TIM SMALE SPENT MONTHS RAISING the capital to start his business but he sees himself as more than simply an entrepreneur. For Smale, 51, making money is beside the point. He and his wife, Jennifer, were selected last summer by state authorities to open one of eight medical marijuana facilities in Maine. When Smale got word, he says, he fell on his knees and cried like a baby. As a migraine sufferer for years, Smale found marijuana to be his only relief. This is not just a business, he says, it s a calling.
Smale had worked most of his life in automotive manufacturing. But when Maine approved the sale of what Smale will only call the medicine, he and his wife, a born-and-raised New Englander, moved back and applied. We are middle America and need and want to serve, he says.
Smale s nonprofit spirit is typical of the pioneers behind today s 2,400 medical cannabis dispensaries. But it probably won t be forever. Fifteen states and the District of Columbia have made medical marijuana legal. Three more are near approval. Federal law outlaws marijuana possession, and any steps toward legalization, of course, remain controversial. Still, last year U.S. enforcers said they would leave medical operations alone if they complied with state law, and a surge of entrepreneurial interest has followed.
But while selling brownies to ease pain is legal in some states, profiting, for the most part, is not. Thus far, in every state except Colorado, dispensaries must be structured as not-for-profits. Steve DeAngelo, founder of Harborside Health Center in Oakland, Calif., embraces that model: He says it preserves the business for local owners and keeps big-money players out. People don t want to see a two-page [advertising] spread for reefer, he notes. At Harborside, some profits support in-house charities that offer free weed to the ailing poor and free addiction counseling, should the ailing poor become addicted. Anyone interested in making money from this, advises DeAngelo, should run the other way.
Which isn t to say there s no money in it. DeAngelo s clinic brings in $50,000 a day. He also founded the for-profit CannBe, a management-consulting firm for medical marijuana start-ups. There are plenty of patient, risk-loving capitalists already eyeing the estimated $36 billion marijuana market and betting that cash-starved states will continue to relax rules. A recent Gallup poll found 44 percent of Americans are in favor of legalization, almost twice as many as 15 years ago.
The seeds of future cash crops are already being planted. At a recent National Organization for the Reform of Marijuana Laws seminar, two hedge funds said they would consider buying any dispensaries available for sale. Still, the field is not for the faint of heart. To open his Remedy Compassion Center, an indoor sales and growing facility in Auburn, Maine, Smale borrowed from friends and tapped his savings, insurance and credit cards. And if a change in political winds erodes the current legal compromise, his dream could go up in smoke. After all, says Smale, I am conspiring to commit a federal felony. But for now he can get a foothold in an industry where the margins are what you call high.
Firing Up a Start-Up
How marijuana dispensary owners are launching their businesses.
Finding seed capital. It can take $500,000 or more. Much of that capital has to come from friends and family banks won t be helpful.
Giving back. Owners are vulnerable to the whims of local politics, so many try to make sure their facility serves the community in some way.
Getting an accountant and a lawyer. Owners are more often targets for annoying regulations and extra taxes than the average Joe.