6 ms·

Very few people are going to get rich off of cannabis. There's really nothing novel about any part of the industry except that it's now legal. Indoor growing /

by exelius 11y ago

Very few people are going to get rich off of cannabis. There's really nothing novel about any part of the industry except that it's now legal. Indoor growing / hydroponics are used for a wide variety of plants, so the tech on the production front is already mature (if not commoditized). Because it's pretty cheap to produce and doesn't take a ton of special knowledge, wide legalization will see a race to the bottom on price (along with razor-thin margins for growers). Prices are still very high right now because nobody can achieve sufficient scale (again, thanks to the weird legal environment) but once they do, prices and margins will fall and a lot of growers will get bought out or go out of business. It doesn't really cost much to grow super-high quality marijuana on an industrial scale. The rest of the value chain is really nothing novel either if you ignore the weird regulatory environment that currently exists. A retail store selling weed is not much different from any other retail store. A delivery service is still subject to the same fundamental issues as any other delivery service -- and when weed becomes really cheap, a $10 delivery fee may not make sense when you're buying $20 worth of weed. There's room in the market for differing tastes and consumption methods, but those too are more or less commoditized and can use general-purpose industrial processing equipment. There's a boom right now because the market is growing quickly, but there will be a corresponding crash once the consumer market starts to hit the point where scale matters.

Zombieball 11y ago
I personally feel you underestimate how much money there is to be made DURING the race to the bottom. Sure 5 years from now you may not be able to charge a $10 delivery fee. But that's 5 years where you can, grow a company, pivot when the time is right and new market trends emerge. I think your sentiment towards the growing side is spot on though. Large players with experience growing produce and other plants will swoop in and dominate.
- exelius 11y ago
  Delivery businesses in general are hard to make a buck in. Most of the ones currently operating are only successful because they either charge sky-high delivery fees or they're operating at a loss to gain market share. It's not like hiring people to deliver things is a new concept.
deleted 11y ago
[deleted]
msrpotus 11y ago
I think you underestimate the opportunity. Just because the businesses won't be completely new (and who knows what people will come up with) doesn't mean there isn't an economic opportunity. McDonalds and Walmart aren't inventing entirely new products (though their systems are pretty impressive) but they still make billions of dollars.
- exelius 11y ago
  Would you try to open a business to compete with Walmart or McDonalds? There's definitely profit potential in marijuana, but there's not a lot of opportunity for startups. Every piece of the marijuana market is adjacent to some other hundred billion dollar market, and the major players there will just slide over and crush the challengers with their operational / financial scale.
  - rgbrgb 11y ago
    My bet is that Walmart will never sell marijuana. McDonalds, like other large companies could in 10 years when it's federally legal. What seems more likely to happen (and this is also what the SV investors and companies like Meadow[0] are betting on) is that a few of the niche players already in the business expand rapidly to fill the supply/demand vacuum as it becomes more and more legal at the state level. With it being federally illegal, it's nontrivial to build--can't plug in an easy payment processor like Stripe for instance. [0]: https://getmeadow.com/ https://getmeadow.com/
  - johansch 11y ago
    Who is the current Walmart/McDonalds in marijuana, then?
  - Implicated 11y ago
    "Every piece of the marijuana market is adjacent to some other hundred billion dollar market" Every? How about the glass blowers? Where's the hundred billion dollar market they're adjacent to? The comparison to microbreweries and wineries is a good one here, IMO. They've done alright. And so have the businesses and services that support them.
sanderjd 11y ago
There may not be much money for very long in selling marijuana yourself, but there are probably good "selling shovels to miners" opportunities in providing products and services to help people navigate the "weird" legal and regulatory environment. That environment will stay "weird" for a good long time, probably indefinitely, if regulations regarding other "sin" markets like cigarettes, alcohol, and gambling are any indication.
- exelius 11y ago
  Yeah, there's a market for consulting and compliance work because it will at the very minimum be regulated, but again - there are huge companies that already do a lot of this work, and once the legal status is cleared up a little more, they'll just expand their existing practices and maybe buy a few boutique companies for their client lists. I'm thinking Big 4 audit / accounting firms here, because that type of compliance work is right up their alley.
  - Implicated 11y ago
    His point went far beyond 'consulting and compliance'. "Selling shovels to miners" is spot on - there's hundreds of millions of 'users' worldwide who spend money not only on the actual cannabis but also on items to supports it's use/storage/transportation.
icanhackit 11y ago
Because it's pretty cheap to produce and doesn't take a ton of special knowledge, wide legalization will see a race to the bottom on price This would be true if all strains of marijuana contained the same levels of cannabinoids, flavor, appearance, combustion rate etc. I think a big one will be balancing Cannabidiol (CBD) levels with Tetrahydrocannabinol (THC) to produce a more relaxed, less paranoid and happier strain. Given the varying affects on different humans due to different neurological makeups, there might even be a market for optimizing levels for individual humans both for medical and recreational purposes.
- exelius 11y ago
  I don't think that matters much at all; it's really no different than developing different strains of tomatoes for size and color. Nearly every large produce grower has an R&D department that develops different types of produce for different uses with optimal yields (i.e. tomatoes used for making pizza sauce vs. heirloom tomatoes designed for straight eating). Basically, if stoners have been doing this secretly in basement labs for the last 30 years, think of the progress an industrial-scale horticultural lab could make.
  - Implicated 11y ago
    I'm confused. You seem to be supporting his point. R&D departments are cheap? No special knowledge required? Race to the bottom on price? How has that worked out in the wine world?
    - exelius 11y ago
      R&D requires scale. There are relatively few jobs compared to the size of the industry. And the vast majority of the wine industry is indeed in the $10-or-less category. Alcohol in general is a pretty well-consolidated industry, with a few global giants owning the vast, vast majority of the global brands and production. And I never said there wasn't money in it -- there is, but it's not going to be made by VC startups. The problem is that it's a relatively easy market to get into (I.e. There are no major technical hurdles) and it's really obvious. People will make money, but its really not a hockey-stick market. The types of companies that will be successful will be ones with superior cost controls enabling them to outlast / outspend the competition on brand advertising.
alaskamiller 11y ago
Cannabis is the new wine. Midwest housewives are the fastest growing market. Wine's trajectory in California doubled to $24 billion per anum over the course of 16 years. And in the midst of all that is anything between a two buck chuck to some fancy Araujo.
- nosuchthing 11y ago
  Edibles/extracts/K-Cup infused/gel breathstrip infused/etc, and boutique craft beer type batches.
nosuchthing 11y ago
One area I know for sure cannabis startups are needed is in cannabinoid strain analysis and organic certification. Only one dispensary in Vancouver I know of offers this as a service, and they hire a trained technician to operate a mass-spectrometer to analyze each batch as they come through for at least 9 extra specific active compounds in cannabis besides THC and CBN. There are massive fluctuations in effect and potency even between the same strain (how are strains verified other than what the vendor claims?), and even same strain+vendor. Another issue with industrial scale growops is that they don't 'flush' the plant properly before harvest, leaving a funky chemical taste.
yodsanklai 11y ago
> It doesn't really cost much to grow super-high quality marijuana on an industrial scale. Personally, I grow one or two plants on my balcony in the summer. It costs me about nothing and produces more weed than I need (being an occasional consumer). Anybody with a garden can easily grow a lot of weed. I wonder if individual growing could be enough to cover most regular users (following a cannabis social club model).

by exelius 11y ago

Zombieball 11y ago

I personally feel you underestimate how much money there is to be made DURING the race to the bottom. Sure 5 years from now you may not be able to charge a $10 delivery fee. But that's 5 years where you can, grow a company, pivot when the time is right and new market trends emerge. I think your sentiment towards the growing side is spot on though. Large players with experience growing produce and other plants will swoop in and dominate.

exelius 11y ago
Delivery businesses in general are hard to make a buck in. Most of the ones currently operating are only successful because they either charge sky-high delivery fees or they're operating at a loss to gain market share. It's not like hiring people to deliver things is a new concept.

deleted 11y ago

[deleted]

msrpotus 11y ago

I think you underestimate the opportunity. Just because the businesses won't be completely new (and who knows what people will come up with) doesn't mean there isn't an economic opportunity. McDonalds and Walmart aren't inventing entirely new products (though their systems are pretty impressive) but they still make billions of dollars.

exelius 11y ago
Would you try to open a business to compete with Walmart or McDonalds? There's definitely profit potential in marijuana, but there's not a lot of opportunity for startups. Every piece of the marijuana market is adjacent to some other hundred billion dollar market, and the major players there will just slide over and crush the challengers with their operational / financial scale.
- rgbrgb 11y ago
  My bet is that Walmart will never sell marijuana. McDonalds, like other large companies could in 10 years when it's federally legal. What seems more likely to happen (and this is also what the SV investors and companies like Meadow[0] are betting on) is that a few of the niche players already in the business expand rapidly to fill the supply/demand vacuum as it becomes more and more legal at the state level. With it being federally illegal, it's nontrivial to build--can't plug in an easy payment processor like Stripe for instance. [0]: https://getmeadow.com/ https://getmeadow.com/
- johansch 11y ago
  Who is the current Walmart/McDonalds in marijuana, then?
- Implicated 11y ago
  "Every piece of the marijuana market is adjacent to some other hundred billion dollar market" Every? How about the glass blowers? Where's the hundred billion dollar market they're adjacent to? The comparison to microbreweries and wineries is a good one here, IMO. They've done alright. And so have the businesses and services that support them.

sanderjd 11y ago

There may not be much money for very long in selling marijuana yourself, but there are probably good "selling shovels to miners" opportunities in providing products and services to help people navigate the "weird" legal and regulatory environment. That environment will stay "weird" for a good long time, probably indefinitely, if regulations regarding other "sin" markets like cigarettes, alcohol, and gambling are any indication.

exelius 11y ago
Yeah, there's a market for consulting and compliance work because it will at the very minimum be regulated, but again - there are huge companies that already do a lot of this work, and once the legal status is cleared up a little more, they'll just expand their existing practices and maybe buy a few boutique companies for their client lists. I'm thinking Big 4 audit / accounting firms here, because that type of compliance work is right up their alley.
- Implicated 11y ago
  His point went far beyond 'consulting and compliance'. "Selling shovels to miners" is spot on - there's hundreds of millions of 'users' worldwide who spend money not only on the actual cannabis but also on items to supports it's use/storage/transportation.

icanhackit 11y ago

Because it's pretty cheap to produce and doesn't take a ton of special knowledge, wide legalization will see a race to the bottom on price This would be true if all strains of marijuana contained the same levels of cannabinoids, flavor, appearance, combustion rate etc. I think a big one will be balancing Cannabidiol (CBD) levels with Tetrahydrocannabinol (THC) to produce a more relaxed, less paranoid and happier strain. Given the varying affects on different humans due to different neurological makeups, there might even be a market for optimizing levels for individual humans both for medical and recreational purposes.

exelius 11y ago
I don't think that matters much at all; it's really no different than developing different strains of tomatoes for size and color. Nearly every large produce grower has an R&D department that develops different types of produce for different uses with optimal yields (i.e. tomatoes used for making pizza sauce vs. heirloom tomatoes designed for straight eating). Basically, if stoners have been doing this secretly in basement labs for the last 30 years, think of the progress an industrial-scale horticultural lab could make.
- Implicated 11y ago
  I'm confused. You seem to be supporting his point. R&D departments are cheap? No special knowledge required? Race to the bottom on price? How has that worked out in the wine world?
  - exelius 11y ago
    R&D requires scale. There are relatively few jobs compared to the size of the industry. And the vast majority of the wine industry is indeed in the $10-or-less category. Alcohol in general is a pretty well-consolidated industry, with a few global giants owning the vast, vast majority of the global brands and production. And I never said there wasn't money in it -- there is, but it's not going to be made by VC startups. The problem is that it's a relatively easy market to get into (I.e. There are no major technical hurdles) and it's really obvious. People will make money, but its really not a hockey-stick market. The types of companies that will be successful will be ones with superior cost controls enabling them to outlast / outspend the competition on brand advertising.

alaskamiller 11y ago

Cannabis is the new wine. Midwest housewives are the fastest growing market. Wine's trajectory in California doubled to $24 billion per anum over the course of 16 years. And in the midst of all that is anything between a two buck chuck to some fancy Araujo.

nosuchthing 11y ago
Edibles/extracts/K-Cup infused/gel breathstrip infused/etc, and boutique craft beer type batches.

nosuchthing 11y ago

One area I know for sure cannabis startups are needed is in cannabinoid strain analysis and organic certification. Only one dispensary in Vancouver I know of offers this as a service, and they hire a trained technician to operate a mass-spectrometer to analyze each batch as they come through for at least 9 extra specific active compounds in cannabis besides THC and CBN. There are massive fluctuations in effect and potency even between the same strain (how are strains verified other than what the vendor claims?), and even same strain+vendor. Another issue with industrial scale growops is that they don't 'flush' the plant properly before harvest, leaving a funky chemical taste.

yodsanklai 11y ago

> It doesn't really cost much to grow super-high quality marijuana on an industrial scale. Personally, I grow one or two plants on my balcony in the summer. It costs me about nothing and produces more weed than I need (being an occasional consumer). Anybody with a garden can easily grow a lot of weed. I wonder if individual growing could be enough to cover most regular users (following a cannabis social club model).