In addition to capturing a larger slice of a legal pot market that Arcview, a cannabis investor network, projects will reach $10bn by 2017, the High Times partners are eyeing other opportunities. Genetic testing will be used to identify strains that compete with other drugs such as sleep aids, on which Americans spend $22bn every year.
"That will persuade the rest of the doubting Thomases that this is a viable and valuable opportunity," Mr Kennedy said.
The fund was conceived at High Times, where, Mr Kennedy says, following votes to legalise cannabis in Colorado and Washington in 2012, the phones began ringing with entrepreneurs looking for seed money for their businesses. The magazine is not an investor.
The budding industry has been plagued by a lack of capital because most banks are wary of doing business with anyone who handles a drug that is still illegal under federal law. That has left many state-sanctioned businesses, including Silverpeak, dealing in cash.
More than 80 per cent of cannabis related start-ups are self-funded by their founders, with just 3 per cent of funds coming from venture capital and 5 per cent from angel investors, according to Mr Lewis.
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"Our natural lifespan without access to capital was getting constrained," he said. "This will fill that vacuum and provide resources to ourselves and other entrepreneurs."
The partners struck their deal over breakfast at the Four Seasons in Denver during the annual Cannabis Cup, an industry expo, on April 20 – a day marijuana aficionados celebrate as "4/20".
Their enthusiasm for cannabis is tempered with a dose of realism. Half of Colorado's medical marijuana businesses have shuttered in the last five years, Mr Zaitz said – a statistic Mr Lewis also cited in his presentation to the conference.
"If we build a good business with a good management team then the market will reward us," said Mr Zaitz, but he added: "To think this is some kind of a gold mine isn't a good bet."