How Silicon Valley Is Looking to Benefit from the Cannabis Green Rush
November 27, 2020 (Investorideas.com Newswire) It is important to note that the hemp and marijuana industries are entirely separate from one another. While both come from the cannabis plant, they have disparate properties. The primary cannabinoid in hemp is cannabidiol. It is a non-intoxicating compound used to create products like CBD topicals.
The 2018 Farm Bill legalized the growth of industrial hemp that has a maximum THC content of 0.3%. This has paved the way for brands like Premium Jane to lead the field in bringing outstanding products to consumers. It is already a multi-billion-dollar industry and is set to thrive. At present, CBD isn't federally legal (barring a product called Epidiolex). However, brands have little trouble selling it across the United States and in dozens of other countries.
It is a very different story with marijuana. It remains a controlled substance. While it isn't federally legal, you can get it with a medical marijuana card only in 22 states. It is legal for recreational use amongst adults aged 21+ in another 11 states plus Washington, D.C., with caveats.
Consumers enjoy marijuana with a high THC content, and it is a more established market than its CBD counterpart. Small wonder then that 'Silicon Valley marijuana' is a phrase we have heard more about in recent times. We know that some of the world's best weed is grown in California.
The entrepreneurs in the famous Silicon Valley region have tried to muscle in on an industry set for enormous growth. It looked like a wise move in 2017, but things didn't quite go according to plan.
Silicon Valley Marijuana - Big Plans, Big Problems
Cannabis entrepreneurship and technology seemed like a match made in heaven. By 2017, the marijuana industry became a haven for venture capitalists. The profits began to reach astonishing proportions, and developers started earning major roles at marijuana start-ups. Already, the North American market was worth close to $7 billion per annum.
Respected financial journals believed that cannabis revenues were likely to quadruple by 2022. Once California began selling recreational cannabis in 2018, it seemed inevitable that Silicon Valley marijuana would earn prodigious profits. High-quality vaporizers such as the products sold by Pax Labs, and the Firefly range, provided users with an outstanding vaping experience.
It seemed that the most significant issue the industry would face was determining how to spend the money. Then the wheels fell off spectacularly in 2019 as cannabis stock prices plummeted. Issues such as high tax rates, problems with banking, and backlogs with licenses started the fall. Soon, investors lost confidence, and those who remained in too long bore the brunt.
One could say that Eaze was the first true Silicon Valley marijuana company. It was a pioneer in terms of raising big money in the Valley. Marketed as the 'Uber of pot,' Eaze raised an incredible $166 million in capital. However, by early 2020, it was on the ropes, having run out of cash.
Eaze managed to generate another $35 million in February 2020. It is going to use the money to move away from its original model.
Will the Marijuana Industry Repeat Silicon Valley Mistakes?
That Silicon Valley entrepreneurs are so interested in cannabis is understandable. Like the marijuana industry today, digital technology was also a new industry built quickly from the ground up 20 years ago. However, females who have managed to get into the cannabis industry insist that it is still engaging in many of the same exclusionary practices that the tech industry did.
One huge obstacle is the consistent bias seen in Venture Capitalists. As is the case with every other industry, VCs tend to ensure that money ends up in the hands of white or Asian men. There is also a potential issue for entrepreneurs with marijuana-related criminal records. Even if your jurisdiction doesn't prevent you from starting a weed business, a VC firm may not even look at your application.
Oakland has implemented an equity program for marijuana businesses. The goal is to reduce the existing criminal-justice barriers that impact cannabis market access. Applicants under this program can earn a maximum of 80% of Oakland's median average income. You must have lived in your neighborhood for at least 10 of the last 20 years. You can access the program as long as your cannabis conviction occurred in 1996 or later.
It remains to be seen what happens next in Silicon Valley marijuana land. It is the second-fastest-growing industry in the history of the United States. Only the internet grew faster! For those that get into the market, the potential rewards are incredible. The trouble is, prospective cannapreneurs need a considerable amount of start-up capital. Without it, you are highly unlikely to reach a position where you can benefit from the green rush.
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