As California edges closer toward cannabis legalization for adult recreational use in November, a marijuana-focused business accelerator program has announced a new Berkeley-based boot camp for entrepreneurs.
Based out of the WeWork building on University, the accelerator called Canopy has agreed to invest a total of $180,000 investment in nine startups — though none of them are tied directly to the cultivation, refining, or sale of the drug. The 16-week program aims to refine the businesses, and ultimately help fledgling organizations raise additional capital, according to Canopy CEO Patrick Rea.
“Berkeley is a great place to launch a cannabis business,” Rea told Berkeleyside in a phone interview. “The important thing is to be in California, and to immerse the teams in the largest legal market for cannabis in the United States, especially at a time period when California is voting on legalization.”
The nine firms range from a cannabis-friendly social network, a vaporizer firm, and another that is developing pre-rolled papers, according to a press release announcing the program (more detail on the portfolio companies here). Firms in the program also have a chance to snag $50,000 in follow-on investments from Canopy. And since none will be cultivating or selling cannabis, they won’t require city licensing.
But, for the chair of Berkeley’s Medical Cannabis Commission, Charlie Pappas, big business — and the perceived ills it brings — are what the likes of Canopy represent. “I’m worried about big corporations becoming involved with cannabis, especially with legalization,” he told Berkeleyside. “It’s about concern for taking away the livelihood of the people that have been involved in medical cannabis, or the so-called ‘black market.’”
Overall, though, Pappas is concerned with the corporatization of cannabis because it may affect patients. “When you have whole corporate structure taking care of investors, you won’t serve patients,” he said. “We’re worried more that it will be a for-profit and that the best uses of cannabis, won’t be furthered. Corporate involvement is more interested in dollars than the best medicine.”
At the moment, Berkeley has four permitted cannabis dispensaries — though one, the iCann Health Center on Sacramento, has yet to open. All of them, by law, must operate on a non-profit or not-for-profit basis. Pappas says that at the moment cannabis is the third largest business in the city aside from restaurants and car dealerships, in terms of what tax revenues end up in city coffers. (On Tuesday, the City Council will take up the issue of adding one or two additional dispensaries).
“We’ve kept the status quo for a long time,” said Pappas, who has been pushing the City Council to allow the commercial cultivation of cannabis in the city, which was approved by voters in Measure T in 2010. Pappas says that the Medical Cannabis Commission has given the mayor and city council materials on possible tax revenues from commercial cultivation within city limits — $1 million per year in tax revenue — but officials have not yet passed the ordinance that sets out the rules.
Yet, the Bay Area, in general, is recognized in the industry as a desirable location to launch a cannabis business venture, according to Ben Larson, co-founder of Oakland-based Gateway, a cannabis incubator program. Though his company looked at Berkeley as a possible location, it settled on Oakland because it’s looking toward cannabis as an “industry that can grow with the city.”
When asked about the concerns Pappas expressed regarding corporations, Larson said that “every other mainstream market has different tiers of business, and cannabis will as well. In the short run, there might be growing pains, but that’s just business.”
Canopy and other business accelerator programs like it, such as Oakland-based Gateway, are a sign of the times. What was once a clandestine industry, with outlaws growing cannabis in the rural Northern California mountains, has transformed into a sprawling industry with an ever-growing market that is increasingly attracting what has long been the proverbial boogeyman: big business.
To wit, according to the Board of Equalization, legal, taxable sales of medical cannabis are on track to double to more than $1 billion from $450 million in 2014. And that’s only medical cannabis sales under the current motley regime of laws. ArcView, an investment company (which is one of Canopy’s partners) that focuses on the marijuana industry estimates the legal market to grow from $2.7 billion to $6.6 billion by 2020.
Colorado-based Canopy has been the target of criticism from anonymous founders of companies which have gone through the program, according to a report by the media company, IBT, which owns Newsweek and other publications. The complaints focused on the terms of the $20,000 seed investment, and the behavior of the executives at Canopy. Rea declined to comment.
Larson said that Canopy has been “providing a strong service for startups.” a
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