It's 4/20, or Weed Day, and investing in the business has never been easier.
Marijuana, known otherwise as cannabis, (or more accurately, cannabis sativa or cannabis indica) is a naturally occurring plant that produces a wide variety of chemicals impacting people in a myriad of ways. Most of us know the most common impact – "getting high," as well as a few of the others, getting hungry, feeling relaxed, or becoming tired.
But here's another we can add to the list: getting rich. The marijuana plant is currently driving the fastest growing industry in the United States with over 30 percent compound annual growth, according to preliminary 2016 revenues reported in Colorado by the Marijuana Enforcement Division. In other words, if you're a serious investor you need to start taking cannabis seriously.
Now you may be saying, "We get that it's growing, but where should I actually put my money?"
There are some critical factors to consider when answering this question.
First, avoid publicly traded marijuana companies (they're all over-the-counter) such as Medbox (OTC:NGBL) which ended up settling with the SEC for securities fraud. There are very few solid businesses in the space and finding the right one to invest in is extremely difficult. Your best bet is to invest in privately-held companies, which means you need to be an accredited investor, per SEC guidelines.
Second, look for companies with solid management teams teams. Yes, this is somewhat obvious, but it's particularly important in a community where "stoners" are still rampant. If someone is getting high at a meeting, that can ruin negotiations and negatively impact the company.
Third, avoid interacting directly with cannabis to side step a lot of risk. A smarter way is to find ancillary companies such as IoT technology firms, business intelligence solutions and next generation marketing platforms that provide the tools to help grow and distribute the plant.
Examples include Flowhub, an innovative software company servicing cannabis businesses, Front Range Biosciences, which helps research the cannabis plant, and BDS Analytics, the industry's authoritative market research firm.
Other hotbeds for ancillary products in the cannabis industry include distribution (Tradiv), marketing, advertising (Adistry), payment solutions (Tokken), agriculture tech (Grownetics) and business intelligence.