Despite the failure of a medical marijuana initiative in Florida—it garnered 57% of the vote, short of the 60% needed to amend the state constitution—victories in three more jurisdictions added impetus to the industry’s gathering momentum. In 2012, Colorado and Washington became the first states in the nation to legalize the sale and use of marijuana for non-medical purposes; 23 states and the nation’s capital already allow medical marijuana; and proposals to legalize adult recreational use are expected to be on the ballot in California, Massachusetts, Maine, Nevada and Arizona in 2016.

A post-election analysis by New York-based GreenWave Advisors, a provider of financial research on the legal marijuana industry, estimates that U.S. retail marijuana sales revenue, including medical and adult use, could reach $34.7 billion by 2020 if full legalization occurs in all 50 states and Washington. Based on what GreenWave sees as the most likely progression of legalization, retail marijuana industry revenues are likely to be $20.9 billion by 2020. The firm lowered both estimates slightly from its pre-election projections because it believes that with Republicans controlling the House of Representatives and Senate, and gaining a net increase of three state governors, the pace of legalization may slow.

Legal marijuana sales will reach almost $196.8 million in Oregon and $79.9 million in Alaska during the first 12 months of retail operations, estimates ArcView Market Research, part of The ArcView Group, a national cannabis investment and research firm. Those sales will generate more than $20 million in excise taxes for Oregon and $10 million for Alaska. The full market potential—which it defines as each market’s value if 100 percent of all current demand for cannabis goes to legal regulated sellers—is $569.4 million in Oregon and $187.5 million in Alaska, according to AMR.

It all adds up to a budding investment opportunity in “the fastest-growing industry in America,” according to Troy Dayton, ArcView’s co-founder and chief executive. The ArcView Investor Network helps match accredited investors with companies involved in the legal marijuana industry that are seeking capital. It more than 300 investors, who have invested more than $14 million in 28 companies.

The legal cannabis industry grew 64% between 2013 and 2014, according to Dayton. He believes many private investors who were biding their time prior to the elections are now ready to commit capital.

“There are investors who were probably sitting on the sidelines saying, let’s see how Colorado and Washington play out and if this whole legalization thing is just a blip or if people are going to backlash against it,” says Dayton. “But now that has clearly been proven wrong. In fact, legalization is just as popular, if not more popular, now. That eases a lot of the concern for more conservative, risk-averse investors and I think we’re going to see a whole new batch of investors jumping in and, perhaps almost as importantly, an additional new batch of entrepreneurs jumping in.”

Investment opportunities are not limited to growers and sellers of legal marijuana. A broad spectrum of ancillary businesses and service providers are starting up and hoping to grow along with the industry. These include everything from packaging manufacturers, which must comply with strict regulations and guidelines to ensure all marijuana product packaging is childproof, to companies that extract the oils and active ingredients from cannabis for use in a variety of products, and others that provide specialized security services for cannabis warehouses and dispensaries.

Marijuana On-Demand?
There’s An App For That
One example of an ancillary marijuana business is San Francisco-based Eaze. Strictly a mobile technology play, the company’s business model is similar to that of Uber, the on-demand service that enables consumers to order a taxi or private car service through a mobile phone app.

The difference is that the Eaze app enables verified medical marijuana patients to select a strain and quantity of marijuana and have it delivered on-demand, usually in about 10 minutes within San Francisco and the surrounding area. Eaze does not handle the marijuana or employ delivery drivers. The company has partnered with SPARC, San Francisco’s largest medical marijuana collective, which hires the drivers who carry a supply of medical marijuana in their vehicles and use the Eaze technology platform to optimize delivery routes and fill patients’ orders.

Ease, which launched in July 2014, announced in early November that it raised $1.5 million in its seed round from about 40 Silicon Valley angel and institutional investors, including The ArcView Group. The technology is already being used to speed deliveries of medical marijuana to thousands of patients in the San Francisco area. It also allows for data and trend analysis that enables the company to make business decisions based on smart analytics, according to Eaze.

“It’s been met with a lot of excitement,” says Eaze founder and CEO Keith McCarty. “We’re touching a lot of hot areas within the technology space, mobile, on-demand consumer services, geolocation. All of these are hot topics within technology and we’re serving this category that is arguably the fastest-growing industry in America, which is marijuana.”

The app is a free download on the company’s website. McCarty said the company has developed an IOS version and is in discussions with Apple to make it available through Apple’s app store.

McCarty says investor interest in Eaze is high “because not only are we touching all these hot topics within the technology world, but we’re not actually touching the [marijuana] plants. So it reduces the risk that would otherwise be involved in investing within that category directly. We’ve seen lots of interest following the elections.”

Eaze plans to use the capital for expansion, primarily of its technology platform, but also for its geographic presence. McCarty declined to put a timetable on expansion to other markets, but noted that the platform is scalable and adaptable for use anywhere.

“The way we’ve developed the technology we can basically flip the switch any time, but it’s a little more complex than that. We want to make sure we’re choosing the right partners,” says McCarty. When Eaze expands to other markets, its app may also expand to recreational marijuana users who wish to order cannabis products and have it delivered on-demand.

“From just a technology perspective, we’re there,” says McCarty. “We have everything set up to be able to scale to these other territories really fast. We’re still making refinements from an operational perspective and just making sure we have a well-oiled machine and a great blueprint here in San Francisco that we can implement and activate in other territories.”

Legal Issues
Perhaps the biggest shadow over the legal marijuana industry is uncertainty about enforcement of existing federal drug laws, under which the sale and possession of marijuana is still a crime. The Justice Dept. has chosen to look the other way in states that have legalized marijuana as long as they do not run afoul of federal priorities such as selling the drug to minors or funneling marijuana revenues to gangs and drug cartels.

Meanwhile, Congress, which has jurisdiction over Washington, D.C., will have to sign off on the District’s legalization initiative before it can take effect. The outcome may be that Congress will allow recreational use of marijuana in D.C. but keep the very same behavior a federal crime in most of the rest of the country.

As election results in 2012 and 2014 show, voters are willing to legalize adult recreational use of marijuana when given the choice. In many other jurisdictions, the trend is towards decriminalization of possession of small amounts of the drug. New York City announced in November that it is directing its police officers to stop arresting people who are carrying 25 grams or less of marijuana and instead issue summonses. A $100 fine is the penalty for a first-offense conviction; $200 for a second offense. Offenders will not be arrested, fingerprinted or have a mug shot or police record.

For investors, though, the one thing they fear most remains: uncertainty.

“Could we wake up one morning and the feds say they’re going to start going after these people and enforcing federal drug laws? They could, and that’s a huge risk. Do I think it’s going to happen? No I don’t,” says McCall. “But there’s a huge black cloud, which is the federal government, that hangs over this industry, so from a legal perspective, in my opinion, you have unmitigated risk.”

“I don’t think we’ll see federal law change in any significant way until 2018-2019,” says Dayton, “but it’s hard for me to imagine a situation where the federal government decides to enforce something that’s so widely supported around the country.”

Law-enforcement uncertainties notwithstanding, investors will continue to be attracted to the legal marijuana industry, and not just for the prospect of high returns, according to Dayton.

“One of the big reasons why some investors get into this is because they see this as an impact investment. There’s no doubt that that business and investment and building a responsible, politically engaged and profitable cannabis industry will be a major factor leading to a day that not a single adult is punished for the plant,” he says. “It’s not just an opportunity to invest in history or invest in the fastest growing industry in America, it’s also a chance to achieve a social end.”