ILLINOIS: Talk long enough to anyone in the business of growing or selling medical marijuana, and you’ll hear plenty about risk.
It’s hard to find a bank. It’s difficult to find insurance. The plants are finicky. Security systems are expensive. Good, trusted employees are hard to find. State laws change at the whim of legislators and regulators. And, of course, because the drug remains illegal under U.S. law, federal agents could swoop in at any time, shut the operation down and put its owners in jail.
The risks may be even greater in Illinois, where Gov. Pat Quinn this month signed a bill into law that will allow a temporary, for-profit medical marijuana industry, permitting cannabis sales to patients with certain medical conditions starting in 2014.
Still, as two events over the past three days have proved, plenty of people are willing to invest hundreds of thousands of dollars — in some cases several million — to get a shot at serving a new market of marijuana consumers.
More than 200 people crowded into a second-floor meeting area of the Embassy Suites in River North on Saturday, paying up to $375 each to learn more about the business of medical marijuana and to network with experienced purveyors of the product from states like California, Colorado and Michigan. That followed an event Thursday at another downtown hotel that drew more than 50.
“I’ve talked to several potential investors here thinking home-run dollars from the beginning,” said Michael Mayes, the Chicago-based chief executive officer of Quantum 9, a marijuana consulting and technology company. “But, here at least, if you’re swinging for the fences, you have to know you might strike out.”
Mayes, 30, who also operates two marijuana cultivation centers and three retail dispensaries in Colorado, had conversations with attorneys, doctors, prospective growers and capitalists who see opportunities in Illinois to carve out a niche in the nascent industry.
While there appears to be plenty of interest, the potential rewards may not outweigh the risks.
“There is a lot of optimism here, but it’s going to take a minimum of a year before any of these businesses can start operating, maybe even 15 to 18 months,” said Hilary Bricken, a Seattle-based attorney who has worked with growers and sellers in other states.
Although the new state law kicks in Jan. 1, three state agencies must also draft rules and regulations to govern the industry. Then there’s an intensive application and review process, which could take several months depending on the number of individuals or businesses that apply for a limited number of licenses to grow and sell the product.
By the time the first ounce of medical marijuana is sold to a patient with a qualified condition at a licensed dispensary in Illinois, it could be mid-2015. And because the four-year pilot program could end Dec. 31, 2017, there may be only two and a half years to recoup an investment that would likely surpass $1 million.
“There are just so many unknowns about Illinois. From a capital perspective, it seems pretty tough,” said Elliott Klug, an industry veteran who operates a growing operation and chain of dispensaries based in Denver under the Pink House banner.
While Klug isn’t willing to test the waters in Illinois, many of his contemporaries have shown interest in competing for one of 22 licenses to grow the product and 60 to sell it across the state.