The Great American Green Rush: 8 Things to Know Before You Invest in the Cannabis Industry

8 Things to Know Before You Invest in the Cannabis Industry

The cannabis industry is booming in the United States as more states are legalizing recreational marijuana and medical marijuana is being used to treat a wide range of health issues. The demand is there and it’s growing, which means that business is growing. Seems like a no-brainer for anyone looking to invest in the cannabis industry, right? But hold up for just a moment. There are some things you need to know, and some important questions you need to consider before you hop on board the green train.

According to CNBC, 2016 revenues reported in Colorado by the Marijuana Enforcement Division, “the marijuana plant is currently driving the fastest growing industry in the United States with over 30 percent compound annual growth.” In 2016, alone marijuana sales in North America grew by $6.7 billion. Yes, billion, with a B. You want a piece of that wealth? Well then you need to start taking a serious look at cannabis as more than just a good time.

It can certainly be a worthy investment, but also a risky one. So before you dive in, here’s what you need to know about getting involved in the cannabis industry.

1. Most Americans Support a Legal Marijuana Industry

Consider the latest numbers. According to a recent poll, 64 percent of Americans support marijuana legalization, which is the highest that number has been since 1969 when the question was first polled. This means that while not every state currently allows marijuana to be grown, distributed and consumed (more on the below), the demand is there, and over the past decades that sentiment has changed drastically. Just look at the Marijuana Business Conference & Expo, which began in 2012 with just 400 attendees. The most recent conference in 2016 had over 18,000 attendees. Like we said, the demand is there, and all signs point to that support only increasing over time.

2. Currently, Recreational Marijuana is Legal in 7 States Across the U.S.

As of December 2017, recreational marijuana is legal in seven states: Alaska, California, Colorado, Massachusetts, Nevada, Oregon and Washington, as well as Washington D.C. In addition, 29 states have legalized some form of medical marijuana. And based on the level of support across the nation, despite the fact that cannabis is still considered an illegal drug by the federal government, it looks like those numbers will only go up. More demand, plus more legalization means there’s a lot of room for growth in the cannabis industry.

3. Even Where Recreational Use is Legal, There are Still Rules

It’s important to know that even in states where there is a legal marijuana industry, distributed and consumed, there are still rules. It’s not a total free for all. In fact, cannabis manufacturers have tons of regulations regarding how they grow their weed and how it is packaged and distributed. And consumers have a lot of rules too in terms of how much marijuana you are allowed to buy and consume, and where you are allowed to do it. If you’re considering investing in a cannabis business, you need to know the rules so that you are as educated as possible about the industry you are getting involved in.

4. Do Your Homework

You wouldn’t invest in a tech company or a pharmaceutical company without doing a little research, would you? Take the same approach to cannabis-related investments, and do your due diligence. Make sure you check the stock filings and you check revenue figures. In the past people were investing based on an idea and business potential, but no real revenue figures. Now that many cannabis companies are actually public companies, you can do a bit more digging to find out what you are getting into.

5. Expect Deviations in the Cannabis Industry

This industry is still developing and changing every day based on new legislations, new technologies, new demands and new opportunities. Expect it to be a moving target with constant deviations and updates. And be prepared to roll with it; yes, it’s a riskier kind of investment, but it also has the potential to be a lot more rewarding and more interesting.

6. Look for Companies with Solid Management

As with almost all businesses, success boils down to people as much as it does the product they are creating. A well-run company with a solid management team will lead to a more successful business plan than a company that can’t keep its finances in order.

7. Consider Looking for Indirect Cannabis Investments

While the obvious choice for people looking to invest in the cannabis industry is to get involved in businesses that grow and sell cannabis and cannabis products, that may not be the only (or the best) option. Other brands that indirectly impact the marijuana industry might offer equally exciting opportunities with less risk. Look into ancillary companies that help market and brand the cannabis products. Perhaps there are companies that provide business solutions or technology to make cannabis production and distribution more efficient and profitable; look into investing there.

8. Be Cautious

As always, be careful, do your research and be cautious. If something seems too good to be true, it probably is. Be smart with your money, don’t jump on the first opportunity that looks and smells green, and make educated choices about how and where to invest your hard-earned cash.

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