As published to Entrepreneur
While the tech industry soldiers on mightily in search of disruptive, game-changing, TED-worthy apps, SaaS platforms, and amplified monetization plays, a few brave souls have taken the proverbial off-ramp in search of the next big thing. Experts estimate that the highly fragmented $2.3 billion US legal cannabis industry will increase to $10.2 billion by 2018.
Tom Bollich, the artificial intelligence-savvy robotics engineer who co-founded Zynga, is betting on that boom. As director and CEO of Surna Inc., he’s gone from virtual goods in Farmville to a pure play on explosive growth in the cannabis industry. Bollich’s Surna produces water-chilled climate control systems, designed for legal marijuana growers but applicable to other hydroponic agriculture needs.
Why would a whiz kid who grew Zynga to a $10 billion market valuation make the pivot from a gaming industry to the promise of the cannabis industry? I contacted him in a written interview, and the explanation is more naturally progressive than you might think.
Familiar language backed by metrics
First, there’s a lot of the same language between the tech/gaming space and the cannabis space. “Expressions like, ‘the birth of an industry,’ ‘this is the next big thing,’ ‘this is going to do nothing but grow,’ are rampant,” Bollich explains. “It’s relatable to us.”
Pair that similar vernacular with the latest tax revenue receipts, and therein lies the great opportunity. National Geographic reports Colorado cannabis tax revenue has generated $29.7 million, and the state of Washington is expected to yield $51.2 million in recreational cannabis tax revenue between 2015 and 2017.
Those are merely early stage industry numbers. Prospective investors are eager to see what this year’s elections dictate as Oregon and Alaska add recreational cannabis initiatives to the ballot for 2014. Another eight states, including Nevada, Massachusetts and California, are set to vote on varying degrees of legalization in 2016.
As legalization slowly but surely spreads across the country, growers will be looking for somewhere to turn to get specialized support, tools and resources for their unique craft. According to Bollich, success in cannabis tech lies in bringing a lot of disparate pieces together, like bioengineering, retail product development and the power of social word-of-mouth, to navigate an entirely new idea.
Surna’s is a system “designed to specifically aid growers in solving their most pressing climate issues for maximum quality and output,” Bollich said. This type of ingenuity is expected to drive greater energy efficiencies and sustainability for commercial agriculture as a whole. That type of functionality makes for a healthy “back-up plan” if decriminalization of cannabis goes slower than anticipated.
Agile marketing opportunity
Because cannabis legalization is not a nationwide plan, it’s an ideal scenario for the agile entrepreneur. There needn’t be an elaborate, cross-country go-to-market plan, and national-sized budget to enter the market. This enables entrepreneurs in this space to practice agile marketing, through adaptive and iterative campaigns over “Big-Bang” launches. Bollich agrees, “A business can say, ‘Okay, we’re really going to focus on Nevada, then focus on Illinois,’ and not lose opportunities as much as if it were a national boom.”
A market bigger than anyone can predict
Finally, because so many users and purveyors are in what’s called the “cannabis closet’ — secretive and non-mainstream pursuits involving the once-illegal substance — the financial opportunity is greater than it may appear to the untrained eye. Bollich recognizes that the concept of the “cannabis closet” changes the game considerably for entrepreneurs.
“The way that .com grew the gaming business and the way those businesses were able to form is very different than what’s going on in cannabis,” he explains, “because it’s a much more ‘hobbled bubble.’ It’s not like [legalized marijuana] is nationwide.”
Just how deep is this closet? According to a new nationwide survey published by USA Today, 7.3 percent of Americans who are 12 years old or older used marijuana on a regular basis in 2012. That number has increased 0.3 percent since 2011, and smashes the 5.8 percent rate distilled from similar 2007 research. According to a Gallup poll, young adults between 18 to 29 are most likely to report that they currently smoke marijuana.
Noting that the average age of a successful startup founder is 39, these younger users may be next in line to begin using newly-developed growing technology to kick-start their own operations in the near future.
With disposable personal income increasing $35.2 billion, or 0.3 percent, in August, paired with analysts like Jim Cramer skeptical about too many tech IPOs, could cannabis tech be a mega-catalyst? If so, the future of this industry is flying high.