Israel gives rise to the ganjapreneur, drawing new opportunities for green investment
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Photo Credit: Gabriel Avner / Geektime

Founded just last year, CannaTech’s conference brings together experts and entrepreneurs from across the growing field of marijuana

The Startup Nation’s Tel Aviv hub opened its doors on Monday to Israel’s first ever international conference on innovation in the medical cannabis industry.

Founded just last year, CannaTech’s conference brings together experts and entrepreneurs from across the field, including growers, researchers, investors, and others that have been drawn to this rapidly expanding field.

The conference was organized by iCan, a group that works to promote the medical cannabis industry out of their base in Beit Shemesh. They are led by Saul Kaye, a supporter of including cannabis as a treatment for a wide range of diseases and pain. Kaye comes to the field of cannabis after a long career in pharmaceuticals in his native Australia.

iCan CEO and Founder Saul Kaye. Photo Credit: Gabriel Avner / Geektime

iCan CEO and Founder Saul Kaye. Photo Credit: Gabriel Avner / Geektime

As the kick off of the two-day event, the conference opened with its star speaker and Chair of this Summit Prof Raphael Mechoulam of Hebrew University. An organic chemist by training, Prof Mechoulam has become one of the leading voices in the medical cannabis movement, speaking on the use of the plant for pain relief in patients.

Israel is home to some of the world’s most advanced research on cannabis, with chemical compounds like THC and CBD having been first identified here. In the time since, while cannabis remains illegal for recreational use, the government has allowed for medical purposes and even allows for clinical human trials, a fact that stands out in comparison with most of the world including the U.S. where these tests are banned.

The times they are a’changing

Walking around the event, one of the first things that catches the eye is the number of people in suits and sports jackets. “Two years ago it would have been hippies and farmers at these conferences. Now you see a lot of jackets. Things are changing,” says Omry Man who along with Avihu Tamir are the co-founders of Canabo Research, a company looking into revolutionary genetic and medical clinical research here in Israel.

Tamir tells Geektime that he is witnessing a new level of excitement in this industry. He and Man both come from Israel’s tech community, and he has been working as a ganjapreneur for the past two years. However over the past half year, Tamir says that the pace has picked up rapidly.

Tikkun Olam, producers of Israeli medicinal cannabis. Photo Credit: Gabriel Avner / Geektime

Tikkun Olam, producers of Israeli medicinal cannabis. Photo Credit: Gabriel Avner / Geektime

The two of them describe a new atmosphere in the field of cannabis that has come about in large part from the move to legalize medical and recreational cannabis in the United States and other parts of the world. To date, 23 states now have medical use on their books, while Washington state, Oregon, Colorado, Alaska and District of Columbia have made it legal for adult recreational use. But this is just the beginning: In 2016, 17 states are likely to have some kind of new legislation in the field of cannabis.

Still at the early stages, the field still seems shaky to some observers.

The path towards an opening of this previously underground market has caught the interest of many investors and entrepreneurs who are eager to get in on the business while it is still in its Wild West phase. “Most of the money is coming from San Francisco,” says Tamir, citing VCs like Privateer Holdings, Peter Thiel’s cannabis investment vehicle, as well as The Arcview Group, and Viridian Capital Advisors as some of the first movers. “The tech entrepreneurs are the first ones to discover the Cannatech industry and they’re the first ones to get the early wins.”

This is not to say that the investing community as a whole is ready to dive in head first into the deep end on cannabis.

“I think that there’s a misconception about investing in Canna tech,” explains Tamir. “There was a perception that because it was an illegal substance, it colors it as dangerous. People color the business in the same way. I think that there’s a new climate right now where people are seeing it as a valid and an incredible opportunity. It’s a green field where there’s no longer a question about whether it will succeed. The question that investors are asking now is how to get in and not should they.”

Zach Hutson, who represents Thiel’s Privateer Holdings, is optimistic about the first mover advantage that is still open at this stage.

“The pace of change is rapid,” he tells Geektime. “There’s an enormous opportunity to generate financial and social returns. We estimate the global market, both legal and illicit, to be valued between $150-200 billion, and that’s a very big market.”

Obstacles to investors entering the market

For those in attendance at CannaTech, the choice to move into this market is clear. They are passionate about it and excited about its potential. While all the indications point to a very promising future in this industry, there are still a number of concerns.

David Hess is the President of Tress Capital, a New York-based private equity management firm that launched their first fund in January. Hess says that they are involved in all sectors of the cannabis industry, with a deep understanding of the issues that can arise in this industry.

He tells Geektime that, “This is a legal industry borne out of an illegal one,” as a reason that there is still some uncertainty about how to progress.

Questions about legality of how to work in each state, and comply with the laws are very important. Numerous people at the event told Geektime that they had to have lawyers on the payroll in every jurisdiction they were operating in to make sure that they were working within the laws.

Spray for cotton mouth. Photo Credit: Gabriel Avner / Geektime

Spray for cotton mouth. Photo Credit: Gabriel Avner / Geektime

Trust is another area where Hess says can be cause for friction. He claims that the Wall Street crowd will sometimes view the industry veterans simply as stoners, and has seen instances where the investors have tried to infringe on their operations. “Tress bridges the two sides, investors and the industry,” says Hess, explaining how his firm could have an edge in this new game.

Predictions toward rapid market growth

Entrepreneurs are looking for new ways to incorporate technology into the industry. John Kagia serves as director for industry analytics at DC-based New Frontier. His company is looking to provide big data analytics exclusively for the cannabis market.

Kagia tells Geektime that they want to bring transparency and visibility into an industry that is growing explosively but where there is very little good data on which decision makers can rely. “We aim to be the Bloomberg of cannabis,” he says, “An online platform where their users can access to navigate through the collected data to find the info that they need.

“Investors want to know how the different aspects of this industry, both medical and adult sides, but also on the ancillary services that support this industry,” says Kagia, explaining that, “This is an industry that needs all of these services from legal, to accounting, tech support. It is an industry that is literally being built from the ground up. It needs all the support that you would need for another industry but with addition all the regulations of the market.”

According to New Frontier’s data, cannabis sales in the U.S. reached a whopping $5.4 billion. His company predicts a consistent compound annual rise in revenues of 30% for both adult use and medical cannabis, with 2020 being the year that recreational takes the lead.

Market predictions for cannabis. Image Credit: New Frontier Financials

Market predictions for cannabis. Image Credit: New Frontier Financials

While this figure is dependent on legalization passing more widely for recreational use, there is no doubt that there is serious money to be made in this industry and good reason for investors to be taking notice.

Where is the industry heading?

Canabo Research’s Tamir is optimistic about the rapid progression towards a widening of this industry, pointing to a top down approach that he says is likely to come into effect this year.

“I see 2016 as being the big year for cannabis,” he says. ”The first is the upcoming UN Commission on Narcotic Drugs meeting on April 19 in New York City. Everyone knows that they’re going to call for reforms on all drugs, and specifically in cannabis. They want to move it from the list of illegals to medical. The meaning of this is that the international trade of cannabis will be legalized. The current laws are slowing down the industry.”

On the U.S. front, he points to the upcoming election when 11 states are set to vote on legalization for either medical or recreational use. “It’s a burning topic,” he says.

Finally, Tamir says that throughout the Western hemisphere countries like Argentina and Uruguay which had previously been heavily influenced by the U.S. and UN to criminalize cannabis, are already moving towards legalization. Canada’s dreamy dreamboat of a hunk PM Justin Trudeau ran on a ticket of legalization.

With these significant shifts in the legal sphere just around the corner, Tamir believes that, “Basically we’re in 1995 of the Internet.”

Hutson believes that the future of medical cannabis lies in what he calls well characterized formulations with defined doses that are consistent from batch to batch. He says that these products will be developed as a result of rigorous clinical research, a field of which Israel is at the forefront.

“In order for medical cannabis to be accepted by mainstream doctors, it has to be studied for different diseases using clinical trials,” he tells Geektime, explaining that this is a necessary step for its acceptance in the insurance structure that will be an essential component of making the system feasible.

One of the fastest growing innovations discussed was that of new delivery methods.

Vaporiser on display. Photo Credit: Gabriel Avner / Geektime

Vaporiser on display. Photo Credit: Gabriel Avner / Geektime

Moving away from simply smoking the cannabis buds, Tamir says that, ”You have other stuff like capsules, slow release pills, sprays, inhalers, the list goes on. The bottom line is that 2015 ended the sales of extracts, meaning non flowers, were 70% in Colorado. When the legalization started, it was only around 20% of non flowers. Everything has shifted.”

“My belief is that as a medical user, these options are very convenient.”

The “friendly” tech conference

Having attended a number of tech conferences over the past year in Israel and abroad, I can honestly say that CannaTech was one of the friendliest events that I’ve been invited to. The haze of excitement filled the air as the blend of old and new school ganjapreneurs mixed it up over the new range of possibilities for innovation and business.

Defying stereotypes of the classic stoner, today’s cannabis entrepreneurs and researchers are painting a sharp picture of an explosive industry. Backed by strong studies of the medical benefits, they have science on their side in making their case not only for increased legalization, but for serious investment as well. Moving past the business of just growing the cannabis, ancillary services like legal and tech startups stand to benefit greatly as well.

The general consensus from those at the event was that changes in the U.S. federal law will be the biggest catalyst for unleashing capital into this industry. New Frontier’s Kagia tells Geektime that, “We regularly meet with investors that see the opportunity but are concerned about its status as a federally illegal product. A change in that law will not only make it possible for financial services institutions to become active in this industry, but will lower one of the last remaining barriers for many conservative investors.”

Over the short term, this industry is likely to be dominated by actors used to playing on the edge. Israel seems to be an ideal ecosystem for letting this seed blossom. The country’s startup culture that was built on a healthy portion of chutzpah and general acceptance of risk has led people like Prof. Mechoulam to make Israel ground zero for the cannabis revolution.

At the time of Israel’s founding, its first Prime Minister David Ben Gurion laid out his vision of making the desert bloom. Whether innovation in the cannabis industry is what he meant is debatable, but as a kibbutznik, chances are that he would have heartily approved of the new ventures.

Photo Credit: Gabriel Avner / Geektime

Photo Credit: Gabriel Avner / Geektime

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Gabriel Avner

About Gabriel Avner

Gabriel has an unhealthy obsession with new messaging apps, social media and pretty much anything coming out of Apple. An experienced security and conflict consultant, he has written for The Diplomatic Club, the Marine War College, and covers military affairs with TLV1 radio. He mostly enjoys reading articles wherever his ADD leads him to and training Brazilian Jiu Jitsu. EEED 44D4 B8F4 24BE F77E 2DEA 0243 CBD1 3F7C F4B6

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