May 15, 2016
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The marijuana industry is not an easy one to get into, nor is it easy to navigate the long list of regulations that marijuana-related businesses have to adhere to, which differ in every state. However, there are some entrepreneurs who have had great success in the industry. In fact, in Denver, Colorado, five entrepreneurs control the vast majority of the marijuana market.
According to research conducted by the Denver Post, these five entrepreneurs include a commercial developer, the owner of a car-detail shop, a former non-profit event planner, a businessman who made a fortune in the child car seat industry, and a one-time Subway franchise owner bankrupted by real estate losses. Collectively, these five entrepreneurs own 134 marijuana business licenses in Denver, which account for 13% of the total number of licenses in the city. That’s a lot considering 44% of all marijuana licenses in Colorado are in Denver.
Here’s the breakdown of licenses owned by these five Denver, Colorado entrepreneurs:
Taking the story a step further, the Denver Post found that just 10 people control approximately 19.5% (204) of the 1,046 active medical and recreational marijuana licenses in Denver. In 2015, marijuana sales in Colorado hit nearly $1 billion, so the amount of money passing through the businesses tied to these 134 licenses, which are controlled by just 10 people, is huge. Their businesses are growing by leaps and bounds demonstrating just how profitable the marijuana industry can be despite the challenges marijuana-related business owners face.
Without those licenses, these entrepreneurs could not generate the revenues that they do. In other words, the Denver marijuana license economy shows just how valuable a marijuana license can be. Ask any of these five entrepreneurs who control 134 of the licenses in Denver what they think their licenses are worth, and I’m sure the answers would be the same—a lot. After all, all five of them have annual revenues of at least $100 million.
Looking at what’s happening in Denver—with such a small number of people controlling a large percentage of marijuana licenses—leads many to speculate that the marijuana industry in Colorado is consolidating with larger companies acquiring smaller ones that can’t afford to keep up with the expensive and onerous fees, taxes, and compliance requirements. In Denver, there is no limit on the number of licenses a person or company can own. Recreational marijuana businesses tend to be larger than medical marijuana businesses, so the opportunities for mergers and acquisitions are certainly something on the minds of marijuana entrepreneurs.
For those people with acquisition on their radar, there are 842 marijuana licenses in Denver owned by 641 different people, but some of those “owners” have as little as a 1% interest in a license. According to the Denver Post, 215 of those owners only have an interest in a single license, and 175 of them are solo license owners.
This is an industry where changing license ownership isn’t difficult in Colorado. In 2015, nearly 450 applications were filed with the state to change license ownership, and many license owners hope that a bill will pass soon that will allow license owners to look for out-of-state investors.
As the five entrepreneurs dominating the Denver marijuana market have proven, the marijuana business can be very profitable, but without the marijuana license, it’s impossible to enter the industry at all. Those licenses are valuable and there is no doubt that savvy investors are taking a very close look at those 842 license owners who just might want to get out of the business and let the bigger players compete.
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