Dichotomy In the Industry
Who wants to own a cannabis company? Who owns many of the existing cannabis companies? Who are the people investing in new canna ventures? Is it wiser to invest in an existing brand or create your own from scratch? The answers to these questions may not be as obvious as many would assume. The first question is simple…. Everyone wants to own a cannabis company. The other answers would surprise many people.
Most associate cannabis companies with the typical stereotypes. They expect guys like Willie Nelson or Bob Marley to be the CEO. These assumptions are so far from the truth it’s scary. The average canna investor seemingly own suits valued more than some cars. They are high net worth, serial entrepreneurs that see not only the potential, but also the rewards associated with the cannabis industry. Many of these investors do not even use the products regularly, however, they see the green! We are in the midst of a modern day green rush. Many other states have successfully opened and operated recreational cannabis markets, which the industry is grateful for these early pioneers. California alone is projected to double the size of the national cannabis industry. We have seen multiple industry projections however most range from $5 billion to $7 billion annually.
Our home base, Los Angeles California, has allowed HDD to have a unique perspective on the ever-growing industry. We see many different types of canna investors and owners. There are many mom and pop businesses that have built impressive brands in the “grey” medical market. Similar to the tech industry many of these companies started in a garage, home kitchen or small warehouse. As the legalization of the adult use market approaches, the challenge they are facing is securing a location or space that is properly zoned for their type of business. Even for the businesses renting, finding a property owner to consent to the industry is a challenge. Many of these small businesses do not have the immediate cash flow to keep up with ever rising rent in a very aggressive real estate market.
The other end of the spectrum is the new canna owner or investor. Many have the funds to secure the property but do not know where to begin regarding the local or state licensing process. Any “cannabis business without a physical property and local licensing is not going to be a cannabis business for much longer if they do not change their ways. Securing a property and then meeting all local building codes and requirements are the first steps to consider before the local jurisdiction will even entertain a cannabis business application. The state licensing process is continuing to unroll and evolve as well. It will undoubtedly take time and effort from the state and industry as a whole, but inevitably the licensing process will strengthen and prevail as the governing process over ALL cannabis business. Many of the start up businesses will be waiting months to legally distribute product into the largest cannabis market in the United States.
Now that we understand some of these very important but many times overlooked details, the question remains. Is it better to find and invest in an existing cannabis brand or to start from scratch? Every situation is unique and requires an in-depth analysis to make the best business decision. We at High Demand Development help our clients understand the ever-changing regulations and market to ensure they make the best decision possible.