Here’s how big the legal pot business will be by 2020
Legal marijuana is already big business in America. Colorado alone sold more than $700 million worth of legal weed in 2014, its first full-year of legal recreational and medical sales. Three other states and the District of Columbia have legalized recreational marijuana. Twenty-three states and Puerto Rico have legalized medical marijuana, and revenue for the industry as a whole has been growing nearly 34% a year for the past five years. And it’s only expected to keep growing.
These five numbers show just how big legal American marijuana could be in five years.
Marijuana is what the research firm IBISWorld calls a growth sector, and it expects legal marijuana to generate $13.4 billion in revenue in 2020, up an annualized 30.3%. Legal marijuana is expected to generate about $3.6 billion in revenue this year alone. Recreational marijuana sales are driving much of the revenue gains, but the medical sector is also expanding. "Should medical marijuana become legal at the federal level, for example, the industry could see even more extensive growth," IBISWorld said.
There are an estimated 5,000 stores currently selling retail recreational or medical marijuana across the U.S., and IBISWorld expects that number to grow nearly 20% a year through 2020, when the number is expected to break the 12,000-mark.
It’s not clear how many jobs legal marijuana has created. While some jobs require government-issued licenses, no entity tracks the total number of jobs created not only by marijuana growers and dispensaries but also by security firms, business service providers, regulators and others who service the industry. IBISWorld estimates 75,000 people will work in legal marijuana by the year’s end and expects that number rise to 212,091 by 2020.
Medicinal marijuana may be more prevalent in America, but recreational marijuana is shaping up as the industry’s real growth opportunity. So far, four U.S. states — Colorado, Washington, Oregon and Alaska — and the District of Columbia have legalized recreational marijuana use. Similar ballot initiatives have popped up in several other states, and by 2020 the ArcView Investor Group —which helps connect marijuana investors with companies seeking funding —expects voters in 18 states will have legalized marijuana. Brendan Kennedy, CEO of Privateer Holdings, the nation's leading cannabis private equity fund, is a bit more optimistic. "It's very likely that the prohibition of retail cannabis will have ended by 2020," he said. "The Berlin wall of cannabis prohibition is past the tipping point."
More than $120 million in investments
Privateer Holdings has raised $82 million from investors, including Peter Thiel's Founders Fund, which also has invested in Facebook, Airbnb, Lyft and Spotify. "Raising that first $7 million was harder than any financial raise I’ve ever done," Privateer's Kennedy said. But times have changed. Kennedy said he's heard from more large institutional investors interested in the marijuana space in the past 90 days than he had in the previous four years. Separately, the ArcView Investor Network said it has helped facilitate more than $40 million in investments in 53 marijuana-related startups. Even Snoop Dogg has gotten into the funding game with a $10 million investment in a medical marijuana delivery startup.
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