The caution shows the divide between the cannabis movement as inspired by principle and as driven by commerce. It doesn't make business sense for entrepreneurs and investors to push too hard for federal legalization. As it is, the fledgling industry enjoys protection against the giants of tobacco, pharma, and alcohol.
Although a recent poll found that most Americans support legalizing marijuana, it remains to be seen how many will dabble in recreational use. A review of about 40,000 legal marijuana purchases made in Washington State from September 2014 to July 2016 found that the average consumer spent $647 annually on the pleasure/vice. The yearly expenditure on tobacco smoking is $2,555 and $1,560 for alcohol, according to data from Bankrate.
And fast-growing industries are prone to shakeouts. Investor-members of Arcview, which was founded in 2010, have put $83 million into 130 companies in the cannabis industry, drawing from more than 500 investors. If distributed evenly, that isn't much capital per startup. Out of so many seeds sown, a few may flourish and provide big returns. The people who wind up funding the many that don't make it will be disappointed.
Investors might be wise to get in on weed before it sweeps the nation. But it has a long way to go before it catches up with the more than $200 billion in revenue that alcohol brings in every year.
This article was provided by Bloomberg News.