Come Jan. 1, it will be legal to purchase and possess recreational marijuana in Illinois. And as the new year gets closer, several Chicago cannabis startups are beginning to imagine what the future holds for them under the new law.
For cannabis growers and dispensary operators, they can expect to attract a whole new set of buyers—not just those with a medical marijuana license. The tech-based startups that simplify how people buy cannabis or how marijuana companies advertise their offerings should also expect to find new consumers. And as happens with any big cultural or economic shift, new companies are likely to pop up once voids in the industry are discovered.
At the end of May, Illinois lawmakers approved a bill that would allow residents age 21 and older to legally possess 30 grams of cannabis, 5 grams of cannabis concentrate or 500 milligrams of THC contained in a cannabis-infused product. When the bill takes effect next year, it will also create a licensed cultivation and dispensary system.
Legalizing recreational marijuana will inevitably change a lot about Chicago. Cannabis sales are expected to generate new and much needed revenue for Illinois, and should help minimize the number of people behind bars for marijuana use and possession. But it’s also going to considerably change Chicago’s culture.
Soon, it won’t be uncommon to see a dispensary next to the local drug store or retailer. Dispensaries will be banned from setting up shop in most of downtown but intend to make their presence felt elsewhere throughout the city’s neighborhoods.
A rendering of Sunnyside, Cresco Labs’ cannabis retail stores.
“Chicago’s the most urban metro area that’s legalized [marijuana] at this point,” said Zach Marburger, the entrepreneur in residence at Cresco Labs, a Chicago-based cannabis grower and dispensary. “Once you start seeing dispensaries pop up on pinnacle real estate corners in Chicago, it’s going to have a real impact on culture and it’s going to bring a whole new set of folks into the space.”
Cresco, which went public last year on the Canadian Stock Exchange, began investing more than $1 million into building its own technology products since the legalization of recreational marijuana was announced, Marburger said. The company is also looking for new cannabis-tech companies to invest in, an initiative Marburger is leading. So far, Cresco has invested in two startups, and Marburger says he expects that number to grow to 10 by next year.
Marburger has his eyes on Chicago’s growing cannabis-tech scene as he looks for investment opportunities, and says he is eager to see how they flourish without the constraints of prohibitive marijuana laws.
For one Chicago cannabis-tech company, weed legalization will allow it to finally operate in the state it calls home. CannaTrac, which launched at the beginning of this year, is a startup that’s working to make the process of buying marijuana from dispensaries easier and more transparent with a smartphone app.
The startup operates a marketplace where dispensaries can sell marijuana products and consumers can purchase them using a secure electronic payment platform as opposed to cash.
Even though it’s technically Chicago-based, CannaTrac’s first market was Colorado because marijuana is currently legal there. Though it’s not technically illegal for CannaTrac to operate in Illinois, CEO Tom Gavin said it has been hard to launch at home because he couldn’t get a bank to agree to support the platform.
“We bank fully transparently in Colorado and we want to do the same in Illinois, but we’re limited in who we can go to,” Gavin said. “We originally [launched] in Colorado specifically because of the legislation and it obviously protected the company…even though the majority of our executives are Chicago-based.”
Once recreational marijuana is legal, Gavin said he expects business to grow, especially because the legalization will likely come with new legislation, like the SAFE Banking Act, which would protect financial institutions that work with cannabis businesses from federal prosecution in states where the substance is legal.
“With more cash in the dispensaries, there’s going to be an even larger outcry for a solution like we have in order for them to bank that money and show transparency,” Gavin said.
Kannatopia, a social media platform for cannabis users, launched in Chicago in 2015. It’s designed for users 21 and older who want to connect with other weed users, dispensaries and marijuana-centric brands.
“We provide a community for them to engage with other people, learn and share experiences and get exposure to all the different products and all the different things that happen across the industry,” said co-founder Kurt Akers. “One of our main priorities from the beginning was always keeping Illinois and Chicago the forefront of where we’re at.”
Kannatopia’s platform is geo-fenced to account for states that have legalized recreational and medical marijuana, which Illinois legalized in 2013. A third of the startup’s users are in Illinois, but once recreational marijuana is legal in the state, Akers said he expects local usership to grow even more.
“The legalization for Illinois just makes things simpler for us,” Akers said. “It gives us more credibility for the platform that we’re building for the Illinois market because we want to be a top cannabis technology brand in Chicago.”
Akers said he also expects the process of securing venture capital to be easier than it was as investors begin to pay more attention to the industry as a good (and legal) bet. Salveo Capital, a Chicago-based venture capital firm focused on investing in cannabis-tech, has backed a number of companies throughout the country, including Chicago dispensary Grassroots Cannabis. A U.S. Securities and Exchange Commission filing from earlier this month indicates that Salveo is raising a $22 million fund.
Green Nyle, another Chicago cannabis-tech startup, offers on-demand virtual cannabis coaches, who provide personalized guidance on how marijuana can help lead a healthy life. Green Nyle Founder and CEO Jilea Hemmings said a large portion of the startup’s target consumers want to wait to use a service like Green Nyle’s until cannabis is legal.
“The legalization for Illinois just makes things simpler for us.”
“The legalization of cannabis will help our business tremendously,” Hemmings said in a statement to Chicago Inno. “Many have heard about the benefits of cannabis, but are waiting on the sidelines until it is fully legalized.”
The other benefit of marijuana legalization is that Green Nyle and other cannabis companies will have more freedom to advertise their services on social media, in print and in commercials in Illinois, a space that has been hard to navigate.
Chicago startup Fyllo recently raised $16 million to grow its business, which helps cannabis companies deliver ad campaigns that are compliant with state and federal regulations.
Other Chicago cannabis startups whose business is likely to grow once recreational marijuana is legalized in Illinois include CannaFundr, an online investment marketplace for companies in the weed industry, and Leaf Trade, a B2B SaaS enterprise software startup for cannabis companies.
“[Legalizing recreational marijuana] is going to be great for not only the individuals, but the small businesses,” said Gavin of CannaTrac. “These [companies] are going to have the ability to do stuff that they couldn’t before. They’ve been waiting a really long time to make money.”