SEATTLE, WA / ACCESSWIRE / January 28, 2016 / The cannabis industry may be booming in terms of revenue, but marijuana companies face a number of hurdles when it comes to raising capital and storing cash. In a two-part series, CFN Media interviewed leading experts in the securities and banking industry to look at how companies are accessing and storing capital today and how things are poised to change over the coming years as regulations loosen around the industry.
Crowdfunding Cannabis with Reg A+: Marijuana Start-ups Get the Capital They Need
The cannabis industry may be booming in terms of revenue, but marijuana start-ups looking to raise capital face a number of hurdles.
The traditional banking sector has shunned the industry, despite the Obama Administration's attempts to open up access. In 2013, Attorney General Eric Holder created a "reduced prosecution safe harbor" for commercial banks, but that's a far cry from legalization. Banking executives were quick to point out that prosecutorial discretion only works as long as the administration in power supports non-enforcement - and elections are coming this year.
Many venture capitalists and institutional investors have been equally reluctant to invest in the sector. MassRoots Inc.'s (OTCQB: MSRT) treatment at the Consumer Electronics Show (CES) and in previous years at Tech Crunch Disrupt is a sign of just how taboo cannabis start-ups remain in the general public. Of course, there are a few notable exceptions including Peter Thiel's Founder's Fund, which invested $75 million in Privateer Holdings.
These dynamics forced many companies to pursue one of two options. First, companies can undergo an expensive and time-consuming process to try and raise angel investment rounds from high net worth individuals, but that's difficult because there's no good exit strategy without VC involvement. Second, companies can list their stock on over-the-counter exchanges, but that involves regulatory hurdles and high costs associated with auditing and making filings.
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The $1.2 Billion Question: Where is Cannabis Banking Headed?
The cannabis industry could generate upwards of $11 billion in revenue by 2019, according to ArcView Market Research, and the majority of it is in $20 bills. Since marijuana remains illegal on a federal level, and banks require access to the Federal Reserve to operate, the majority of dispensaries must run payroll, pay taxes, and cover expenses in cash. These dynamics create both security risks for employees and owners, as well as a headache when it comes to tracking.
"Without a business bank account, simply paying our bills is a challenge," says Dieneka Manzanares, who owns Sweet Leaf Pioneer Dispensary in Eagle, Colorado. "Every month, we have to drive to Denver to pay our sales tax with physical currency, where we must be escorted by a security officer. Businesses like ours need a regulated financial system because being forced to operate as a cash-only business is both a major hassle and makes the most routine parts of our business - like paying taxes and bills - a major safety issue."
In December of 2014, the company's Carbondale, Colorado store was robbed by armed, masked men that handcuffed an employee and stole cash and marijuana.
Companies like Blue Line Protection Group (OTCQB: BLPG) and CSA Holdings Inc. (OTCBB: CSAX) help marijuana companies securely store and transport cash, but on-site robberies have been a consistent burden facing the young industry. According to many business owners, the only real solution will be full access to the banking sector in order to reduce the amount of cash on hand that needs to be securely stored and transported at least monthly.
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About CFN Media
CFN Media (CannabisFN), the leading creative agency and media network dedicated to legal cannabis, helps marijuana companies attract investors, customers (B2B, B2C), capital, and media visibility. Private and public marijuana companies and brands in the US and Canada rely on CFN Media to grow and succeed.
CFN launched in June of 2013 to initially serve the growing universe of publicly traded marijuana companies across the US and Canada. Today, CFN Media is also the emerging digital media choice for the top brands in the space.
To learn how your company can be covered by CFN Media, visit http://www.cannabisfn.com/become-featured-company.
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SOURCE: CFN Media