As the marijuana industry heats up, street dealers think about going legal

Marijuana is predicted to bring $22 billion into the U.S. economy by 2020, according to Arcview Market Research. With such a promising future, Bay Area investors and entrepreneurs are positioning themselves for the emerging market. Carter Laren, founder of Oakland-based Gateway, California’s first incubator for marijuana-related businesses, said that in the past month, close to a dozen venture capitalists expressed an interest in launching firms with the explicit intent of investing in marijuana-based businesses.

“A lot of what we’re used to in tech has become saturated, so people are looking for something else, and cannabis represents enormous new potential,” said Laren.

Medical marijuana is only legal in 23 states, including California, and recreational use is legal in only four, including the District of Columbia. (It remains illegal under federal law.) But as the year edges closer to the November election, Bay Area workers in the marijuana industry are crossing their fingers that all 11 cannabis initiatives that have been proposed for the state ballot go before voters.

And as the legal marijuana industry takes off, “underground” cannabis entrepreneurs are starting to take notice. “Dank Man,” an Oakland street dealer, is working towards launching a cannabis delivery business. Over the past year, he’s been attending industry events and exploring his options of either joining a business incubator or starting from scratch. “One cannabis event really showed me that people are likeminded and are trying to launch marijuana businesses for the right reasons,” he said. (“Dank Man” is an alias used for this news report.)

But while some feel that the legal cannabis industry is growing, street dealers and others in the “underground” community worry they are getting left in the dust. As the marijuana market expands, entrepreneurs from other industries are moving into the space and creating a social bubble that excludes the “underground” group. Laren believes the friction comes from the differing professional backgrounds both groups bring to the ecosystem. “The skill sets of selling on the street aren’t the same skill sets are running a legitimate business,” said Laren. “You don’t just take the same skill set and suddenly go legal and everything works out.”

Though Gateway only launched four months, they’ve already had to expand and will be opening a marijuana co-working space later this year. “Dank Man” hopes to be a member of the co-working community.