The Exchange

Legal Marijuana Finally Gets Its Wall Street Close-Up

Photos and reporting by Siemond Chan

Investors with the cannabis-industry—focused ArcView Group hope the fast-growing legalization movement will soon make the herb a hot commodity on Wall Street.

The angel investment group was in New York City’s financial district June 14 for a pitch session where several marijuana-affiliated startup companies presented their business ideas to the Wall Street establishment at an event on Old Slip. Ever since voters in Colorado and Washington state last fall approved recreational marijuana use for adults 21 and older, the cannabis community has been working overtime to bootstrap new companies in every possible business niche — from distribution to staffing to packaging — but has been hamstrung by a lack of funds due to federal drug policies that preclude most banks from participating in the marijuana trade.

But many in the ArcVice Angel Investor Network, which currently includes some 40 high-net-worth investors, expect those limitations to soon change, opening up the floodgates on what could become the next great American cash crop, on par with tobacco and cotton, according to some industry watchers. For the time being, however, investors are focusing on ancillary businesses, those firms that serve cannabis growers and distributors but don't handle the plant themselves. That fact was reflected in the lineup of companies at the ArcView Group pitch session in New York.

“The most remarkable thing about [the] event was that it wasn’t remarkable,” said ArcView Group CEO Troy Dayton from his San Francisco office this week after returning home from New York. “It looked like any other investor pitch event for any other nascent industry. Wall Street has just begun to realize the potential in this market. Someday there will be entire floors on Wall Street devoted to the cannabis industry. The first steps were taken on Friday.”

What happens when the cannabis industry rubs elbows with the Wall Street establishment? Below are a few photos from the event, with comments from those in attendance.

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ArcView Group president Steve DeAngelo, a longtime marijuana activist and founder of Harborside Health Center in Oakland, Calif., speaks to reporters before the pitch sessions.

“If cannabis were to be fully legalized for all purposes, including industrial purposes and wellness purposes, it would be one of the 20 top industries worldwide," said marijuana activist Steve DeAngelo, pictured above. "Cannabis can be used to produce 25,000 consumer goods that we know of. It’s an incredibly valuable source of medicine, for everything from cancer to insomnia. The nutritional potential of cannabis is really just beginning to be explored, but it’s the world’s best source of essential fatty acids. So we have the potential to really create a multifaceted industry that operates not just in the medicinal realm, not just in the industrial realm, not just in the realm of food goods, but in all of those realms simultaneously.”

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DeAngelo introduces his dog, Goliath, to reporters.

“Since Colorado and Washington legalized cannabis for all adult use, we’ve seen a couple of interesting things happening. First of all, there’s been a change in the kind of people who are interested in creating cannabis businesses. We’re seeing people who have established businesses, people who have spent 20 or 30 or 40 years building a skillset, building a reputation, building a career in some other field and are now finally feeling secure enough to bring those skillsets to bear in the cannabis industry. ... We’re seeing an influx of people that are generally coming from a more professional and established kind of background.”

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Andy Joseph, president of Apeks Supercritical, a maker of CO2-based botanical and cannabis oil extraction equipment, pitches his company to the assembled investors.

“Today we’ve built 40-plus CO2 systems for cannabis applications," said Andy Joseph with Apeks Supercritical Extraction, pictured above. "That represents about 90% of our business at the moment. We’re projecting $3 million in revenue for 2013. Our calculations show that approximately 8% of the cannabis extraction equipment market is represented by us, but we feel we have the potential to be a $22 million company by 2018. That's representing about 20% of the cannabis concentrate equipment market, and we estimate conservatively a 16% profit to growth.”

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Dan Williams, founder of marijuana industry security provider Canna Security America, offers his pitch.

“Since 2009 we’ve done over $780,000 in sales,” Dan Williams, founder of Canna Security America, said in his presentation. “In 2011 we did approximately $184,000 in sales, in 2012 we did $283,000 in sales and met profitability at $67,000. In 2013 we’re looking for this to dramatically increase.” Added Chris Jensen, the company’s director of sales: “So what’s the plan? Full-scale national rollout with business sale within five years projected at $30 million.”

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