By Michelle Konstantinovsky
Once upon a time, not so long ago, the idea of investing in cannabis raised eyebrows from skeptics—even in California. But nearly a year after the state legalized recreational marijuana use for adults, entrepreneurs are hoping to capitalize on a (pun intended) budding industry.
Douglas Cortina, a founding partner of Osiris Ventures, got a head start three years ago, when he sensed major change on the horizon. The East Coast native initially moved to the Bay in 2010 to pursue a career in real estate and develop high-end residential properties in San Francisco. But by 2014, Cortina was ready for a new challenge.
“I was always fascinated with medical cannabis and how the laws worked,” he says. “I started paying more attention to the space and doing a little research and meeting with attorneys to get up to speed on what the law allowed.”
In addition to starting his own medical dispensary, Batch Seven, Cortina has sponsored several medical cannabis cultivation and extraction projects. “As a developer, you can see what you build because it’s tangible,” he explains. “This is a kind of different space where you actually produce and grow to help people, and I thought it was really cool and kind of unique for me.”
He also helps people invest in the industry and his guidance may be helpful to anyone trying to understand the nuances of farms, dispensaries and even food products. (Did you know marijuana-infused wine is a thing?) Here are his best tips for would-be cannabis backers.
Get to know the legal landscape
“A lot has changed locally and on the state level,” Cortina says. “In 2015, you had three companion bills passed in the state legislature that composed the California Medical Marijuana Regulation and Safety Act. Then, last year, voters approved Prop 64, the Adult Use of Marijuana Act. In San Francisco, there’s Article 33 of the Health and Safety Code, which has new ordinances that address adult use. There’s been so much going on—it’s been interesting and engrossing, and not a dull moment.”
Recognize the real potential
and the limitations
“Cannabis has always been the largest, most popular, most widely consumed drug in the country,” Cortina observes. “Even if you don’t consume it yourself, you know someone who does. It’s a massive market in which people haven’t been able to invest because it’s been illegal for so long.” But although California voters loosened the reins on medicinal and adult use, cannabis consumption remains banned nationwide. Says Cortina: “Large companies are barred from participating because of the fact that it’s federally illegal. That creates an opportunity for entrepreneurs to comfortably get into the space.”
Learn how to spot
“The state law breaks licenses into different categories—there are maybe 10 to 15 classes of licenses including cultivating, dispensing, transporting, testing, et cetera,” Cortina advises. “Understand the space at a higher level and then you can look at the different opportunities with some context. Because someone could say, ‘I’m raising money for a farm in Sonoma County,’ but unless you understand licensing, you wouldn’t know what to ask to know if it’s an appropriate investment. I just encourage people to do a little research around what the state permit licensing system looks like.”
Disregard the old stigma
“In this part of the country, it’s rare to come into contact with someone so opposed to cannabis that you would suffer reputational risk because of your involvement,” Cortina says. “Silicon Valley is the hub of innovation and it attracts entrepreneurs looking for the new and cutting-edge. Over the past two years, I’ve seen many more affluent, deep-pocketed investors getting in, and that reputational risk is subsiding.”
Slow your roll
According to Cortina, “A lot of companies are raising money and it’s difficult to see them all lasting. There’s a little bit of a scarcity factor where people feel like they’re missing an opportunity, so that allows some companies to raise money at valuations that maybe aren’t sustainable. I’d advise people not to be concerned they’re missing the window; it’s more important to identify good operators and solid companies and make sure they’re doing things the right way.”