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San Diego Incubator Stokes Businesses Aimed At Marijuana Market

Medical marijuana clone plants are shown at a medical marijuana dispensary in...

Credit: Associated Press

Above: Medical marijuana clone plants are shown at a medical marijuana dispensary in Oakland, Feb. 1, 2011.

A San Diego investment group is hoping to cash in on the state’s legal marijuana market.

Canopy San Diego is helping fledgling companies while keeping an eye on potentially huge profits as the California marijuana market grows.

The San Diego-based business accelerator is celebrating its first graduates. Eight companies focused on the cannabis industry completed Canopy’s 16-week business training.

MycoCann is one of those firms.

“We create biological soil additives that we believe can increase the oil production in cannabis by 100 to 200 percent,” said Paula Young-Libby, MycoCann’s chief executive officer.

The technology she’s working with has already been proven in other farming applications. MycoCann is ready to help apply those lessons to the nascent legal pot industry.

“If you can double or triple your production without adding a single plant or without adding a single light — that’s going to help the infrastructure. That’s going to help the industry, a lot,” Young-Libby said.

A niche for start-ups

Big agricultural companies won’t touch cannabis-related businesses and that created a niche for start-ups. Libby brought the biotechnology product from a sister company in Georgia that already has a slice of the legal agricultural market. That firm is interested in the cannabis market but wanted legal distance from MycoCann.

Canopy San Diego steps in where established firms won’t go.

“Companies need the technology that we’re developing,” said Jack Scatizzi, Canopy San Diego’s managing director and founding partner.

The demand makes it easier to balance the risk and reward.

“While it’s still stigmatized, that represents a risk for entrepreneurs,” Scatizzi said. “So, we’re backing the people that are interested in taking that risk. And the ones that take the larger risk are going to have the higher reward.”

A position to reap the rewards

Scatizzi estimates the medical marijuana industry in California is already worth $7 billion and the addition of recreational marijuana could double the market relatively quickly. Accepting the risk before all the legal questions are resolved means the incubator’s companies are in position to reap the rewards.

“We would like to have as many companies in the market, as possible, when adult recreation use hits. And our goal with the companies is to get as much market penetration as possible. Which will make them extremely attractive acquisition candidates from larger companies,” Scatizzi said.

Canopy San Diego invests in start-ups that focus on marijuana-related products, but they won’t work with firms that handle plants directly. That passes their risk threshold.

A luxurious marijuana carrying case

The first companies to graduate the incubator are pretty diverse. Some offer software solutions for medical marijuana management. There’s a system to handle inventory at cannabis-focused businesses, and one makes a luxurious marijuana carrying case.

“If you keep your wine in a wine cooler, and your liquor in a bar, and cigars in a humidor, why on earth are you keeping your high-quality cannabis in a shoebox,” said Whitney Beatty, founder of Apothecarry Brands.

The company’s high-end storage box is aimed at what could be a huge home market. The incubator helped focus her business strategy.

“The industry is really new. It’s kind of like the wild, wild West. So, we need to have a group that will get us in front of the people that we need to be in front of,” Beatty said.

Canopy San Diego does that.

The incubator trains and focuses companies, in exchange for a financial share of the start-ups. Investors hope the payoff comes when the cannabis market matures and their graduates are already established.

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