, dispensaries and wholesalers. Credit David Maxwell for The New York Times </FIGCAPTION></FIGURE>
In May he licensed out production and distribution of OdorNo, and he and his team began building FunkSac in Denver. Although FunkSac bags are awaiting government approval, Mr. Fortune said he had hundreds of thousands of orders from cultivators, dispensaries and wholesalers. The company plans to begin delivering them this month and estimates it will have first-year revenue of about $2 million.
Mr. Fortune said he had been contacted by dispensaries in 17 of the 22 states where medical marijuana was legal. “Right now,” he said, “it’s like drinking from a fire hose.”
To many, today’s cannabis industry resembles a modern-day Gold Rush. Troy Dayton, co-founder and chief executive of the ArcView Group in San Francisco, a network of 250 high-net-worth investors that backs cannabis start-ups, said more than 30 early-stage companies contact it every week. In the last year, he said, the group sent about $12 million in funding to 14 companies.
The size of the legal cannabis industry in the United States, measured by sales of the plant, was $1.5 billion in 2013, according to ArcView, which projects it will reach $2.6 billion in 2014 and $10 billion by 2018 — figures that do not include the growing numbers of ancillary businesses. The entire industry is dominated by small businesses, Mr. Dayton said, both because it is so new and because marijuana’s legality remains murky. Banks, for example, have been reluctant to take deposits or make loans to dispensaries because the drug is still illegal under federal law.
“You can’t have a national business,” Mr. Dayton said, because the laws vary by state. Opportunities for small businesses also exist because the stigma associated with the industry has discouraged bigger companies from getting involved. “You can’t find another industry growing at this clip that doesn’t have any major players,” he said. “That gives the little guy a chance to make a run at this.”
Continue reading the main story
That potential has spawned a wide array of cannabis start-ups — many incorporating novel technologies. Potbotics in New York City has raised almost $3 million from friends and family and has three cannabis-related products in the works, including a “virtual budtender” known as Potbot that it expects to be available for sale next year. A budtender is a dispensary worker who is knowledgeable about and sells marijuana; Potbot is a robot with a tablet-size monitor that is meant to replace the budtender.
The plan is to place Potbot robots in dispensaries and medical facilities where marijuana patients can ask questions and get information. “Dispensary budtenders almost always have an agenda — they are trying to sell what they have most in their stock,” said David Goldstein, a founder of the company, which was started in October. “We created a software and technology platform that is able to talk to patients and educate them about what strains are actually best for their ailments.”
<FIGURE role=group aria-label=media id=media-100000003041948 class="media photo embedded has-adjacency layout-small-horizontal media-100000003041948 ratio-tall" itemid="http://static01.nyt.com/images/2014/08/07/business/07sbiz-pic2/07sbiz-pic2-master315.jpg" itemtype="http://schema.org/ImageObject" itemscope="" itemprop="associatedMedia" data-media-action="modal">Photo
<META content=212 itemprop="height"> <META content=315 itemprop="width">
<FIGCAPTION class=caption itemprop="caption description">The bags made by Mr. Fortune's company are designed to be odor-proof and child-resistant. Credit David Maxwell for The New York Times </FIGCAPTION></FIGURE>
A San Diego start-up, Herbalizer, makes a small, sleek vaporizer with a heating system that took three years and two engineers to develop. Its co-founder and chief executive, Josh Young, previously designed advanced NASA computer systems and military programs; Bob Pratt, a co-founder and the chief technology officer, was a designer of stealth bomber radar systems. And yet, Mr. Young said, the technology behind the Herbalizer “has been the greatest challenge of our lives.”
The vaporizer heats up in seconds and uses a 32-megahertz processor, a 300-watt halogen bulb and a temperature sensor to release active compounds in the plant selectively, without creating smoke. Ninety percent of Herbalizer’s customers use it for marijuana, Mr. Young said, although drug paraphernalia laws prevent the device from being marketed for that purpose (it is sold instead for use with herbs like peppermint and lavender). The company expects first-year revenue of more than $2 million.
Fund-raising has been tricky for Herbalizer and similar companies. Traditional investors remain leery, said Christian Groh, a partner and the chief operations officer at Privateer Holdings, a private equity firm in Seattle that invests in cannabis start-ups. “In the U.S., marijuana remains a Schedule I narcotic, so you still have this outlaw mentality within the community,” he said. “I know there’s a lot of exuberance now, but I don’t think we’re at the point where we’ll see real institutional money or a Fortune 500 company making a play in this space. Not yet.”
In 2011, Privateer bought Leafly, a Seattle start-up that provides consumer ratings and reviews of marijuana strains, dispensaries and recreational shops. Most dispensaries carry 20 to 50 strains, Mr. Groh said, and the lack of standardization and consistency is a big issue. Leafly has about 80,000 reviews in its system.
“That information has to come from the community right now, because there is no WebMD for marijuana,” said Cy Scott, one of Leafly’s founders. The company also offers tools for dispensaries that let them manage inventory, update menus online and respond to reviews. Dispensaries and recreational shops pay a monthly subscription fee of $200 to $2,000 a month, said Mr. Scott, who expects revenue this year of $3.6 million.
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SpeedWeed, a Los Angeles delivery service, allows customers to place an order online or by phone and have it delivered — depending on traffic — within 45 minutes. Although there are hundreds of marijuana delivery services in Los Angeles, AJ Gentile, a founder, said SpeedWeed was the largest. “Delivery services here are typically guys driving around in their car with a big box of weed,” he said.
Mr. Gentile said that SpeedWeed worked only with cultivators its legal team had vetted and that along with its delivery service, it planned to sell proprietary software to dispensaries nationwide. He estimated that the company had 20,000 legal customers and that revenue would double this year, up from $1.7 million in 2013.
Biological Advantage, founded in April, has a system of products it plans to introduce this month that are applied to a marijuana plant’s soil and leaves to enhance photosynthesis. The company’s chief executive, John Kempf, is also founder of Advancing Eco Agriculture, a crop-nutrition consulting company he started that has invested $400,000 in Biological Advantage.
Mr. Kempf said his companies were a bit ahead of the game, anticipating what the market would need. “Growers aren’t yet looking at nutrition as a means for improving the medicinal concentrations in plants,” he said. “But they will.”
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<ARTICLE> A Co-Working Space for Cannabis Start-Ups
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