So You Want To Start A Cannabis Company

So You Want To Start A Cannabis Company

Operations | Posted by YouInc.com - April 19, 2019 at 12:30 am
516
SHARE

The cannabis industry is one of the most explosive industries in the world right now. A report by New Frontier Data predicts that by 2020 there will be more new cannabis jobs than manufacturing jobs, and everyone wants in: investors, retailers, growers and more. So where does a budding cannabis entrepreneur get started, and what do you need to know before you do?

KNOW YOUR LAWS

The most important thing to consider right off the bat is where you’re setting up shop because cannabis is still federally illegal in 33 states in the United States.  Even in those states where it’s legal, there are restrictions on what sort of business you can operate and what your risks of prosecution are if you stretch the gray areas. 

While it’s federally legal in Canada, individual provinces in Canada can opt out of some forms of cannabis sales, such as cannabis stores (dispensaries).

Marc Ross, JD, Founding Partner of the law firm Sichenzia, Ross, Ference in New York City, and an adjunct law professor on the business and law of marijuana at Hofstra University School of Law, points out that there used to be protections for recreational and medical marijuana sales under something known as the Cole Memorandum, through the Department of Justice. 

“Historically this provided that federal prosecutory offices would not go after you if you complied with the eight points of the memorandum.” 

However, former U.S. Attorney General Jeff Sessions rescinded that memorandum in January of 2018. So now, Ross says, “There is no direct policy protection for those in the recreational space.”

CONSIDER YOUR FUNDING

Additionally, in the U.S., if you are up front about opening a cannabis business, “You probably won’t get a bank account,” says Ross.

“Many public companies, as part of risk disclosures, articulate they have been kicked out of banks [for engaging in cannabis businesses],” Ross says.

Other entrepreneurs will open multiple accounts within a single institution as a back-up in case they lose access to one.

This does, however, lead to multiple investment opportunities for people who want to get into cannabis through that route. 

PICK YOUR NICHE

If you understand the legal implications wherever you’re setting up business, and you’re still all in, then it’s important not to try and get your hands in too many pots, so to speak, says Ryan Kocot, Chief Compliance Officer and in-house legal counsel at Ikänik Farms, a vertically integrated cannabis company in Sacramento, Calif. 

“People think [cannabis is] a way to make a quick buck, but it’s much more important that you actually leverage a skill that you already have,” Kocot says.

Shira Kalfa, founder and partner of Kalfa Law in Toronto, Ontario, finds that people’s passions tend to drive them organically toward one area of cannabis or another. “There’s the grow side of it, the investment side of it, the research and development side, and then there’s the retail side of it.”

In Canada, she explains, you can get a cultivation license for a hefty price that can run into the millions, or a smaller, slightly less expensive, “microcultivation” license to grow cannabis, though you cannot do the same in the U.S. as of yet.

There’s a lot of growth opportunity for cannabis stores in Canada, as well, she says. However, you cannot legally sell cannabis edibles in cannabis stores until October, 2019. Even after edibles become legal, she says they will be under strict regulations that includes prohibitions on making them look like candy, an often-popular selling point.

In the U.S., Kocot says the best route is to “Pick a niche, don’t become a master of none and spread yourself too thin.” Once you’ve gotten some mastery in that niche, and revenue is flowing, then you can expand.

One area Kocot sees as a great entry point is marketing and branding of cannabis companies, particularly as the industry becomes saturated. “There’s an opportunity for media companies to come in and help cannabis companies get away from just selling and build a brand that has goodwill and social equity with people.”

Additionally, now that the Farm Bill of 2018 legalized hemp, and thus hemp-derived cannabidiol, or CBD, the non-psychoactive agent touted for its numerous alleged healing properties, there will be even more immediate opportunities that don’t come with the legal hassles of cannabis.

Ross believes that the industry is past the tipping point in the U.S., as more states legalize medical and recreational cannabis. “It’s a vibrant industry,” Ross says. For every problem or hurdle the industry faces, he says, “There are many people overcoming them. There hasn’t been a billion-dollar industry like this in a long time.”

Tags: business, business advice, entrepreneur, health and wellness, law, marketing, business law, cannabis, cbd oil, marijuana

Jordan Rosenfeld

Jordan is a freelance writer and author of eight books--six writing guides and two novels--most recently: How to Write a Page Turner (Writer's Digest Books). Her articles and essays have appeared in such publications as The Atlantic, Daily Worth, The New York Times, Quartz, Scientific American, The Washington Post and many more. Follow her: @JordanRosenfeld on twitter, or visit: JordanRosenfeld.net.

Comments
Featured Members
Randy A Eckert
Saferway Driver Training School…
Sarah Goodman
VitalSines
See All   ► Recent Activity Recent Activity
Okas commented on the story "Reinvesting Profits Into Your Business"
Robert William joined YouInc
Harry Miller joined YouInc
Constantine Harper joined YouInc
Okas joined YouInc
Romy Chhikara joined YouInc