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Who Will Fund Start-Up Pot Businesses?

Liquor Board May Ban Out-of-State Investors

Who Will Fund Start-Up Pot Businesses?
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Most cannabis-related investment advice I've seen seems to distill down to this: Avoid companies that actually sell pot and instead invest in "ancillary" businesses—such as the hash-oil-machine maker, pot-selling software, and web-based weed advertising services. The typical reasoning for this reservation is the big federal question mark, the uncertainty about whether the Feds might start forfeiture proceedings against legal pot investments.

It turns out there might be another reason for investors to shy away from state-licensed cannabis companies: Initiative 502 may prohibit out-of-state investors from profiting from Washington's legal pot businesses.

At least that's been the state's interpretation. "The current thinking of the board is that all members of any license structure will need to have resided for three months in Washington," wrote Brian Smith, spokesman for the Washington State Liquor Control Board, when I asked him two weeks ago.

But Troy Dayton of the Arcview Group, a network of accredited investors interested in pot businesses, fears that a lack of outside capital could cause the state's legal pot experiment to fail. "When people are undercapitalized, they cut corners, they are unable to meet the consumer's need, and they are unable to commit energy to the things that matter to the public," he says. Dayton was buoyed by draft rules issued by the liquor board in mid-May, which make a distinction between owners—so-called "true parties of interest"—and financiers. "There is a residency requirement to be an owner, even a partial owner," he says. "There doesn't seem to be that requirement for financiers."

Can an investor really share in pot profits and not be considered an owner? "It's definitely a little ambiguous," says Hilary Bricken from Canna Law Group in Seattle.

But the state, upon further consideration, seems to be interpreting its own rules more conservatively. In response to my questions last week, the liquor board has clarified its position on out-of-state investments. "Being entitled to a percentage of the profits from the business would make someone a true party of interest," Smith tells me. "So, in essence, there is no allowance for an out-of-state financier that expects a percentage of the profits in exchange for a loan." recommended

 

Comments (11) RSS

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1
If one of the main goals of I-502 is avoiding Federal intervention, keeping all the business interests instate (limiting the interstate activity and the commerce clause) seems to make a whole lot of sense.
Posted by Shouldn't The Starbucks Of Pot Be A Local Company? on May 31, 2013 at 12:03 PM · Report this
2
It's been what? 7 months since voters legalized it. State's is going to drag its feet for the rest of the way simply because it's found a sweet spot. A spot were they won't prosecute people and leave the Feds to apply their rules themselves. Who wants to bet they (WA Government) ask for an extension to finalize the law?

On the other hand, how much pressure is coming from the Feds and how much is just fear of the Feds? Banks fear to lose their FDIC status, did the Feds say they would revoke it or is it pre-emptive fear?
Posted by JakeTheAligatorBoi on June 3, 2013 at 12:49 PM · Report this
3
it's my understanding that "financiers" in the draft rules means people who loan money only expecting the money back plus interest, not a share of the profits, and those people can be from out of state.
Posted by westseattlered on June 3, 2013 at 5:05 PM · Report this
4
Perhaps it's time for voters to take control away from the liquor-tards?
Posted by Seamus Ruah on June 4, 2013 at 9:37 PM · Report this
5
Washington State has literally thousands of millionaires, and I'm guessing that many of the Microsoft millionaires smoked just a little bit of weed in the day.

Finding local investors is not going to be a problem.
Posted by David in Shoreline on June 5, 2013 at 6:21 PM · Report this
6
I DON'T KNOW I AM LOOKING NOW READY TO GO JUST NEED FINANCING AND LOCATION. WHERE ARE THE FINANCER? I Have A Trademarked Company Name (GWB) George Washington Brand llc, Business License, Complex Turn Key Business Plan with every detail, Branding and Marketing Plan, Financer Agreement and much more. NEED Financing (total start up $568,000 – 4 yr % repayment out of state interest only permitted in State company share ok)and Building Location as a I-502 Producer and Processor in Washington State. Year 2 over $1 mil net profit, year 3 over $2 mil. Looking at 35% to 45% for financing. You will like the precise Business Plan and Branding Marketing Strategy!! SEE www.GeorgeWashingtonBrand.com Contact through site or GeorgeWashingtonBrand@gmail.com THIS PLAN AND BRANDING WILL BE # ONE (GWB)
Posted by George Washington Brand on August 27, 2013 at 6:18 PM · Report this
7
We are starting a chain of small weed shops in Washington and we are looking for investors.

http://cc-shops.com/

We are trying to raise $1,250,000 to open 4-10 small I-502 shops. Our cost per equity unit is $25,000.

We have a great team in place.
Posted by Pete&C&C on August 31, 2013 at 9:11 PM · Report this
8
Looking for financing in the I-502 industry. I have a comprehensive business plan. Start to finish.
Contact travissmith@ymail.com
Posted by Cannabliss on September 24, 2013 at 10:14 AM · Report this
9
Our I502 business, Green Amigos, LLC are interested in meeting with potential investors. We are able to provide extensive, professional business plan, operational plan, and anything further requested to potential investors. We currently are working with attorney Kurt Boehl in Wallingford area of Seattle, and are excited about the potential of our company! Please feel free to contact Thomas at 425-615-5973 with any interest in a meeting to review our company, and to discuss investment opportunities in our company. Thank you! Green Amigos, LLC
Posted by Green Amigos, LLC on December 16, 2013 at 3:13 PM · Report this
10
I am the owner of The Green Door MMD L.L.C.

I am currently in the approval process for a producers endorsement for my business through the L.C.B.

I am looking to transition into the recreational industry.

I am looking for an investor / loan to build a off grid greenhouse to maximize production.

Anyone interested e-mail thegreendoormmd@gmail.com
Posted by The Green Door on December 23, 2013 at 5:50 PM · Report this
11
Looking for financier for organic producer located in Pend Oreille County, WA. Business plan is available along with plat map.

Contact: backwoodsorganicgarden@gmail.com

Dan Shelgren
Owner
Posted by Backwoods on February 5, 2014 at 7:36 PM · Report this

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