The national medical marijuana industry will reach $8.9 billion by 2016. "Operators who are now working in this industry are not wrong, they are early," says Ben Holmes, owner of the Lafayette-based Centennial Seed Company and former Wall Street maven.
To help investors get in on the action, Holmes is part of "The State of Medical Marijuana Investment in Colorado," a free seminar at 11 a.m. Monday, May 23 at the Oxford Hotel, 1600 17th Street. The seminar, which will feature representatives from Colorado medical marijuana businesses, business consultants, a financial information firm and banking experts, is intended for serious investors only ( to RSVP, e-mail firstname.lastname@example.org.)
Here's a sampling of the investment tips Holmes and his colleagues are planning to share at the event:
Not for the faint of heart The current medical marijuana industry is not a place for amateur investors, warns Holmes. In other words, if you're thinking of selling your mortgage or taking money out of your meager stock portfolio to invest in the industry, the gig is not for you and don't bother showing up at the investor seminar.
"This is for someone who has a high risk tolerance, who can sleep at night knowing they're investing in something that goes against federal law," says Holmes. "It's for someone who could take a loss in case the industry goes away over night." Of course, he says with a laugh, he doesn't really see that happening; "It's something you say to shake out the weak."
Kick the tires Don't just invest in a medical marijuana company because you like the operator's sales pitch or think they have a clever name. warns Holmes. "It is an absolute necessity that anyone who is going to be involved in this has to go out and visually look at the operations," he says. "Look at how they operate and how they interact with their customers, look at their books and make sure everything is in line in terms of financial controls."
Such groundwork is especially important in the medical marijuana industry, says Holmes, because there are not yet atn bank analysts evaluating the industry like they do for other businesses. That means the onus has to be on to do all the due diligence. "Its going to take some work," says Holmes, "But it's the only way you're going to find good operators, the ones who are compliant and are long-term thinkers."
Venture off the beaten path If you're going to invest in the industry, don't just think in terms of medical marijuana centers, says Holmes. After all, there's wide range of offshoot companies, what Holmes calls the "picks and shovels" of the industry. Examples include the marketing companies, the packaging operations, the seed businesses, the grow-supply stores and the testing labs.
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Another option could be real estate. "A portfolio of real estate that services this industry could be put together that includes property for both production and retail," predicts Holmes. "Early movers in this space could gain scale quickly because there is no competition."
All in all, Holmes believes it's now or never for those seriously considering investing in medical marijuana. And for those still on the fence, he offers an analogy: "Thirty-one years ago, there were no microbreweries in Colorado. And when the first one came, there were stories in the paper about how it would lead to back-alley crime and prohibition. Now there isn't a reasonable person left who would argue that the microbrew industry isn't a tremendous asset to us.
"This is the exact same industry, thirty years back, and thirty years from now no one will remember it was once a struggle. And I can tell you that the people who invested in microbreweries 31 years ago are probably pretty happy that they did."
More from our Marijuana archive: "Medical marijuana license application process begins tomorrow: How does it work?"