Marijuana boom spawns ancillary businesses
Ben Wu took a six-figure pay cut when he left a career in private equity for a shot at the marijuana boom.
Trained to spot small businesses with big potential, he started this year as chief executive of Kush Bottles, a Santa Ana, Calif., company that sells child-resistant plastic cannabis containers.
It took some persuading to get his parents and girlfriend to embrace the move. But Wu insists it was a sound business decision. As the pot industry blossoms, he reasoned, a robust supply chain is needed to help grow, package and market legal marijuana.
“The sky's the limit,” said Wu, 35, a New York University business school graduate and former vice president of Wedbush Capital Partners. “As long as states continue to adopt, we're going to double growth each and every year.”
Container brands such as Kush Bottles are among a slew of ancillary companies joining what many are calling the green rush. Where there's weed, there's a growing need for everything from greenhouses and fertilizer to pipes and vaporizers.
“The annual revenue is easily in the hundreds of millions, and likely much more,” said Chris Walsh, editor of website Marijuana Business Daily.
Demand for pot-related products and services is expected to grow sharply as more states loosen marijuana laws. Twenty-one states and Washington allow the sale of some form of pot.
Entrepreneurs are attracted by the industry's open field, with few established players and many untapped markets. Some say the marijuana boom reminds them of the Gold Rush a century and a half ago.
“We're selling shovels in a gold rush, is all we're doing,” said Rich Nagle, a former electrical engineer who peddles an automated indoor marijuana growing system, designed to be managed remotely with a smartphone.
The federal government classifies marijuana as a Schedule 1 drug, on par with heroin and ecstasy. That means any enterprise that handles pot faces the threat of closure or prosecution, no matter what state laws say. Because it's a cash-only business, companies that sell pot are at higher risk of being robbed or burglarized: Most banks are prohibited from taking deposits from marijuana sellers.
“Any time you're literally touching marijuana, you're subject to a different set of laws,” said Justin Hartfield, founder of Weedmaps, a review website that is similar to Yelp but for pot dispensaries. “We don't touch the product itself, and that's how we're able to get a bank account.”
Hartfield's site is one of the most recognized brands to emerge out of the recent rise of legalized pot. Founded in 2007, shortly after Hartfield received his first medical marijuana card, Weedmaps grossed about $25 million in revenue last year.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Covestro leader MacCleary finds stability amid change
- Union leaders warn Post-Gazette newsroom of possible layoffs
- Mall stores required to open for Thanksgiving
- Black Friday loosens its hold on the holiday season
- Coke had hand in shaping nonprofit health group, emails show
- German financial giant Allianz SE slashes coal investments
- Feds upgrade GDP’s growth
- New rules proposed for high-speed traders
- Stocks shake off Middle East tensions, drop in consumer confidence
- Not all in support of UAW contracts
- Tax hit a surprise for some Mylan shareholders