Real estate speculators stake out territories for what’s to come, infrastructure builders and lawyers queue up for business, investors jostle to get in on the ground floor, and tech startups seek ways to make a new industry run more efficiently.
This could be any nascent industry, but in this case it’s marijuana.
After graduating from Yale, Steve Berke played professional tennis. Then, after a career-ending injury, he became a medical marijuana patient. That led him to be a marijuana activist, and he ran for mayor of Miami Beach twice on a marijuana-legalization platform. After the second election loss in 2013, marijuana companies had seen his social media campaign and were reaching out to him to plug them into videos. “That’s when I realized there was no way for these companies to connect with consumers,” said Berke, and he turned to entrepreneurship to find a solution.
When one of his activist YouTube videos did not truly go viral despite pickups on Buzzfeed, Upworthy, NBC and other sites, the YouTube enthusiast learned that Facebook’s algorithms suppressed it. He thought the cannabis industry needed a different way of marketing. “I’ve been on a very organic journey to a leadership role in the cannabis business community.”
Today, Berke, 35, is CEO of Bang Holdings of North Miami Beach, which has a subsidiary that provides brand management, cannabis-related digital content and social influencer-based marketing for the cannabis industry. While major media providers restrict online marijuana advertising, Bang’s marketing networks allow cannabis companies to directly reach consumers. Today, Bang runs one of the top two or three cannabis-related Facebook pages as well as sites on Instagram, Snapchat and YouTube.
From growers, dispensaries and product makers to software developers and “the Tinder for the tokers,” entrepreneurs like Berke are taming the wild, wild west of pot.
“Cannabis is growing more mainstream by the day. This is a viable, vibrant industry, and we are seeing more and more sophisticated financial executives entering this space,” said Chris Ganan, chief strategy officer of MedMen, a Los Angeles-based cannabis firm. Ganan, who has had a long career in private equity and hedge funds, was speaking on a cannabis panel at the Real Estate Family Office and Private Wealth Management Forum in Miami this week.
Four states — California, Massachusetts, Nevada and Maine — legalized recreational marijuana Nov. 8, joining Colorado, Oregon, Washington and Alaska. Four more including Florida passed medical marijuana measures on Election Day, bringing the total number of states with some form of legal cannabis to 28. Florida voters approved allowing doctors to recommend full-strength marijuana as a treatment for a long list of conditions, including glaucoma, HIV/AIDS and cancer, and authorizing Florida’s Department of Health to license growers, labs and dispensaries.
In Florida, the medical marijuana market is expected to hit $193 million in 2018, when the law is fully in effect, and then is estimated to take off, growing to $1.6 billion in annual sales by 2020, according to an ArcView research report released this week. Cowen and Company recently joined the ranks of mainstream research firms covering the cannabis industry, forecasting that the U.S. marijuana market will grow to $50 billion by 2026 from $6 billion today, seeing a huge transition of black market sales to the legal market as more states legalize marijuana.
Still, said MedMen’s Ganan, whose cannabis firm has both a management and a $100 million capital arm: “This is a federally banned substance that is regulated by a mind-boggling patchwork of local and state regulations. Expert knowledge is key to capitalizing on business opportunities.”
Tech Gets Head Start
Several tech companies have taken root in South Florida. Unlike growers, dispensaries and makers of cannabis-containing products that have to grow their businesses state by state under myriad rules because the plants can’t cross state lines, tech companies don’t touch the plants so they can more easily scale their businesses.
BioTrackTHC, a Fort Lauderdale software company employing more than 60 people spanning three offices nationally, tracks cannabis sales from seed-to-sale for government agencies and other organizations. Since winning its first state contract, Washington, in 2013, the company now has contracts with five states and a city, and more than 2,000 companies use its software, said CEO Patrick Vo.
Then there’s High There!, a social connectivity platform some have called “Tinder for tokers” because of relationships made there. Co-founders Darren Roberts and Kenny Frisman moved their company back to Boca Raton from Colorado this fall in anticipation of Amendment 2’s passing and have expanded the platform to include a news feed.
They join growers and dispensaries such as Costa Farms’ Modern Health Concepts of Miami, which holds one of the six licenses in Florida to cultivate low-THC cannabis and medical cannabis but hopes to make medical marijuana in other forms now that Amendment 2 has passed. There are also specialized construction firms, security companies, product makers, consultants, even a staffing company checking out the cannabis climate in the Sunshine State. Ganan is interested in Florida, too: With a population of 20 million, lots of travelers and a large geriatric community, “the demographics in Florida make it a compelling market for the long-term,” he said.
Attorney David Black of Berger Singerman is part of a team within the Miami law firm that collaborates on cannabis business. He says Amendment 2’s passing will likely bring a greater pool of patrons and a broader range of products but cautions that since the regulations haven’t been written yet, there are still a lot of unknowns. Because state health regulators now must write the rules and Florida has until next September to begin the registration process for ID cards and treatment centers, “it’s a waiting game,” he said. Still, Black is seeing lots of interest from real estate investors seeking out blocks of industrial land that may be appropriate for growing or storefronts for dispensaries.
Because everyone wants to know how to get into the business, Fort Lauderdale-based law firm Kelley Kronenberg brought in speakers and hosted a meet-up group, the Medical Marijuana Business Networking Group (MMBNG), earlier this month and plans to host them regularly. The first one attracted more than 50 people, including owners of dispensaries and growers located in other states, a nutraceutical manufacturer, a cannabis investment fund, wellness centers, doctors and conference planners, said Seth Hyman, a medical marijuana activist who has a daughter with severe disabilities including uncontrolled seizures that a certain form of cannabis could help. To get help for his child and others like her, he fought for years to get Florida’s first medical marijuana bill passed as well as the much wider Amendment 2.
“I was a corporate lawyer and never anticipated going into the cannabis business until I heard [Hyman’s] story about his daughter. No one should have to go through this,” said Howard Wander. Wander, along with other lawyers and Hyman, who’s not a lawyer, are part of a practice unit at the Kelley Kronenberg firm formed in late 2013 to serve not only businesses wanting to get into the industry but also all companies with employment, workplace and security issues concerning medical marijuana. Akerman, GrayRobinson, Greenspoon Marder and other South Florida firms are also forming practice groups either locally or nationally.
Visits to other states and numerous meetings with dispensary owners, growers, ancillary companies and doctors validated their beliefs. “This is going to be a massive industry when it comes to Florida. ... And you have people who are excited to be in the industry, there’s an energy,” said Wander, who has fielded calls from software firms, consultants, and security and transportation companies from other states. “All those companies, they want to be here.”
Investors Get Ready
The money men and women have begun to come out of the woodwork, too. Black has begun to see potential operators and investors beginning to mix, such as entrepreneurs with capital wanting to take a minority investor role in an existing cannabis business.
Last month, San Diego-based Innovative Industrial Properties, a real estate investment trust, filed to become the first cannabis-related company to be traded in the New York Stock Exchange. Private investment firms are forming, too, including Phyto Partners, founded by Larry Schnurmacher in Boca Raton last year.
“Instead of investing in the stock market, I wanted to invest in the cannabis industry — companies that are going to be significantly important in the ... nationwide expansion and normalization of cannabis, most importantly as a medicine,” said Schnurmacher, who was a wealth manager and investment adviser for Morgan Stanley and other Wall Street firms for more than two decades.
Schnurmacher is raising $15 million for his Phyto venture capital fund, and has invested in nine companies so far. Most are early-stage technology companies. His portfolio includes New Frontier Financials, a data collection firm; Leaf, a “Plug ‘N Plant” do-it-yourself system to grow artisan pot at home; Baker, an app to reserve your cannabis and earn loyalty points, and Seed CX, an institutional trading platform awaiting regulatory approval from the U.S. Commodity Futures Trading Commission. All of them will likely do business in Florida, including a national testing lab he’s funded, Schnurmacher said.
“These startups have the same issues that all startups have, executing their business plans, developing their footprints, making sure they don’t run out of money,” he said. “We try to be strategic partners for our investments .... providing executive assistance.”
For now, South Florida’s cannabis-tech startups are gaining ground because they don’t have to wait for regulations. In an effort to be the go-to place for cannabis news and information, High There! is rolling out early next year a revamped website with a news feed called Daily Joints featured prominently, Roberts said. There will be in-person High There! meetups, too.
“What’s happened is individuals have met, yes, for dating, but High There! has really expanded into the medicinal community …veterans who suffer from PTSD, individuals who are dealing with illnesses from anxiety to cancer — it’s really become a site to connect on multiple levels,” Roberts aid. “It’s an environment where the stigma doesn’t exist.”
The free High There! app has been downloaded a few hundred thousand times, and recently 500 to 1,600 times a day, Roberts said. Founded in early 2015, High There!, a team of nine and hiring, plans to sell “targeted, non-intrusive” advertisements and its data will be valuable, Roberts said.
As for Bang Holdings, Berke believes social media will be the dominant advertising platform of the cannabis industry for the next decade and the way to do that is to build a network of influencers. He says he has about a dozen influencers now, all with 250,000 to 10 million followers. To try to sell products via Facebook Messenger, the company recently rolled out a chatbot — but not just any bot.
As an experiment, Bang’s team recently developed a chatbot likened to Donald Trump, mainly because of the relative ease of attracting his enthusiastic supporters. The bot is called “The Donald” and it now has a Facebook following of more than 500,000 fans — and many had no idea they were chatting with a bot, Berke said. “Now that we have a proof of concept for what we have dubbed a ‘Digital Social Influencer,’ we are ready to bring our new technology to our core cannabis marketing business,” Berke said.
The Bang social community is 1.3 million subscribers strong, the pages pull in 2.5 million to 3 million views daily, and Bang is on the way to building the biggest and best cannabis-related Facebook audience, primed for monetization, Berke said. Stay tuned.