The recent 4/20 events in Colorado made clear how rapidly the state's cannabis industry is growing. With pot sales becoming legal in many other areas around the country as well, some big mainstream investors and entrepreneurs are coming into the space.
And when there's money floating around a promising business like marijuana--it's a $2 billion industry in Colorado alone--it attracts sharks. In this case, serial entrepreneur Kevin Harrington, one of the original investors on ABC's Shark Tank. Harrington gave the keynote speech at the Marijuana Investor Summit on April 21 in Denver to a room packed with audience members looking to enter the market.
"Marijuana is here and it's here to stay for many, many years," he said. "By 2030, [the industry] will be worth $200 billion, and I want to get my share of that."
The Marijuana Investor Summit, which featured educational seminars, a pitch session, and a trade show, is thought to be the largest conference of its kind. With dozens of companies, entrepreneurs, and investors attending the three-day event, which was organized by the website Marijuana Investor News, the summit offered an inside look into early-stage businesses and investment opportunities.
Right now, the national marijuana industry is worth $50 billion, according to the latest industry figures. While most of that is still in the black market, the potential for above-board profits is drawing scads of investors. But with any nascent industry--especially one with a core product that is illegal on the federal level--there is a lot of risk involved.
Harrington, who says he has helped build 500 brands, said that despite the legal and regulatory issues there is a big opportunity for entrepreneurs who play it smart. Although the product, cannabis, is at the center of the industry's growth and excitement, Harrington stressed that pot sales don't have to be the basis of the most successful businesses in the space.
"The Gold Rush peaked in 1852, with billions of dollars in precious metal. But the majority of the money wasn't made selling gold; it was made from all the ancillary businesses that supported and surrounded the gold industry," he said. "That's where the money will be made in this industry."
Below, check out Harrington's tips for entrepreneurs who want to get in on what he says is "still a ground-floor industry."
First off, Harrington said, you should not be thinking about where the industry is now, but rather shoot for where it is going to be. And the future of the marijuana business is in companies that show they have an extensive reach. "You need to look like a national brand," he said.
Build a team
The cannabis industry requires many different skill sets. If you're a marijuana expert, you need to bring in professionals who have been working in other fields such as law, accounting, technology, packaging, design, and media. Harrington said your team is the most important thing to focus on in the early going. As an investor, he said, he would prefer to "go with an A team with a D product, rather than a D team with an A product."
Practice your pitch
Harrington said entrepreneurs need to always be thinking about raising money. If you want to land a shark like him, you need to practice your pitch and know how your company uniquely solves a problem. He offered three rules for a killer pitch: Tease, Please, and Seize.
Tease: First, you need to grab the audience's attention by identifying a problem. Your company needs to solve that problem or pain point quickly, easily, and in a unique fashion.
Please: This is where you showcase your product or service. You need to demonstrate the benefits and solutions your company provides quickly--what he calls the "magical transformation" of the problem.
Seize: This is where you seal the deal, Harrington said. During this phase you ask the investors for capital and pledge to provide value in return.