Investors Are Funding Cannabis Startups

Economic Impact of Cannabis

The economic-themed article chosen for this paper is from Forbes, and it takes a position that would have been considered controversial, even outrageous, just a few years ago. The writer asserts that marijuana is considered the "best start-up opportunity" for entrepreneurs in 2015. This paper will present a review and critique of the article. At the end of the bibliography the link to the story is provided. Marijuana can become a huge boost to state's economies, and in time, according to the article, many states will benefit economically.

Why Legal Cannabis Is 2015's Best Startup Opportunity

Journalist Carol Tice, who covers entrepreneurship issues and startups for Forbes, explains that helping develop the legal marijuana industry is a smart way to launch a business in 2015. Twenty-three states now have legal marijuana for medical purposes, which means with a doctor's prescription (and a state ID in many cases) a person can legally purchase small amounts of pot. She doesn't go into what maladies medical marijuana is prescribed for, but she does explain that while buying marijuana is only legal in two states at the present time (Colorado and Washington State), two other states (Alaska and Oregon) will have legal marijuana for sale over the counter later in 2015. In fact Alaska's new law goes into effect later in the month of February, Tice notes.

"It's just a matter of time before more states get on the bandwagon," Tice explains, and that spread of legalization will "open up huge new markets," and startups that get launched this year will be fully ready to profit from this new demand that is on the horizon (Tice, 2015). She doesn't explain how a startup in a state where marijuana is illegal would be able to grow the cannabis in anticipation of being able to sell large quantities of various strengths in legalized states, but she obviously believes there is a huge market where is already legal, or about to be legal.

Because new industries aren't "spawned…very often," legal marijuana may be the "best ground-floor opportunity" since the days when the Internet was just being developed (Tice, p. 1). Last year, according to Factbook, about $1.6 billion to $1.9 billion was raised through legal medical marijuana sales; and an additional $600 to $700 million was sold for "legal, recreational use" in Colorado (Tice, p. 2). Over the next three years, the estimates show that the business of cannabis will reach $8 billion in revenue, Tice points out. That will be a huge boost to the economies in those states, and as to governmental benefits, the tax revenue from $8 billion in sales will be significant.

What does it cost to launch a startup marijuana business? Tice explains that a third of marijuana wholesalers spent "…less than $50,000" to get started; about 14% of startups spent between $50,000 and $100,000; 24% of startups spent between $100,000 and $500,000; and the other 29% of marijuana startups spent upwards of $500,000 (Tice, p. 3). Of those startups that Tice researched, 16% are "very profitable"; about 38% are "modestly profitable"; 28% are breaking even; 15% are seeing some financial losses; and just 3% say they are suffering "significant losses" (Tice, pl 3).