Weed Industry Draws Bold Investors

By Chrisanne Grise 07/19/13

Pot may still be illegal under federal law, but some firms are already finding ways to make a profit off weed.

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As more states move to legalize marijuana, private equity firms are beginning to invest in the industry. Privateer Holdings, a two-year-old Seattle company, has gained about $7 million dollars during its first round of fundraising by investing in pot-related companies. And they anticipate that the next round beginning in the fall will earn at least $25 million, according to CFO Michael Blue. Still, that’s chump change compared to the $20 billion nationally that annual marijuana sales (both medicinal and through the black market) are worth, says Harvard economist Jeffrey Miron. "The obstacle is it's not a legal product yet...It's not legal under federal law," says Miron. "That's a huge impediment to being able to earn a profit or keep a profit." To protect itself, Privateer invests in pot-related businesses that aren’t directly involved with production, distribution or sale of the drug. Instead, they have considered putting money into things like light designers for growing pot indoors, or companies that manufacture harvesting equipment. They also purchased Leafly.com—a medical pot website which has been widely dubbed the “Yelp of weed”—about a year and a half ago. In addition to Privateer, there are reports of a handful of independent investors, including an anonymous senior political aide in Washington state, who are pooling their money in the hopes of building a marijuana farm in Walla Walla. But the sudden financial interest in the industry is concerning to some, including the anti-legalization group Project SAM. Says co-founder Kevin Sabet: "This is about profit maximization based on addiction."

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Chrisanne Grise is a multimedia journalist specializing in health/fitness, lifestyle, travel, bridal, and music. Her work has appeared in print and online for publications such as Martha Stewart Weddings, Parents, FitnessMagazine, Fisher Price, Bridal Guide, Scholastic's Choices, AbsolutePunk.net, Chorus.fm, and more. She is the Senior Editor at The New York Times Upfront. Follow her on Linkedin and Twitter.

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