“CanopyBoulder is seed-stage, mentorship-driven business accelerator for companies developing ancillary products and services for the legal cannabis industry,” says Patrick Rea
The US economy doesn’t spawn an entirely new industry very often and legal marijuana may well be the best ground floor opportunity we’ve seen since the early days of the Internet. The fact is that the pendulum tipped and the legal marijuana business is the fastest growing industry in the US.
Last year, Colorado dispensaries sold almost $700 million worth of medical and recreational marijuana. If the drug is legalized nationwide, CanopyBoulder CEO Patrick Rea believes cannabis will be a $37 billion domestic market. (By comparison, coffee is a $30 billion domestic market.)
No one knows when or if cannabis will be made legal federally, but Rea often references two upcoming milestones creating much chatter around the industry: California is expected to vote on legalization on election day 2016 or earlier, potentially opening sales to adults in an economy larger than Russia’s. (California already allows medical marijuana.) Secondly, Rea said, when cannabis businesses obtain full access to banking services, startups will see their valuations rise, “because right now no one can finance acquisitions and investments.”
Rea’s background includes investment banking and time in the nutritional and wellness space, which he compares to cannabis. The latter two are underregulated, which he says creates opportunities for businesses with the right mix of boldness and prudence. (Cannabis is regulated in Colorado but not federally, since it is illegal.) He came up with the idea for CanopyBoulder while attending a demo day for the Unreasonable Institute, another Boulder accelerator. Rea wrote the first draft of the business plan on his phone. It was there that he met Micah Tapman, now CanopyBoulder partner and program manger, and they bonded in “classic Boulder style,” over bike rides and craft beers.
CanopyBoulder has raised $1.2 million from investors, and plans to work with 20 startups this year, all selected from an open application. A tip to prospective applicants: You probably don’t want to approach Canopy with an idea for a new smoking device or vaporizer. “A lot of really interesting bongs and pipes and things like that came across our desks,” Rea recalls. But the market is so saturated that “you really have to have some truly unique evolution of that product to be competitive.” Selected companies will include software, hardware, media, data, safety, grow-tech and other businesses that don’t “touch the plant”. There will be no grow operations, extraction businesses, manufacturers of edibles, nor dispensaries in our accelerator.
Upon selection, startups are invited to Boulder for a 13-week business boot camp while surrounded with expert advisors, mentors, and investors. Each company is given $20,000 in seed capital, over $40,000 in business services, $1M in mentorship value, and produce a demo day where they can tell their story to an auditorium of investors and cannabis industry professionals.
On CanopyBoulder’s opening day this past Spring, each company gave its pitch to the group and sat for a talk by Nick Hofmeister, a serial entrepreneur who mentors TechStars companies. Other mentors include lawyers, investors, and prominent cannabis entrepreneurs, as well as figures from Boulder’s vibrant startup scene.
“Cannabis is a terribly interesting space, and I don’t come at it as a user,” Hofmeister told Fast Company during a recent interview. “But I find it a fascinating industry, because it’s one of the only cases where there is a market that’s $50 billion but the legal market is only $2.7 [billion]. So you know the market demand is out there, and you know there’s going to be a massive expansion of regulatory support for it. What does it look like to create an industry not from scratch, but from legal scratch?”
Before the opening-night party, Steve DeAngelo, one of the most prominent cannabis activists and entrepreneurs in the country, spoke to the eager group of startups gathered at CanopyBoulder. DeAngelo, who wears his long hair in two braids, topped with a trademark fedora, envisions a day when cannabis has a place in every medicine cabinet as a remedy for minor ailments like insomnia, and becomes a standard treatment in nursing homes.
When this happens, he predicts that domestic sales will rocket past $150 billion. “I’m not after the alcoholic beverage market, I’m after the health-care market,” he says.
During his talk, DeAngelo balances a healthy respect for profit with a sense of social responsibility. He says that the cannabis industry needs to become “a new kind of industry” that treads lightly on the environment and pays workers a living wage.
And then, getting into the sweet spot of his ideas, he hits on a thought that future CanopyBoulder applicants would do well to consider: “If, 20 years from now, we turn around and look over our shoulders, and all we’ve done is make big piles of money, we will have blown it.”