6 ms·

Ask HN: Why would or wouldn't you do a marijuana-focused startup?

• squozzer 13y ago
  Despite some of the obvious problems, the matter of "taste" provides the biggest challenge / opportunity. By "taste", I mean something similar to what plagues wines especially, but also beers and single malt scotches -- maybe better described as snobbery. How does one either surf (or conquer) the matter of "taste" in weed? What happens when -- by analogy -- someone makes the weed version of "Sideways" and you're the guy holding the weed version of merlot?
  • vytasgd 13y ago
    Just make some types more expensive. Here's a study that was showing "You get what you pay for" essentially saying that when you pay more for a wine, you get more pleasure (than if you bought that same wine for cheaper). http://news.cnet.com/8301-13580_3-9849949-39.html http://news.cnet.com/8301-13580_3-9849949-39.html
    • dylanhassinger 13y ago
      yeah weed isn't like that if you can produce good shit, there will be a market for it but the real startup opportunities (for now) are not in mass production
  • TillE 13y ago
    That's mostly an issue of marketing, and not too difficult if you're familiar with the illegal, legal and medical markets that currently exist. For example my fantasy business plan for Washington, the easiest way to get started, would have been to establish a "Dutch coffeeshop" brand, with Cannabis Cup winners and other famous strains. It's easy to go out and buy the genetics which already have an established reputation.
• MWil 13y ago
  From a legal standpoint, I'd love to get involved just because it is a kind of frontier.
• philwelch 13y ago
  I'm surprised no one has mentioned the obvious thing, which is that you'd end up in prison. The DEA might ignore small shops in CO and WA but not a nationally known internet startup.
  • zachrose 13y ago
    Websites for Nevada brothels exist.
    • aaronblohowiak 13y ago
      Nevada brothels are legal. In fact, they are highly regulated. http://en.wikipedia.org/wiki/Prostitution_in_Nevada http://en.wikipedia.org/wiki/Prostitution_in_Nevada
    • philwelch 13y ago
      Are there federal laws against prostitution or is it merely a state matter?
    • zamfi 13y ago
      Prostitution is not illegal under federal law, only under (most) states' laws. Marijuana production / distribution / etc is illegal under federal law. The DEA (a federal agency) could come after you -- and would, if you get big enough -- even if it's legal in your own state.
  • j_baker 13y ago
    What if your startup is a small shop in CO or WA? Not every startup will grow to be nationally known.
    • philwelch 13y ago
      Then it's just a cannabis retailer, and the question is much less interesting.
• 6d0debc071 13y ago
  Sounds boring unless you're prepared to do the illegal stuff, and then that introduces its own problems.
• rholdy 13y ago
  Regulation. In a true "free-market" system, like we would have if the HN Libertarians were in charge, running a business of this type would be much easier and more profitable. In Colorado, for example, the only reason they have recently "legalized it" is to tax the hell out of the sale of marijuana. The licenses to run a weed-selling business are expensive and almost impossible to get, the taxes you pay on each sale are the highest of anything in the state (more than gas, cigarettes, ect...), and they have crazy regulations regarding the way you are allowed to acquire inventory (the majority of your inventory must be home-grown, all your workers documented and screened, grow-space must be separate from retail space, ect...) Selling weed legally is a logistical nightmare. Not worth it, in my opinion.
  • genwin 13y ago
    Good points. If the OP could navigate the nightmare and still make a good profit margin, I'd say it's worth it. Perhaps a risk is black market weed selling for less enough than legal weed that a legal profit can't be made.
    • pyoung 13y ago
      That's is roughly my take on the situation. Until it is legal nationally, it is much too risky to make big money investments that would produce at scale, which would compensate for the thinner margins. At this point in time, you essentially have backyard growers competing against each other and those that stay on the black market can compete at lower prices and with higher margins. If Washington and Colorado both make efforts to punish dealers who don't comply with state law, then that might push the risk-reward balance further to the legal side of things.
• DanBC 13y ago
  Cannabis is currently illegal. This means that some of the people involved in growing and distributing cannabis are vicious criminals. This includes some of the Mexican narco gangs, and in the UK includes people who traffic illegal immigrants into the country and force them to work in grow farms. (Here's one example, but there are more http://www.chroniclelive.co.uk/news/local-news/illegal-immigrant-made-guard-cannabis-1370117 http://www.chroniclelive.co.uk/news/local-news/illegal-immig... ) Any cannabis related service would have to risk-assess that kind of involvement. And any attempt to create a "nice" market - avoiding that kind of exploitation by having small growers providing small amounts to locals, avoiding the associated criminality and restricting service to those over the age of 21 would be destroyed by The War On Drugs. "We" might think it's a good idea, but plenty of people would call it Evil and get support for that viewpoint.
  • j_baker 13y ago
    Cannabis isn't illegal everywhere. Washington and Colorado legalized it recently, and other states will likely follow in the future. Not to mention that Cannabis is legal as a medical treatment in many states.
    • TallGuyShort 13y ago
      >> Cannabis isn't illegal everywhere. Well that's the first problem I thought of. The federal government maintains that it's banned at that level, and that's still an ambiguous conflict that no one's really confronted directly yet. Some local / municipal governments have also banned it inside these states, often only a short time after the state legalization. The reason I wouldn't do a cannibis-focussed startup is because it seems impossible to predict how you might negotiate this legal terrain. Can you count on your town not to make it illegal again? Can you count on how the state vs. federal disagreement will be resolved? Can you deal with such inconsistency between towns if you have a broad client-base?
      • yourmailman 13y ago
        Fair point but the point has actually been addressed. The federal government will take no direct intervention in the two states so long as the proposed state laws are followed.
• Plasmoid 13y ago
  Unless I had full-on born in the US grade citizenship, I wouldn't touch it. The US legal hassle plus the arbitrary nature of border guards makes this an absolute non-starter.
• chatmasta 13y ago
  The best opportunity in this industry is selling the pick axes to the gold miners. The marijuana industry will need a lot of infrastructure. Just look at all the regulations. For example, there is a lot of tracking involved. So maybe a startup could focus on tracking inventory for dispensaries. But the point is that you can make money here without doing anything illegal. Just build the infrastructure for the people who are selling the weed, and once it's legal, you'll be in a great position.
  • JanezStupar 13y ago
    Are you certain that providing infrastructure to an illegal industry is not illegal in itself? And I guess illegal industries have high barriers of entry as participants tend to be a bit paranoid.
    • chatmasta 13y ago
      Obviously I'm not certain because I'm not a lawyer. But it's hard for me to imagine the Feds arresting the principals of a company that provides inventory tracking to state-legal marijuana dispensaries with the express purpose of helping them to conform to the new laws. Infrastructure startups that help follow regulations are in the best interest of the federal and state governments because it gives them both assuredness that dispensaries and the like will be responsive to new law changes.
      • LanceH 13y ago
        Your client gets their money frozen. They've been paying you regularly so you get your money frozen. You spend 5 years in court maybe getting some money back.
        • gte910h 13y ago
          That's a risk you get other places too. Not unlike businesses going under. However, whomever is poised to move the second the industry goes 50 state legal is going to make a huge pile of money
• aclevernickname 13y ago
  Canada is a whole new ballgame for Cannabis startups. Prime Minister Harper announced that legalization is coming in the next 10 years, tops. We have 6 months before the new regulations are in place, which open the floodgates for corporate cannabis providers. We're currently in a cannabis gold rush right now, so I figured this would be a great time to start a Cooperative that courts illegal growers into becoming legal ones, if just to prevent clogging the courts with people trying to produce medicine for sick people. We've gotten a lot of support from Health Canada, too, as it seems that there's a massive contingent within that's unhappy with MMAR (the previous regulations) going away. We haven't even sought outside (public or semi-private) funding yet, because we haven't had to. :) we have a website with a fantastic (imo) domain name, but we're keeping it quiet until we're closer to launch. hoping to pimp it here when it's ready.
  • loganu 13y ago
    Can you shoot me any more info on what you guys are doing?
    • aclevernickname 13y ago
      medicalcannab@urssmail.org and I'll happily fill you in.
  • epa 13y ago
    Interesting but I see a lot of liability issues on your behalf if you offer consulting services to people who end up breaking the law for some reason 'based on your advice'. Careful.
    • aclevernickname 13y ago
      we're not really venturing into "consulting" per se; more of a franchise sort of setup, where everyone interested in growing ensures their product and growing space meets our internal standards, which meet or (in most cases) exceed the requirements listed in the Controlled Drugs & Substances Act. We're cooperating at every step with Health Canada to keep our product and facilities as safe as possible, in order to deliver directly to customers come April 2014, when the MMAR/MMPR switch flips. While we've met many people looking for a legal loophole to commit crimes, we're only really interested in those people willing to be in harmony with the government's new MMPR program, and are focused on growing medicine for sick people. We understand there's a massive Blue Ocean of legal consumer cannabis product opportunities that will be opening up here in ten years, but weeding out (sorry) the criminal element is of paramount importance to us before even thinking of expanding our scope to cover those markets.
• mrtriangle 13y ago
  Without going into too much detail, I did found a MJ based startup, however I ran into 3 big problems: 1. My startup focused on fostering relationships with producers and distributors, both of whom are hesitant to openly discuss or display their business, location etc in a way that can be easily accessed publicly. 2. Legal fees. I tried to set up everything as legitimately as possible through a lawyer as well as keep him on retainer in case I ended up in any trouble with the law. Massive overhead. 3. Saturation and fear. At the time of my efforts there were two major shifts in the West Coast market. The first was a flood of growers both indoor and out that greatly reduced the value of anything that was not of the absolute highest quality. The second was the crackdown on many major players in the game; people saw that old names in the MJ industry were getting raided and prosecuted and started to either withdraw or severely limit their business relationships. Basically until everything is legalized at both the state and federal levels it will continue to be very difficult and expensive to try to revolutionize this industry.
• codeonfire 13y ago
  Karma. You're in a business that's easy for ordinary people and makes a lot money and is arguably exploiting people who develop a habit. You are competing with the illicit drug industry. In societies eyes, anything goes, so if someone with a little power wants to strongarm you there will be no one anywhere on your side. If you have any success someone will just come and take it from you. Many people won't even do business with you. Good luck even renting a space. There are much better industries and opportunities to be in.
  • MartinCron 13y ago
    You do realize that Karma is a metaphor and not a real thing, right?
    • codeonfire 13y ago
      The dispensary application fee in CO is $18k. Karma is the thing that costs $18k.
  • benched 13y ago
    For a different perspective from the connotations of 'exploiting' and 'habit': http://en.wikipedia.org/wiki/Entheogen http://en.wikipedia.org/wiki/Entheogen
  • moocowduckquack 13y ago
    Try telling that to the construction companies in British Columbia.
  • jjwiseman 13y ago
    "Good luck even renting a space." You must not live in California. In LA, it seems like there's a dispensary on every other block. And lots of people defended their right to be there when the city tried to limit their number.
• jjwiseman 13y ago
  Regulatory gray areas are risky, but can sometimes be great opportunities. Uber and Airbnb are two well known examples of companies that got huge by doing something that may not have been legal everywhere. Related examples include drones[1], bitcoin, crowdfunding investment[2], self-driving cars[3] and 3D printing[4]. Both Airbnb and Uber have become so big that they can try to work the system and change the regulations in their favor, but smaller companies might have to be more wily. For example, commercial drone activity is basically illegal in the U.S., but I know of one startup that currently develops and flies their technology on manned aircraft with the idea of putting it on drones when they can, and another that resides in the U.S. but is currently focused on customers outside the U.S. [1] http://www.wired.com/dangerroom/2013/02/drone-regulation/ http://www.wired.com/dangerroom/2013/02/drone-regulation/ [2] http://www.crowdvalley.com/2013/05/06/the-secs-recent-no-action-letters/ http://www.crowdvalley.com/2013/05/06/the-secs-recent-no-act... [3] http://www.forbes.com/sites/jimgorzelany/2013/06/03/feds-ask-states-to-ban-self-driving-cars/ http://www.forbes.com/sites/jimgorzelany/2013/06/03/feds-ask... [4] http://newsfeed.time.com/2013/10/10/how-3d-printed-guns-are-shooting-a-hole-through-firearm-regulation/ http://newsfeed.time.com/2013/10/10/how-3d-printed-guns-are-...
• unoti 13y ago
  I would do a marijuana-focused startup. Marijuana has a real impact to improve people's lives in an abundance of ways. Culturally, it's not very well accepted now, but that will change. To me, it's a lot like sex: a couple of decades ago, there was this tremendous stigma surrounding sex that eroded to a large extent in our culture. I think we're seeing the same thing with marijuana. A lot of people have no experience with marijuana, or experience limited to partying in high school and college. There's much more to it than that which society at large has not yet realized. Modern strains with high CBD combined with carefully controlling your dosage and using smoke-free delivery systems such as vaporizers and tinctures make taking it a much cleaner, less offensive affair. Not all marijuana has to blow your mind; it's quite practical to control your dosage and type to just give anxious people clarity of mind, help uneasy people sleep better, and a hundred other applications. I know lots of people who wouldn't take drugs or smoke a joint, but when I show them a neatly packaged high cbd lozenge which will help them get right to sleep and have no hangover effects are most intrigued. I bought a Pax vaporizer and it's amazing, and made by a San Francisco startup. It's a tremendous product.
• scrabble 13y ago
  I wouldn't do one because I don't know the domain, so can't figure out what the problems surrounding it are for enthusiasts.
• mikekij 13y ago
  In 30 years we'll be looking at a billionaire or two who made their money from the decriminalization of marijuana. The question is wether you want to be one of them or not. I don't smoke weed. Never have. But I don't see anything immoral with a marijuana based company. In fact, providing a legitimate means for people to buy weed would take a lot of money away from violent drug criminals. So you'd likely be doing society a service.
• lubujackson 13y ago
  I would try to learn from the lessons of music sharing businesses from Napster to Spotify. For legally-vague ideas with a lot of money to be made, the key seems to be staying in front of how things are being regulated. Marijuana in CA, for instance, is more or less legalized for consumers but the feds have spot-targeted producers and storefronts through infrastructure attacks (like threatening landlords). To me, this sounds like a stalling tactic to keep the industry from growing too rapidly. If I was to work on a startup in this field I would focus on the consumer end of the business and only in a supplemental way, like a review site. What you don't want is a business with a warehouse full of pot or a lot of bills owed from producers/retailers who are used to being threatened and have no incentive to pay you.
  • nilkn 13y ago
    I think Leafly is already dominating in the review space: http://www.leafly.com/ http://www.leafly.com/
• bradleyland 13y ago
  I'm not saying I wouldn't do it, but I do have an anecdote that might explain why you should be cautious. About 15 years ago, I did some work with a guy who ran online pharma websites. He made a mint in the business, but it wasn't without it's bumps. This was before the online pharma boom, and before the Feds really got involved. He ran a website where users filled out questionnaires, which were then reviewed by a doctor (no really, an actual doctor), who then wrote a prescription, which was then filled by a pharmacy. One day, the men in the black suits came knocking. Right now you're probably thinking that everything above was clearly illegal and this guy is screwed, but that turned out not to be the case. He and his partner sat in jail while the Feds figured out exactly what they were doing wrong. They had good, detailed records of every "patient", and because selling medication over the internet was so new, there weren't a lot of laws that covered exactly what the requirements were. In the end, the two owners spent about 90 days in jail, and had millions of dollars seized by the government. The Feds dictated that they could continue to operate their business under a handful of conditions: 1) They could no longer operate their own pharmacy. 2) They could no longer directly employ the doctor reviewing prescriptions, and the doctor must be paid regardless of whether a prescription is written. 3) They could not sell any drugs of a certain classification (controlled?). There was some specific class of controlled drugs they couldn't sell, but I can't remember what it was. This guy, and his family, ended up in the press with their name slandered all over the place. They ended up moving out of state to escape the aftermath. I'm sure plenty of people are lined up ready to judge the guy, but I knew him. He was the kind of guy who gets shit done, and he ran an above-board business considering what they were doing. That's the only reason he's not still rotting in a cell. So, the moral of the story is, these kinds of businesses can be very profitable, but they're not without risks. This is an entirely different kind of risk than what an investor is willing to take on. We're not talking capital risk, we're talking criminal prosecution. Those are the risks when you operate in a legal gray area. Don't get me wrong, someone has got to do it, otherwise there will be no progress, but you should go in with eyes open.