Entrepreneurs get ready to roll on the ‘cannibusiness’ Green Train
By Elizabeth Zwerling 02/13/2014
Bob Calkin, a charismatic yet mellow speaker, told the 25 entrepreneurs attending a recent daylong seminar in Burbank that their business action teams should include an accountant and a lawyer, as well as investors and a healthy membership base.
“You’re creating a nonprofit,” said the 50-year-old instructor and CEO of several nonprofit and for-profit businesses, his shoulder-length hair tucked neatly behind his ears.
“How do you earn money from a nonprofit? You pay yourself a salary.” Nonprofits can pay for-profit contractors handsomely for their services, Calkin reminded the group gathered in an elegant meeting room at the Universal City Hilton on a rainy Saturday.
The accountant is most important to navigate the nuance of this type of business and the complicated legislation governing it — legislation that can vary dramatically from city to city and state to state and is subject, particularly in California, to frequent change. The lawyer should be available to you if needed to fend off a legal challenge, Calkin told his audience.
Calkin said he’s had no legal problems in nearly 20 years of running his nonprofit Green Dot Medical Marijuana Delivery Service and Collective. “I stay under the radar,” he said.
“Those who are zoned correctly and conduct their businesses legally and don’t raise any eyebrows tend to stay open,” he said.
An exploding market
Investors are key, he told the group. Bank loans to start marijuana dispensaries, delivery services, co-ops and collectives are hard to come by.
Unique challenges of dealing in a product that is illegal federally and has a patchwork quilt of state and local laws governing its production and distribution aside, Calkin, who is also founder and CEO of the North Hollywood-based Cannabis Career Institute, was preaching to the converted.
“We need people to see the medical benefit of this,” said Casey Keith of Ventura, who learned late last year that medical cannabis reversed the blindness and paralysis brought on by her multiple sclerosis. She came to the Burbank seminar with the goal of opening a holistic health center that would offer a variety of strains of medical cannabis, in smoke-able, edible and topical forms, with education on the controversial herb’s many healing uses.
Other workshop participants, some who flew from as far as Texas with medical marijuana cards in hand, shared personal experiences of cannabis’ healing effects or details of their desire for financial independence via pot. Well-dressed, articulate, average age around 40, this group was far from any old-school stoner cliché.
“It was all an adjustment in my thinking,” said Keith, 39. “My partner was in law enforcement for 23 years. We’ve always been straight arrows.”
The enthusiasm in the seminar room — for the financial possibilities of cannabis — was palpable. Participants asked well-informed questions and raised individual business concerns, such as how can one really one really “run” a co-op where decisions are made by member vote, to which Calkin explained the notion of proxy votes. “Members can simply sign their votes over to you,” said Calkin, who crisscrosses the country taking the daylong workshops to elegant hotels from Washington to Rhode Island, states whose laws permit medical cannabis or are moving in that direction.
The Burbank students seemed to have a sense of their own great timing in boarding “the green train,” as financial analysts predict an explosion in the marijuana industry.
The Marijuana Business Daily, an industry trade publication, projects marijuana revenues nationwide will increase from $1.5 billion in 2013 to $6 billion in 2018. Other industry projections put legal revenues at $10.5 billion by 2018.
“That prediction is based on the trend of more states passing medical marijuana laws,” said Marijuana Business Daily editor Chris Walsh, who is based in Colorado, which on Jan. 1 became the first state to legalize marijuana for recreational use.
Today 20 states and Washington, DC, have medical marijuana laws, and effective this year Colorado and Washington state laws permit “adult use” or recreational marijuana. Last year, more than 50 percent of Americans said they support legalizing marijuana — for the first time in four decades of polling on the subject, according to a Pew Center for the People and the Press survey, which found 52 percent of Americans support legalization, compared with only 12 percent in 1969, and less than 25 percent in 1996, when California became the first state to legalize medical cannabis.
The change in attitude is based on the public’s increasing belief in marijuana’s relative safety, its potential medical benefits and concern about excessive criminal penalties to users, according to the Pew survey.
Just 38 percent of Americans believe marijuana use leads to the use of hard drugs, compared with 60 percent in 1977; 30 percent believe it can be useful for “a medical issue”; and 72 percent believe government efforts to enforce marijuana law cost more than they are worth, the Pew survey found.
“The industry is changing so rapidly,” Walsh said. “In the first couple of days in Colorado, dispensaries making the transition (from medical to recreational) did 10 to 15 times the daily business.” Walsh predicts that there will be more than 1,000 new marijuana industry jobs in 2014 in Colorado alone.
Currently California, the first state to legalize cannabis for medical purposes, leads the nation in legal marijuana revenue, with more than $900 million in estimated revenue for 2013 among the state’s roughly 2,000 “cannabusinesses,” or dispensaries, co-operatives, wellness clinics, and delivery services, according to the ArcView Market Research group, which tracks the changing legal marijuana market for entrepreneurs and investors. The group projects more than $1 billion in revenue statewide in 2014.
Yet marijuana entrepreneurs in the most populous state today face more uncertainty than those in states that only recently legalized medical cannabis, Walsh said.
The Wild West
In Pasadena, a 2005 amendment to city zoning codes prohibits medical marijuana dispensaries from operating within city limits, while surrounding cities — Los Angeles, Temple City, and several in the San Fernando Valley — have legal medical dispensaries. In Los Angeles, the state leader with roughly 800 dispensaries, voters last year approved ballot Measure D to reduce the number of pot shops, which caused the closure of roughly 80 dispensaries. Amid confusion over state and local law, however, some have since re-opened, Calkin said.
“California is a difficult market with different laws in each city and county – dozens have enacted bans and moratoriums,” Walsh said. “If you open a business in California, you have to be completely prepared for the possibility that you’ll go out of business. What needs to happen is that the state needs to pass regulations that go across the state that govern the California businesses. It’s still the Wild West [until] lawmakers do something,” Walsh said.
The state legislature is currently considering legislation that would create consistency across the state, including one proposal to legalize and regulate marijuana similar to alcohol. A similar ballot measure, “The Marijuana Control, Legalization and Revenue Act,” could go to California voters later this year.
“It’s always a few steps forward and a few steps back,” said Justin Hartfield, a Newport Beach-based venture capitalist and co-founder of Weedmaps.com, an online directory of marijuana dispensaries and services across the nation, which gets more than 4 million hits a month and last year generated more than $20 million.
Hartfield, 29, who also serves as treasurer of the National Association for Reforming Marijuana Laws (NORML) and on the board of the National Marijuana Policy Project, has his eye on 2016, when he believes California will follow Colorado and Washington in making marijuana legal for recreational use.
“We see a huge market opportunity, like with tobacco and alcohol. It’s one of the biggest market opportunities today,” he said, noting that six more states are considering some form of marijuana legalization this year. “The end of federal prohibition is coming.”
Hartfield is wasting no time. Though he concedes he does not want to mess with the current complicated and contradictory state and federal laws, in March of last year he became a managing partner of Emerald Ocean, the nation’s first venture capitalist company to focus on marijuana-related products.
“We will invest in ancillary businesses that don’t involve the marijuana ¬– just the paraphernalia (including) analytic labs for testing cannabis and gadgets like vaporizers and bongs. “We’re looking to raise around $10 million. We’re close. Once that dollar amount is pledged, then the fund can start making investments.”
Stoner guys rule
Calkin, a veteran of the marijuana industry from before it was legal in California, is positioning himself and his more than 2,000 CCI graduates for the expected industry explosion. Since opening CCI five years ago, his teaching team has expanded to include lawyers, accountants, a dietician, and edibles and grow consultants. Students’ $299 tuition buys them lifetime access to the class, where they can network and stay up-to-date on state and federal laws.
He may not always be at the helm of this growing career college. “I’m getting my ducks in a row to sell,” he said. “My companies are going to sell for millions of dollars. We already have billionaires coming around saying they’re interested.”
He said when he does sell CCI, he will likely stay on as an employee. Unless he’s too busy with his newest project, creating Cannabis State University, an online university and learning exchange, for which he is helping develop curriculum for accredited colleges and universities that want to include dispensary management in their curriculum.
“My role is to facilitate the information for the professors,” Calkin said. “Students will be able to earn a business degree with a minor in dispensary management. It’s being developed as we speak by professors that are actual real professors creating real curriculum. They need the information from us — the stoner guys. So it will be the stoners teaching the professors who teach the regular kids.”