An embarrassing experience trying to get medical marijuana gave Mark Hadfield, chief technology officer of HelloMD Inc., the idea he needed to stimulate his business.
"My wife gave me the 'aha!' " said Hadfield. Two years ago, Pamela Hadfield visited a rent-by-the-hour doctor's office to obtain a medical marijuana card for her chronic migraines. Scheduling the appointment was cumbersome, and the office lacked privacy. The receptionist called out her name and date of birth to a packed waiting room, and then took her blood pressure at the check-in counter. The bad trip was an inspiration for her husband: Instead of targeting patients with general medical ailments, the foundering telemedicine company could connect people seeking medical marijuana cards with doctors.
HelloMD was able to use its existing technology to make an already-legal process more efficient and discreet. Within six weeks, the revamped HelloMD app was available to Californians. Consumers download it, answer two dozen health questions and spend roughly 20 minutes video chatting with a doctor, who can then recommend various marijuana strains. Customers receive a PDF of the doctor's approval a few minutes later and a laminated card in the mail. The whole process costs $49.
HelloMD is one of a growing cluster of startups pivoting their businesses into the cannabis industry. According to a 2015 estimate by the Marijuana Policy Project, nearly 1.5 million Americans have secured doctor recommendations to use marijuana as medicine.
Alaska, Colorado, Oregon, Washington, and the District of Columbia have approved marijuana for adult recreational use, and voters in California, Nevada and Massachusetts may pass similar measures in November. At least a dozen states are considering pot-related measures this fall, meaning that marijuana could soon be legal in some form in the majority of states nationwide.
Although cannabis is still illegal under federal law, individual states have been given free reign to design their own policies, and enforcement of national laws has been lax. That market opportunity isn't lost on investors or entrepreneurs. Venture capitalists jumped in last year, investing a record high of $215 million in 2015, up from $97.1 million in 2014, according to research firm CB Insights.
Mainstream venture capital firms, such as Founders Fund, DCM, Slow Ventures, and Y Combinator, made their first bets last year, joining longtime cannabis investors and advocates, including ArcView Group and Snoop Dogg's firm Casa Verde Capital. Those investments have emboldened a new class of entrepreneurs to launch marijuana-related startups focusing on cultivation, tracking, distribution and delivery. Other more established companies are shifting their business plans.
Transcend Lighting Inc. Chief Executive Officer Brian Bennett began getting cold calls from growers last year. His startup, which makes energy-efficient LED lights, had been working with aquarium operators who grow coral reefs and Canadian farmers who farm lettuce indoors. Transcend said its products' energy consumption is half the industry standard. That's appealing to cannabis growers, as electricity costs are one of the most expensive parts of the operation.
Bennett said he was surprised when he got his first cannabis call. He was also a little uncomfortable because he didn't know much about the industry. After confirming that supplying components to growers was legal, he began tailoring products for clients, like offering flexible LED ropes.
Cannabis has become the company's fastest growing category, now accounting for a third of its revenue. Transcend's LED lights, which are a proprietary blend of several colors but appear white, are designed to encourage growth of marijuana plants during the leafy vegetative stage. Transcend plans to soon offer lights targeting the flowering stage, the time when plants produce buds and are harvested.