Ask HN: Why would or wouldn't you do a marijuana-focused startup?

Despite some of the obvious problems, the matter of "taste" provides the biggest challenge / opportunity. By "taste", I mean something similar to what plagues wines especially, but also beers and single malt scotches -- maybe better described as snobbery.

How does one either surf (or conquer) the matter of "taste" in weed? What happens when -- by analogy -- someone makes the weed version of "Sideways" and you're the guy holding the weed version of merlot?

From a legal standpoint, I'd love to get involved just because it is a kind of frontier.

I'm surprised no one has mentioned the obvious thing, which is that you'd end up in prison. The DEA might ignore small shops in CO and WA but not a nationally known internet startup.

Sounds boring unless you're prepared to do the illegal stuff, and then that introduces its own problems.

Regulation. In a true "free-market" system, like we would have if the HN Libertarians were in charge, running a business of this type would be much easier and more profitable. In Colorado, for example, the only reason they have recently "legalized it" is to tax the hell out of the sale of marijuana. The licenses to run a weed-selling business are expensive and almost impossible to get, the taxes you pay on each sale are the highest of anything in the state (more than gas, cigarettes, ect...), and they have crazy regulations regarding the way you are allowed to acquire inventory (the majority of your inventory must be home-grown, all your workers documented and screened, grow-space must be separate from retail space, ect...)

Selling weed legally is a logistical nightmare. Not worth it, in my opinion.

Cannabis is currently illegal. This means that some of the people involved in growing and distributing cannabis are vicious criminals. This includes some of the Mexican narco gangs, and in the UK includes people who traffic illegal immigrants into the country and force them to work in grow farms. (Here's one example, but there are more http://www.chroniclelive.co.uk/news/local-news/illegal-immig... )

Any cannabis related service would have to risk-assess that kind of involvement.

And any attempt to create a "nice" market - avoiding that kind of exploitation by having small growers providing small amounts to locals, avoiding the associated criminality and restricting service to those over the age of 21 would be destroyed by The War On Drugs.

"We" might think it's a good idea, but plenty of people would call it Evil and get support for that viewpoint.

Unless I had full-on born in the US grade citizenship, I wouldn't touch it. The US legal hassle plus the arbitrary nature of border guards makes this an absolute non-starter.

The best opportunity in this industry is selling the pick axes to the gold miners. The marijuana industry will need a lot of infrastructure. Just look at all the regulations. For example, there is a lot of tracking involved. So maybe a startup could focus on tracking inventory for dispensaries. But the point is that you can make money here without doing anything illegal. Just build the infrastructure for the people who are selling the weed, and once it's legal, you'll be in a great position.

Canada is a whole new ballgame for Cannabis startups.

Prime Minister Harper announced that legalization is coming in the next 10 years, tops. We have 6 months before the new regulations are in place, which open the floodgates for corporate cannabis providers. We're currently in a cannabis gold rush right now, so I figured this would be a great time to start a Cooperative that courts illegal growers into becoming legal ones, if just to prevent clogging the courts with people trying to produce medicine for sick people.

We've gotten a lot of support from Health Canada, too, as it seems that there's a massive contingent within that's unhappy with MMAR (the previous regulations) going away. We haven't even sought outside (public or semi-private) funding yet, because we haven't had to. :)

we have a website with a fantastic (imo) domain name, but we're keeping it quiet until we're closer to launch. hoping to pimp it here when it's ready.

Without going into too much detail, I did found a MJ based startup, however I ran into 3 big problems:

1. My startup focused on fostering relationships with producers and distributors, both of whom are hesitant to openly discuss or display their business, location etc in a way that can be easily accessed publicly.

2. Legal fees. I tried to set up everything as legitimately as possible through a lawyer as well as keep him on retainer in case I ended up in any trouble with the law. Massive overhead.

3. Saturation and fear. At the time of my efforts there were two major shifts in the West Coast market. The first was a flood of growers both indoor and out that greatly reduced the value of anything that was not of the absolute highest quality. The second was the crackdown on many major players in the game; people saw that old names in the MJ industry were getting raided and prosecuted and started to either withdraw or severely limit their business relationships.

Basically until everything is legalized at both the state and federal levels it will continue to be very difficult and expensive to try to revolutionize this industry.

Karma. You're in a business that's easy for ordinary people and makes a lot money and is arguably exploiting people who develop a habit. You are competing with the illicit drug industry. In societies eyes, anything goes, so if someone with a little power wants to strongarm you there will be no one anywhere on your side. If you have any success someone will just come and take it from you. Many people won't even do business with you. Good luck even renting a space. There are much better industries and opportunities to be in.

Regulatory gray areas are risky, but can sometimes be great opportunities. Uber and Airbnb are two well known examples of companies that got huge by doing something that may not have been legal everywhere.

Related examples include drones[1], bitcoin, crowdfunding investment[2], self-driving cars[3] and 3D printing[4].

Both Airbnb and Uber have become so big that they can try to work the system and change the regulations in their favor, but smaller companies might have to be more wily. For example, commercial drone activity is basically illegal in the U.S., but I know of one startup that currently develops and flies their technology on manned aircraft with the idea of putting it on drones when they can, and another that resides in the U.S. but is currently focused on customers outside the U.S.

[1] http://www.wired.com/dangerroom/2013/02/drone-regulation/ [2] http://www.crowdvalley.com/2013/05/06/the-secs-recent-no-act... [3] http://www.forbes.com/sites/jimgorzelany/2013/06/03/feds-ask... [4] http://newsfeed.time.com/2013/10/10/how-3d-printed-guns-are-...

I would do a marijuana-focused startup. Marijuana has a real impact to improve people's lives in an abundance of ways. Culturally, it's not very well accepted now, but that will change. To me, it's a lot like sex: a couple of decades ago, there was this tremendous stigma surrounding sex that eroded to a large extent in our culture. I think we're seeing the same thing with marijuana.

A lot of people have no experience with marijuana, or experience limited to partying in high school and college. There's much more to it than that which society at large has not yet realized. Modern strains with high CBD combined with carefully controlling your dosage and using smoke-free delivery systems such as vaporizers and tinctures make taking it a much cleaner, less offensive affair. Not all marijuana has to blow your mind; it's quite practical to control your dosage and type to just give anxious people clarity of mind, help uneasy people sleep better, and a hundred other applications.

I know lots of people who wouldn't take drugs or smoke a joint, but when I show them a neatly packaged high cbd lozenge which will help them get right to sleep and have no hangover effects are most intrigued.

I bought a Pax vaporizer and it's amazing, and made by a San Francisco startup. It's a tremendous product.

I wouldn't do one because I don't know the domain, so can't figure out what the problems surrounding it are for enthusiasts.

In 30 years we'll be looking at a billionaire or two who made their money from the decriminalization of marijuana. The question is wether you want to be one of them or not.

I don't smoke weed. Never have. But I don't see anything immoral with a marijuana based company. In fact, providing a legitimate means for people to buy weed would take a lot of money away from violent drug criminals. So you'd likely be doing society a service.

I would try to learn from the lessons of music sharing businesses from Napster to Spotify. For legally-vague ideas with a lot of money to be made, the key seems to be staying in front of how things are being regulated. Marijuana in CA, for instance, is more or less legalized for consumers but the feds have spot-targeted producers and storefronts through infrastructure attacks (like threatening landlords). To me, this sounds like a stalling tactic to keep the industry from growing too rapidly.

If I was to work on a startup in this field I would focus on the consumer end of the business and only in a supplemental way, like a review site. What you don't want is a business with a warehouse full of pot or a lot of bills owed from producers/retailers who are used to being threatened and have no incentive to pay you.

I'm not saying I wouldn't do it, but I do have an anecdote that might explain why you should be cautious.

About 15 years ago, I did some work with a guy who ran online pharma websites. He made a mint in the business, but it wasn't without it's bumps.

This was before the online pharma boom, and before the Feds really got involved. He ran a website where users filled out questionnaires, which were then reviewed by a doctor (no really, an actual doctor), who then wrote a prescription, which was then filled by a pharmacy.

One day, the men in the black suits came knocking. Right now you're probably thinking that everything above was clearly illegal and this guy is screwed, but that turned out not to be the case. He and his partner sat in jail while the Feds figured out exactly what they were doing wrong. They had good, detailed records of every "patient", and because selling medication over the internet was so new, there weren't a lot of laws that covered exactly what the requirements were.

In the end, the two owners spent about 90 days in jail, and had millions of dollars seized by the government. The Feds dictated that they could continue to operate their business under a handful of conditions:

1) They could no longer operate their own pharmacy.

2) They could no longer directly employ the doctor reviewing prescriptions, and the doctor must be paid regardless of whether a prescription is written.

3) They could not sell any drugs of a certain classification (controlled?).

There was some specific class of controlled drugs they couldn't sell, but I can't remember what it was.

This guy, and his family, ended up in the press with their name slandered all over the place. They ended up moving out of state to escape the aftermath.

I'm sure plenty of people are lined up ready to judge the guy, but I knew him. He was the kind of guy who gets shit done, and he ran an above-board business considering what they were doing. That's the only reason he's not still rotting in a cell.

So, the moral of the story is, these kinds of businesses can be very profitable, but they're not without risks. This is an entirely different kind of risk than what an investor is willing to take on. We're not talking capital risk, we're talking criminal prosecution. Those are the risks when you operate in a legal gray area. Don't get me wrong, someone has got to do it, otherwise there will be no progress, but you should go in with eyes open.