By Omar Sacirbey
The giants of American business are getting more comfortable about partnering with marijuana-related companies, and they’re willing to go public about it.
It may be the tip of the iceberg, as Corporate America angles to grab a share of the growing marijuana industry. That could mean partnership opportunities for established cannabis companies, as well as mergers and acquisitions.
“I believe we are going to see many more mainstream companies brave enough to explore getting into the cannabis industry, especially over the next 30 days,” said Tom Quigley, CEO of The Gluu, an online B2B marketplace in Tampa, Florida, which serves marijuana companies.
Quigley believes the changing attitudes within Corporate America are not random. Rather, they’re connected in large part to widespread speculation that the Drug Enforcement Administration may soon remove marijuana from Schedule 1, the federal government’s classification for “the most dangerous drugs.”
That could have major ramifications for those in the industry, especially when it comes to medical research and perhaps taxes and banking.
“This is something that a lot of major companies are watching,” Quigley said. “They realize there could be a big change, and they want to be involved as soon as they can.”
The latest corporate giant to take the plunge is Colorado-based Arrow, which manufactures and distributes electronic components and devices. It is teaming with MyDx, a San Diego maker of handheld chemical analyzers that allow consumers to check the potency of marijuana strains.
In a news release, MyDx announced last week it had struck a deal with Arrow under which the Fortune 150 company will help manufacture MyDx’s analyzers and provide other services as well as a line of credit.
The previous week, Los Angeles-based Kind Financial announced it was partnering with Microsoft to offer seed-to-sale tracking systems to government customers to keep tabs on marijuana commerce.
Both of these partnerships come at a time when more than half the states have approved medical marijuana programs and a number of states are weighing recreational MJ this fall, opening the door to additional cannabis revenues nationwide.
Within the marijuana industry, meanwhile, the specter of large corporations entering the business has stoked fears that a small number of corporate players will corner the market and drive out the smaller, more established businesses. Whatever the case, the involvement of large companies would change the face of the industry.
Corporate interest in cannabis
Corporate interest in cannabis isn’t new. The marijuana industry had been piquing corporate interest long before the DEA announced in April it would make a decision about whether or not it would change marijuana’s Schedule I status.
For example, several marijuana-related businesses said such relationships have existed for years now in the form of cannabis-related companies buying materials or using online platforms from mainstream companies. Before Arrow, MyDx used another company to manufacture its device, but didn’t tout the relationship.
Arrow warranted publicity because of its size, said Daniel Yazbeck, MyDx’s CEO. Arrow initially will produce 10,000 of the company’s analyzers, but could make more if there is demand, Yazbeck said.
Although Arrow did not try to stop MyDx from touting their relationship, the company wasn’t eager to publicize it either, Yazbeck said. “They’re approaching this cautiously. They’re happy to work with us, but they’re not going to come out and be vocal about their involvement with cannabis.”
Arrow did not issue a statement about the partnership and did not return calls seeking comment.
Quigley, the B2B CEO, noted that for more than a year he has been meeting people who work at major financial institutions like JP Morgan and Salomon Smith Barney at industry conference after-parties and other industry get-togethers. These Wall Street types are interested in getting into the cannabis industry, he said.
An important difference, Quigley noted, is that a year ago or so ago these people were coming to cannabis conferences out of their own personal interest. More recently, however, he thinks executives at financial institutions have been sending staffers to cannabis industry events to do some corporate reconnaissance.
“In the past, it was independents who were trying to fish on their own. But now I think more people are being sent by their supervisors,” Quigley said. JP Morgan and Salomon Smith Barney could not be immediately reached for comment.
Cannaphobia still exists
To be sure, corporate cannaphobia has not vanished. Social media giants such as Facebook and Instagram have shuttered cannabis-related accounts, and banks and insurance companies are shunning marijuana clients. Still, Microsoft and Arrow’s participation in the cannabis industry suggests that marijuana isn’t the radioactive subject it was only a few years ago.
“There is some movement on the stigma,” said Jeanne Sullivan, founder of Sullivan Adventures, a New York investment advisory firm following the cannabis industry. “The enlightened companies know how to seek the best-of-breed companies that are being built and formed today, opening the door for partnership, scale, revenue opportunities and (merger and acquisition) activity.”
She added: “Arrow’s home base is Colorado, so they know up close the economic opportunities that the cannabis industry is able to generate.”
While the MyDx-Arrow partnership symbolizes promise for the cannabis industry, it’s also good for MyDx.
Under the agreement, Arrow will manage MyDx’s supply chain, manufacture MyDx’s line of chemical analyzers, and provide the company credit that it can use for its products.
“It’s great for MyDx because they have a partner who can help them improve the quality of their devices, and scale up manufacturing for them,” said Quigley. “When you’re a small company and want to move to the next level, this is the kind of move you want to make.”
Sullivan believes that Microsoft and Arrow have broken new ground that will unleash more interest in the cannabis industry among mainstream businesses.
“These types of partnerships highlight the opportunities now and ahead for entrepreneurial companies serving the cannabis sector,” she said.
Omar Sacirbey can be reached at [email protected]