Imagine you’re a businessperson living in Colorado, the first state to legalize recreational use of marijuana. You know there’s an incredible demand for this newly legal product, not to mention an exciting business opportunity sitting right there, ripe for the taking. You take a deep breath, apply for a license, and open your own shop.
People who want their weed have to get it from somewhere, so you hock everything you have to start a business to meet that need. It sounds like a winner, but at some point, in order to survive, you’ll have to take your business to the next level. That means you need an infusion of money.
Try to get a bank to finance the growth of a pot shop. Do the words “not on your life” ring true? Yeah, we thought so.
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Executives from the magazine High Times came to the same conclusion. That’s why they’ve established the HT Growth Fund, a new private-equity fund that will invest in the growth of established mid-size cannabis-related businesses.
“What we are looking to do is provide capital and credit to companies that are established and have grown and reached their potential as much as they can without access to traditional capital markets,” the fund’s managing director, Michael Safir, told the Denver Post.
Colorado‘s History-Making Legalization Decision
As the first state in the nation to legalize recreational cannabis, all eyes are on Colorado these days. The state anticipates raking in $67 million in taxes on sales of weed in 2014. Washington state, which also recently legalized the recreational use of pot, will begin allowing it to be sold in June 2014.
More than 10,000 people in Colorado bought recreational marijuana on New Year’s Day. That’s $1 million in sales on the first day it was legally available. Within the first week, an estimated 100,000 buyers made pot purchases. Stores that once saw perhaps 20 medical marijuana customers in a day were suddenly overwhelmed, serving up to 1,500 daily buyers.
“Every day that we’ve been in business since January 1st has been better than my best day of business ever,” Medicine Man Dispensary owner Andy Williams told The Huffington Post.
The demand is incredible and unlikely to diminish. Colorado had licensed 136 marijuana stores as of December 23, 2013, and even so lines were still around the block on day one. Additionally, the state is likely to become something of a tourist destination for pot smokers.
Take all this together and expanding a cannabis store in Colorado looks like a golden opportunity for the right business person. The only problem is money.
The HT Growth Fund Comes to the Rescue
High Times magazine has been the seminal publication on cannabis culture for forty years now, so its people know a thing or two about the business of pot. The newly established HT Growth Fund is a separate entity from the High Times publication. It aims to provide this new business growth area with the support it cannot count on from regular banks and investment schemes.
“We have a deep and detailed knowledge of the needs and wants of the cannabis industry,” states the HT Growth Fund website. ”The team at the HTG Fund have a combined 70 years of experience related to all things cannabis, which allows us to use our historical knowledge to forsee [sic] the future.”
“If you are running a cannabis business, you aren’t getting (a Small Business Administration) loan, you don’t have bank accounts,” Michael Safir told the Denver Post. “It is hard to grow when you don’t have the tools.”
The fund will invest in companies at the $2 million to $5 million level, so clearly we’re not talking about little rattletrap, hole-in-the-wall weed stores. The fund was created to support “best of breed” businesses. The focus is on well-strategized, mid-size enterprises that can demonstrate they’ve got smart management and will be a real investment opportunity for fund investors.
The question of whether legalization of marijuana in Colorado was a good idea or not isn’t part of this equation. It’s done. Some jump for joy while others lament this development. As a business venture, however, there’s little room for that discussion. For those who don’t have a problem with legal, recreational pot smoking, the lure of big returns from investing in such a hugely popular new business can be a powerful motivator.
This is business, after all. Even investors in the legalized pot trade need to feel confident they will reap the rewards that come with the risks of plunking down hard earned cash. It’s a brave new world. Perhaps those considering investing in this fund will need to take a toke or two before making a final decision. They already know just where to go to do that.