With the U.S. legal marijuana market forecast to grow to $2.6 billion this year, investors in Denver heard pitches from companies developing everything from a mobile application that matches potential users with cannabis dispensaries to motorized scissors for trimming plants.
Three times as many investors listened to business plans for 11 marijuana start-ups yesterday as attended a similar event in the Mile High City in September, before Colorado became the only state to allow retail sales of pot.
About 250 angel investors from New York to Seattle gathered at the Denver Center for the Performing Arts for a conference organized by San Francisco-based ArcView Group. The network hosted 75 investors at a similar meeting at the Denver Athletic Club nine months ago.
“The challenge is there is a lot of capital looking to be deployed, but in many cases investors are trying to find the right thing to invest in,” said Troy Dayton, ArcView’s chief executive officer.
“People are looking to put $100 million to use but not finding a lot of opportunities,” he said. “This is a very nascent industry. People don’t like investing in start-ups, and that’s all there is.”
ArcView members have invested $10 million in a dozen companies in the last 16 months, Dayton said. The network’s members include Joby Pritzker, whose family started Hyatt Hotels Corp.; Douglas Leighton, a managing partner at Dutchess Capital in Boston; Sam Znaimer, a general partner at Vancouver-based Ventures West; and Craig Kinzer, chief executive of Seattle-based Kinzer Real Estate Services.
With New York poised to become the 23rd state to allow medical marijuana and as Colorado marked the six-month anniversary of becoming the first state to sell pot recreationally to those 21 and over, there’s growing interest in cashing in on a market emerging from prohibition.
The legal pot market in the U.S. is expected to be more than two-thirds larger this year than in 2013, when it reached $1.53 billion, according to The State of Legal Marijuana Markets, published by ArcView Market Research. Retail cannabis sales in Colorado brought in $3.6 million in sales and excise taxes in April, the latest month for which figures are available, up from $2 million in January, according to the state Department of Revenue.
ArcView, which vets ideas for new cannabis companies in weekly Internet seminars, invited 11 firms to pitch their ideas at the Denver event after hundreds of companies vied for the spots, Dayton said. The group charges members a $2,500 annual fee and seeks investors interested in putting at least $50,000 into the industry in the next year.
Dayton said the fact that marijuana is still illegal under federal law, in addition to the hodgepodge of state regulatory requirements, is still causing some investors to hold back.
“People are really cautious about the legal risk,” he said. “They are looking into ancillary businesses like equipment and software.”
As the Colorado market matures, and recreational marijuana prices come down as more supply comes online, investor interest is expected to increase, participants said.
“I know of dozens of deals done personally -- of syndicates doing deals that aren’t interested in being on stage,” said Tripp Keber, chief executive officer of Denver-based Dixie Elixirs & Edibles and an ArcView investor.
“I imagine hundreds of millions will be invested in the next eight to 12 months,” said Keber, who invested $5.5 million in a new facility that will open soon. “There are massive amounts of money on the sidelines. People are coming out of the shadows.”
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