Jun 092015
 June 9, 2015

New York marijuanaWhen it comes to starting a marijuana business, not all states are created equal. In many medical marijuana states with older programs, the barrier to entry into the market is not that large. In Oregon it’s literally as easy as applying for a dispensary license for a fee, and finding a place that is a proper distance away from a school or another dispensary. I know people that have opened dispensaries in Oregon for $10,000, and that includes all the startup costs to start making sales. Most dispensaries in Oregon cost more than that, but for a basic dispensary, that amount is doable.

In medical marijuana states with newer programs, the barrier to entry is much higher, and the amount of licenses are very limited. For instance in Illinois I know of a company that spent 1 million dollars trying to get one or more cultivation licenses, and they didn’t even get one. For those that did get approved for a license, they are learning the hard way that it’s going to be a very long time before they turn a profit. That’s fine if you are just invested a handful of thousands of dollars. It’s quite a different thing when you are in the hole over 1 million dollars.

Marijuana companies are learning from the Illinois situation, and as a result, are avoiding New York due to the likely record setting startup costs. Per Marijuana Business Daily:

More companies apparently are taking a pass on New York in favor of other medical cannabis markets due to the high financial requirements – and potentially lower returns on investment – in the Empire State.

Startup costs for each of the five businesses selected to receive MMJ licenses could hit $25 million, and profits likely won’t materialize for at least a few years, according to a report in Crain’s New York Business.

It’s simple math for companies such as Terra Tech, a publicly traded firm that has cannabis business interests in California and Nevada.

Up until last week, a division of Terra Tech was considering submitting an application in New York. But the company decided not to take a shot and will instead focus more on Nevada, which has a much broader MMJ law, according to Crain’s.

A representative from the Illinois company told me during a discussion that his company was looking for an advantage. He said that they would never expand to Oregon because there are so many growers out there. ‘Competing with 25,000 growers, that’s not an advantage. Being one of just 21 growers, especially in a state as big as Illinois, that’s an advantage.’ I tried to offer up some advice that yes, Oregon has more growers, but we also have 28 times the amount of patients in Illinois because Oregon’s medical marijuana law is so much better than Illinois. Plus, in Oregon no one has ever spent 1 million dollars just to fail at getting a cultivation license. If your company is new to the marijuana world, make sure to do your research to see what the true potential is of your state’s medical marijuana program.

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  8 Responses to “Marijuana Companies Are Passing On New York Due To High Startup Costs”

  1.  

    our governor is terrible!!! and 85% of our lawmakers are idiots, trust me when I say that the mmj laws are just the tip of the incompetence iceberg that is New York state,

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      The culture of high level corruption in New York state government is pretty startling too.

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      The anti-marijuana drivel spewed by late NY Gov. Nelson Rockefeller is the bedrock of Gov. Andrew Cuomo’s philosophy. Generations of arrogant American men foisted the Anti-Marihuana Tyranny upon us, and defeating this policy once and for all still seems utterly impossible in Mr. Cuomo’s over-bearing nanny state of New York. Today, Jordan, I was actually among the patients and advocates in the Capitol building in Albany, who demanded immediate access to medical cannabis products a full YEAR after passage of the Compassionate Care Act. There was a smiley young lady named Mackenzie Kulawy (and her therapy dog Stella), who suffers almost daily from epileptic seizures. There was a very graceful nurse from Staten Island, Rebecca Campo, who traveled many hours with both of her parents to make her voice heard. Ms. Campo’s mother suffers from serious health problems and is confined to a wheelchair, while Ms. Campo herself was forced into disability after experiencing a seizure last year. All of the advocates are such good people and they simply want to try medical cannabis for some relief, but NO, Gov. Cuomo and his legal attack dogs are always there to squelch such demands. Pure tyranny, I say.

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        I applaud you for being a part this push, especially taking the initiative to go in person. I honestly don’t know how Cuomo can sleep at night with all of the horrible things he has done to our state. we need mmj system that isn’t so foolish its unworkable(hmmm 400+ for a decent vaporizer or 5+ for a bowl). sorry Cuomo im willing to bet most people that will receive mmj in flower form will not be forking out all that money for a vaporizer, so in reality this mmj will pretty much keep the criminal stigma over using it even when its medically legal, once again new York making criminals out of law abiding citizens just to fill their coffers and prisons. TEN PRISONS TO EVERY ONE UNIVERSITY WELCOME TO NYS

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      Cuomo has to GO!!!…I voted for him the 1st time he ran hoping he would bring some new fresh ideas to NY with Medical Marijuana…guess I was WRONG!!!…He has his capitis up his rectum when it comes to medical mj and/or marijuana in general…I’m from the capital district area an’ from here north and west he did not do well this last election…he has to GO this next election!!!….

  2.  

    As a counterpoint to this story AMNY had a piece last week about businesses scoping out retail space.

    “Company leasing space for medical marijuana dispensary in Downtown Brooklyn”

    http://www.amny.com/news/medical-marijuana-dispensary-in-downtown-brooklyn-palliatech-inc-leasing-space-1.10508827

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