Marijuana: An Entrepreneurial Dream?

First off, I can't believe I'm actually writing a remotely positive article about Marijuana, even if it is from a business standpoint. I've never tried it and I never will; I don't care what people say, burning something and inhaling the vapors can't be healthy. But I digress from the subject.

On November 6th, 2012, Colorado Amendment 64 was passed. This allowed for "the personal use and regulation of marijuana for adults 21 and over" in the fields of commercial cultivation, manufacture, and sale, effectively regulating cannabis in a manner similar to alcohol.

Naturally, opinion was divided...harshly. Specifically in terms of how it'd affect the economy, pundits clashed as to whether the loss of motivation (a side-effect of marijuana) would lead to a overall loss of productivity that would outweigh the tax income.

Two years in, that question still remains hazy. Colorado is expected to  bring in about 610 million dollars from the beginning of this year to the end of the next fiscal year (June 30th.) It turns out that demand was even greater than state officials expected. Lines were so long that dispensaries actually ran out
of weed. Demand is still rampant to this day. 

Moralistic issues aside, the growth of the cannabis industry has attracted many investors in addition to many enthusiasts to the state. Colorado is growing quite nicely; GDP since weed was legalized was 2.6% for 2013 - up from the 2.0% of 2012. This comes in spite of the fact that Colorado's Joint Budget Committee released a request to allocate $103.5 million towards the following causes: $45.5 million for the prevention of youth marijuana use; $40.4 million for treatment of substance use; $12.4 million for public health; $1.8 million for regulatory oversight; $3.2 million for law enforcement and public safety; and $200,000 for "statewide coordination."

Which brings me back to my main point: The weed industry will be a BIG source of income for anyone who realizes it's potential.

Aside from the already above impressive income numbers, the industry will appeal to investors because of basic supply and demand economics. After all, Colorado and Washington are still the only states to full legalize weed for "recreational use and distribution", so they are the only "supply" at the moment. Sure, theirs all sorts of backdoor outlets, but there are still a lot of consumers who don't want to risk breaking the law. In fact, the numbers seem to support this. According to Hopper, a flight pricing company, flight search demand for Denver has been 6.3% above the national average since December first of 2013. This time last year, the search demand for Denver was at/below the national average.

The craziest part about this entire thing is the ridiculous demand. For once, people who are buying the weed aren't complaining about taxes - they're just happy that they have a source of legal weed. As of now, pot sold legally in Colorado is subject to the state’s 2.9% sales tax, another 10% state tax on retail marijuana sales, and a final 15% excise tax on average market rate of wholesale marijuana. That's a lot of taxes - particularly when compared to the cost of just buying it illegally outright. But Colorado has reported an increasing tax revenue from pot coupled with a decreasing rate of arrests for illegal buying.  

From an investor standpoint, the options are limitless. As of now the industry is still young, which means early investors can leave an indelible mark - and fortune - through this as it grows. Already, penny stocks such as GreenGro Technologies and Advanced Cannabis Solutions have been popping up in the OTC markets. Pot conventions are being held to discuss investments. Heck, even investment firms have been started, specifically with the idea of connecting marijuana companies with investors. One such company, ArcView Group, is estimating the market for pot to grow to 2.34 billion dollars for the year. 

And anyone who figures out a way to join in the madness may just be rewarded.