An app with 'high' expectations

An app with high expectations
An app with high expectations

Each week on CNBC's "Elevator Pitch" series, an entrepreneur gets an opportunity to blind pitch his or her company to a secret investor. The investor doesn't know anything about the business being pitched, so it's the entrepreneur's one shot to sell it.

One entrepreneur is lighting up the social networking space by combining tech with a love for cannabis.

Mass Roots is a fast-growing social network for marijuana consumers.

"People use our app to find smoking buddies, share their cannabis experiences and stay connected with local dispensaries," co-founder Isaac Dietrich told CNBC.

Dietrich was given 30 seconds to blind pitch his company to "Shark Tank's" millionaire investor Kevin O'Leary. After hearing the pitch, "Mr. Wonderful" voiced concern that there are only a handful of states where the business concept is even applicable.

Mass Roots is only available in states with legalized marijuana use, but Dietrich remained confident in the company's market potential, explaining that there are 23 states where marijuana use is legal for at least prescribed medicinal use, and it's a growing industry.

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According to Ibis World Reports, medical and recreational marijuana is a $1.9 billion industry, and revenues are expected to grow over 30 percent in the next five years.

More importantly, O'Learly asked, "How do you make money?"

Mass Roots generates revenue by charging dispensaries a monthly recurring fee for listing its products, services, and connecting the dispensary with the app's 375,000 cannabis consumers, Dietrich said.

"Right now we're just doing advertising because that's what's easiest by law," he said.

Dietrich added, "since launching MassRoots for Business in March 2015, over 500 cannabis-related businesses have joined, including 46 percent of the dispensaries in Colorado. Based on our current projections, we expect to be generating $1 million per month in revenue by the end of 2016."

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O'Leary had a variety of other concerns including "the profits you make in states that are legal, you can't even put it in a bank yet."

According to Dietrich, Mass Roots doesn't face any significant competition from other social networks for cannabis. In the coming weeks, the company plans to expand to facilitate distribution transactions through a partnership with seed-to-sale system Flowhub. The integration will give MassRoots' users access to live pricing, inventory and an order-ahead system.

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Since its official launch in July 2013, the Denver-based company has raised $2.4 million in funding. In April, Mass Roots became one of the first cannabis-related companies to go public, trading under the ticker symbol MSRT.

O'Leary agreed that the company has great potential, but he can't get involved "until it's a federal mandate that doesn't put me at any risk in any state."

Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."