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Ask Our Experts 09/09/2018

 

Q: Which are the best opportunities for investors looking to invest capital in the cannabis space if picking one singular business model/niche?


Though last January’s rescission of the Cole Memo by U.S. Attorney General Jeff Sessions citing the Controlled Substance Act of 1970 cast a chill over businesses’ opportunity for interstate commerce, there nevertheless remain hot pockets for opportunity in the market.


U.S. investors seeking to minimize risk and bypass such legal restrictions should consider choosing a pick-and-shovel play for investment strategy. One place to look for growth opportunities is among companies developing software or patented technology to improve the quality and speed of cannabis production.


Alternatives to investing in “plant-touching” companies (including cultivators, distributors, and producers) include a wide array of ancillary businesses which enjoy less inherent risk by dint of being “no-touch” operations.


For example, some companies specialize in the development of software for cannabis operations without running the risk of ever physically dealing with a cannabis plant itself.


Another strategy might be to consider investing in a company which, say, develops an underlying technology to produce cannabis-infused edibles. A specific example might be a patented technology that affects a cannabis-infused edible’s potency and onset time, such being entry points for advancements where huge market opportunities loom. So long as state-by-state opportunities stand in the face of federal cannabis prohibition, there will be plenty of risks among the rush of possibilities. Scalability and flexibility are among the most obvious benefits to investing in these types of companies.


Regardless, opportunities for success in a burgeoning, global industry exist for discovery by the investor whose intrepid spirit is surpassed only by shrewd decision-making. The chances for success will only expand as markets expand across state and national borders, offering broader access to bigger markets.