Colorado's new growth industry: pot

Entrepreneurs ramp up after the state's voters approved a constitutional amendment legalizing recreational use of marijuana.

Pedestrians are reflected in the main window of the Rocky Mountain High marijuana dispensary in downtown Denver. Venture capitalists are trying to figure out how to capitalize on the marijuana market in the wake of voter approval of recreational pot use in the state. (Genaro Molina, Los Angeles Times / December 12, 2012)

They are meeting a business consultant to discuss a way to boost share prices at one of their portfolio companies, which sells indoor garden kits for tomatoes, herbs, flowers and salad greens. Their idea is to tap into a new market, one they need to be discreet about for fear of blemishing the publicly traded company's reputation:

Marijuana.

Similar meetings have been taking place across Colorado in the two months since state voters approved a constitutional amendment allowing the adult use of recreational weed. The state has become a nucleus of the rapidly evolving marijuana industry, offering a glimpse at what life might be like if weed is legalized nationwide, with companies, entrepreneurs and investors maneuvering for a piece of the expected boom.

Dispensaries are handing out glossy prospectuses to lure investors. Luxury cannabis leisure magazines in the vein of Cigar Aficionado are promoting the industry and cannabis tourism. Companies are jostling for various sectors of the market, from grow lights to point-of-sale systems. And marijuana growers are shedding the pothead vibe to sell their services to MBAs, who may have the capital to get started but not the arcane knowledge required to produce good weed.
The hedge-fund partners from Lazarus Management Co. are among the new breed. They have come to Sputnik to talk to Ean Seeb, a consultant specializing in marijuana.

"In the past you had a bunch of marijuana enthusiasts with little or no business acumen looking to get into this industry," said Seeb, 37, co-founder of Denver Relief Consulting. "Now we're seeing a complete role reversal. A bunch of businessmen with a lot of money who recognize this opportunity, and they have no clue what they're doing as far as cultivation."

The state already boasts a regulated for-profit market of medicinal marijuana. It's much more regimented than California's industry, which operates under murky, ever-changing rules that vary from place to place.

In Colorado, sellers of medical marijuana must go through a background check, pay between $15,000 and $20,000 a year in licensing fees and submit to regular inspections by the state. Every plant is tagged and numbered, from seed to sale. No such system exists in California.
Seeb and his partners have run a dispensary for medical pot since 2009, and they know the key players in Colorado and how to get licensed. They tapped that expertise to start consulting in 2011. Their first client was a 97-year-old Denver institution, Central Bag and Burlap, which wanted to provide packaging for pot shops and marijuana edible products.
"We helped them create their name, their logo, their product line, the initial marketing," Seeb said. "They are now the premier packaging supplier for the industry in Colorado."
Other businesses are hoping the new law will spur even more growth. Toni Fox, owner of 3-D Denver's Discreet Dispensary, is seeking investors. She printed a company prospectus the moment Amendment 64 passed.

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http://www.latimes.com/news/local/la-me-pot-colorado-20130127,0,5071536.story