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Potpreneurs rush to cash in on the new market Add to ...

It seems that almost everyone these days has a medical marijuana scheme, a press release and some post-industrial site on which to grow their dreams. One B.C. company wants to re-purpose an elementary school, re-placing rows of children’s desks with hedges of marijuana. Another plans to refashion an old Imperial Tobacco plant in Aylmer, Ontario. Two hours away, in Lakeshore, Ontario, another company plans to spend at least $20 million building a medical marijuana empire; $3 million of that investment will go to security alone, including a double ring of 12-foot fences topped with razor wire. Near Hamilton, a father-son duo is building its grow-op in what was once an indoor soccer stadium, near a dance studio.

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It’s a dot-com flashback of sorts, but this surreal version involves a swaggering new class of potpreneurs ready to capitalize on the birth of an industry. The federal Conservatives sparked the green rush last June, when they announced they would privatize the market for medical marijuana, regulate the producers and, of course, tax it. As of midnight on March 31, the 37,000 Canadians who use marijuana to soothe a variety of ills—chronic pain, epilepsy, nausea and loss of appetite due to chemotherapy, the tremors associated with Parkinson’s—will have to navigate an entirely new green world.

Under the old rules, Health Canada allowed licensed grow-ops to supply weed to two patients apiece. In other words, they could grow it themselves. Or they could visit a compassion club, which offered them marijuana at a discounted price—especially important to the large group of financially challenged users who don’t have the money or resources to cultivate it themselves. Clubs are banned from distributing. Home producers are fighting to keep their right to grow in the federal courts.  For the patients who aren’t growing it themselves, they will be required to purchase cannabis from licensed and heavily monitored producers, paying a shipping fee and tax.

Ottawa has long struggled with how to regulate a drug with scientifically unproven efficacy, so the new system is a no-brainer. Producers will cultivate in strictly regulated conditions; no more worries about the pesticide-created toxins from homegrown pot creeping into the lungs of immunocompromised patients. Police will worry less about baggies going out the back door to organized criminals. There will be fewer complaints about electrical fires caused by amateur growers frying their overloaded outlets.

The industry will be worth somewhere between $120 million and $220 million in the first full year. But Health Canada estimates that within a decade, the marketplace will grow to at least 400,000 registered patients, generating annual sales of some $3.1 billion. A simplified application process will no doubt help: Under the old system, prospective users had to fill out a 12-page form, signed by a specialist, justifying their need for cannabis. Under the new system, the Marihuana for Medical Purposes Regulations, patients plough through roughly half as much paper, depending on their malady. The Conservative government’s hints that it might decriminalize possession of small quantities of pot—a major policy reversal—could also boost the market.

So far, just 12 companies (including PPS’s CanniMed division) have been licensed to sell marijuana. But at least 450 others have applied—many of them plonking down hundreds of thousands of dollars, if not millions, just to get started—and there’s no cap on how many will ultimately enter the market.

“You wouldn’t believe the cold calls I get from people who want to get into this business—investor types,” says Adam Greenblatt, executive director of the Montreal-based Medical Cannabis Access Society, adding that there are names on the list that would be readily recognized by Globe and Mail readers. He believes many companies are playing the long game—setting up shop and building economies of scale for the moment when cannabis is legalized here in Canada, as it has been in Colorado and Washington. “Just like Seagram did before Prohibition ended,” he says.

It’s an intoxicating story as feverish as the Klondike gold rush, and as hazy and hubristic as the early days of Silicon Valley—a dose of refreshing, unshakeable entrepreneurial insanity. These are scenes from the green rush.

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THE GRANDDADDY

Unless you call and ask for directions, you will never find CanniMed Ltd. Google Maps places the company in the middle of the South Saskatchewan River, just east of the Mendel Art Gallery. “We don’t want to be found,” says John Woodley, the company’s chief security officer, who used to work in drug enforcement for the Saskatoon Police Service—a job trajectory that is not all that unusual in this industry. “It makes sense, for security reasons.”

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