Derek Peterson (left) and Dhar Mann (right) with one of weGrow's hydroponic growing units.
Which is where the new breed of pot entrepreneurs comes in. "Because the industry's moving from the black market into the light, there are just so many different ways that money can be made," says David Abernathy, the director of Compassionate Green Financial Services, a venture-capital firm that advertises a staggering 80 percent average annual return on its marijuana-based investments. A former investment-bank analyst, he claims to have sunk more than $1 million (he won't disclose the precise amount) into pot dispensaries, delivery services, and grow ops. Half of it, he says, was raised from hedge fund managers and other professional investors. For investors with a high tolerance for uncertainty, the quasi-legal status of the pot business is a huge opportunity, he says, since it's allowing "small businesses to get a foothold before the big Philip Morrises jump into the game."
Those who are bullish on pot note that 15 states now allow some form of medical marijuana use. The Justice Department has said it will no longer raid medical marijuana dispensaries, as it did during the Bush administration. Forty-six percent of Californians voted for Proposition 19—more than voted for Republican candidates for governor or senator—proving that pot legalization is no longer a fringe cause. Marijuana activists say it's only a matter of time before the law catches up with Americans' softening attitudes toward pot and the realization that regulating it could fill empty state and local treasuries. In October, California downgraded the possession of an ounce or less of pot from a misdemeanor to an infraction, the equivalent of a speeding ticket. Pot activists are talking about getting legalization initiatives on the ballot in Colorado, Washington, Nevada, and California (again) in 2012.
Yet for the paranoid, there are still plenty of reasons for caution. Last fall, Attorney General Eric Holder warned that while he'd tolerate medical marijuana, he would continue to "vigorously enforce" federal drug laws against anyone who dares to "possess, manufacture, or distribute marijuana for recreational use." Which is why Abernathy, the venture capitalist, tries to give his investors plausible deniability by financing his pot companies through a web of holding and servicing firms. "We have spent many, many hours with many, many lawyers coming up with ways to protect ourselves," he says.
The weGrow guys have consulted with attorneys, too, and they came away unfazed. "You throw four lawyers in the room, and they all have a different opinion," Peterson scoffs.
The Hempire reality show's pilot, filmed by A-Team director Joe Carnahan, has all the elements of a hit: cocky front man, calculating numbers guy, and Lindsay, their attractive, put-upon executive assistant.
Besides, when your business plan depends on publicity, there is no upside to playing it safe. The promo for Hempire, which Mann and Peterson financed themselves, features an image of the duo in suits, flanking a giant marijuana leaf cut from a $100 bill. It has all the elements of a hit: the cocky front man, the calculating numbers guy, and Lindsay, their attractive, put-upon executive assistant. "I personally have always wanted a reality show 'cause I just think that my life is somewhat appealing to watch," says Mann. The show's pilot was filmed by A-Team director Joe Carnahan, and Mann and Peterson say they're in negotiations with the production company behind Deadliest Catch. "It's a hedge," Peterson explains. "If we screw everything up in our personal lives and our businesses go down the drain, they're gonna love that in TV land!"
A financial consultant for medical marijuana investors, growers, and sellers, who didn't want his name used, says the weGrow guys "are cocky and pushing too hard, too fast." With their in-your-face attitude, they might get raided, snarled in red tape, or written off as blowhards. "In a lot of ways they are stumbling around in the dark. But," he adds, "it's not implausible that something amazing would come out of it, because they have the public-relations apparatus, the money, and the balls to surge forward."
THE SEEDS for weGrow were planted in early 2009, when Dhar Mann received a visit at his property-management firm from a tenant whose office had just been burglarized. Mann was about to call the cops when the tenant confessed that he wasn't actually a caterer, as he'd claimed on his lease. He was a medical cannabis grower, and he'd been using his space to cultivate six dozen plants.
The notion of being a landlord for pot growers intrigued Mann, the scion of Oakland's largest taxicab company, who'd founded a mortgage refinancing mill and a luxury-car rental company before he'd turned 25. He paid $500 to enroll in courses at Oaksterdam University, started in 2007 by longtime legalization advocate Richard Lee to provide technical and legal training to would-be growers. Looking at the old-school potheads studying at "America's first cannabis college," Mann realized he could fill a niche. "Everybody I was meeting was a little bit older, more a part of the hippie generation," he recalls. "I was like, 'I bet there's so much room for innovation and new ideas.'"
His first enterprise was igrow420.com, a kind of Facebook for potheads that never took off. Undeterred, he rented a giant warehouse (from his dad) and prepared to become a grower. When he walked into a hydroponics store in Berkeley and asked how to start a pot farm, the salesman kicked him out. A federal ban on selling pot paraphernalia and comedian Tommy Chong's 2003 imprisonment for selling bongs have scared most hydro shops into avoiding any mention of marijuana.
That's when Mann switched gears again: He'd create "the first honest hydro store," one that didn't perpetuate the charade that its customers are spending thousands of dollars growing amazing tomatoes. When the PR shop that was managing weGrow's grand opening in January 2010 handed him a press release that read "Urban gardening megastore opens by airport," Mann fired the firm and rewrote the release himself: "Marijuana Superstore Opens in East Oakland."