Team up a former investment banker, pharmacy guru, and ex-Marine and the possibilities are near endless. In this case, they are also unpredictable.
Canopy Boulder is the United States’ first accelerator for early stage ventures in the legal cannabis industry. Where many Americans see controversy, Patrick Rea, Micah Tapman, and Mark Nottoli see a budding legit industry.
Although still illegal on a federal level, four states and Washington D.C. have legalized recreational marijuana use. Meanwhile, 19 additional states have legalized medicinal marijuana. In the U.S. the legal cannabis industry generated $2.4 billion in sales in 2014. If federal sanctions are lifted, Rea says, the medical and recreational marijuana business could become a $37 billion industry. Last year, Colorado dispensaries alone sold nearly $700 million in recreational and medical marijuana. According to the ArcView Group (PDF), it is the fastest-growing industry in the United States.
Founded in September 2014, Canopy Boulder sifted through 115 applications to choose 10 potrepreneurs to participate in its inaugural 13-week accelerator program, which started in late-March. The second and final round of potrepreneurs to go through the program in 2015 began earlier in the fall.
The legal marijuana industry currently exists in two broad categories: companies that “touch the plants” and “ancillary businesses,” which do not grow, test, process, or retail the plant. Canopy only works with the ancillary side, which by nature is a lot less risky.
“A lot of really interesting bongs and pipes and things like that came across our desks,” Rea told Fast Company. “You really have to have some truly unique evolution of that product to be competitive.”
Canopy uses an accelerator model akin to Techstars and Y Combinator. Participating companies receive $20,000 in seed capital and access to industry mentors while meeting hard incubation deadlines. In exchange, Canopy gets a 9.5% stake in each company.
Although the market potential is there, some caveats leave some entrepreneurs and investors hesitant. Banks and investors are queasy about getting involved with any marijuana ventures for fear of Federal attention. Changing administrations mean changing attitudes toward enforcement. The industry also has an image issue. Consequently, Canopy sets out to advise companies to think and talk like investors, requiring budget sheets, thoughtful industry research, and an established business plan.
Canopy also strives to prepare interested investors, serving as a go-between for startups and intrigued investors. Finally, with such a fledgling industry, there are a lot of unknowns surrounding what each company is actually worth. Canopy sets out to help with realistic and accurate valuations of marijuana companies.
The company raised $1.2 million to fund two programs in 2015. Next up, Canopy hopes to raise $5 million for the 2016 classes and expand to San Francisco.
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