Pot startups cash in on wave of legalization

Peter Thiel's fund gets into pot
Peter Thiel's fund gets into pot

The wave of pot legalization hasn't just been a boon for growers. A slew of other businesses are jumping on the bandwagon as well.

"A guy calls me a few weeks ago about a domain name he owns, nugs.com [a reference to marijuana nuggets, or the bud of the plant]," said Jared Mirsky, founder of Online Marijuana Design. "It's a great four-letter domain name, which itself is rare and valuable."

Mirsky's Seattle branding firm, which exclusively works with the cannabis industry, is helping him capitalize on it.

"The business idea is to make nugs.com a repository for stock photos of pot," he said.

Related: Everyone in Colorado may get a pot tax refund

Other firms, like Sussex, Wisc.-based Vaportek, have pivoted to work with the marijuana industry. Originally, the company created a machine to control odors in hospitals. The business grew to target fire and flood restoration, crime scenes and, most recently, the marijuana industry.

"As soon as it became legal, we knew our products would be a great fit for the industry. And it's a new area to increase our sales," said spokeswoman Sunny Schneider-Christensen.

Vaportek created smaller home dry vapor systems for individual use as well as larger machines for larger growing facilities.

"We're targeting bedroom smokers to big industry growers," she said.

Related: Is weed legal in your state?

The U.S. market for legal marijuana soared 74% to $2.7 billion between 2013 and 2014, making it the fastest growing industry in the country, according to a report from the ArcView Group, a cannabis-focused investment and research firm. It's expected to reach $3.5 billion in 2015.

Four states -- Washington, Colorado, Alaska and Oregon -- have legalized the sale of recreational marijuana, and 23 states have legalized its medical use. (In Washington D.C., you can smoke it, but you can't sell it.)

marijuana start ups

"Under full legalization, this could be a $36 billion industry," said ArcView Group's CEO Troy Dayton.

"Most people who are getting in won't be marijuana growers or processors. That requires a very specific skillset," he said. "It's like with the Gold Rush. It's a great time to be selling picks and shovels, instead."

WaterPulse, in Longmont, Colo., helps marijuana growers reduce water usage by as much as 70%. Its automatic watering mats, placed underneath cannabis plants, let growers set timers, said Mike Croy, the firm's VP of sales and marketing.

"This helps prevents water wastage and allows plants to grow uniformly," he said, adding that marijuana's legalization has generated a lot of interest.

"It's become the fastest-growing part of our overall business," he said.

Related: New bank could save the pot industry

Brother-sister team Kevin and Kathleen Sullivan launched Forever Green Indoors in 2013. The Kirkland, Wash.-based firm sells lighting panels for indoor marijuana farms.

Kathleen had run a small business that sold energy-efficient lighting options for businesses.

"We recognized an opportunity for our products in the marijuana business," said Kevin. LED lighting is much more effective for growing cannabis indoors -- and considerably cheaper, he said.

"The market demand for LED lighting panels has really picked up in the last six months," he said. Forever Green Indoors has installed about 500 LED panels (each costing $1,400) since the firm launched. "We're not profitable yet, but our pre-orders are growing fast," said Kevin.

Related: Peter Thiel invests in pot startup

Mirsky, who used to design websites for dispensaries, is overwhelmed by the rush of new clients.

He started the branding agency five years ago and has already worked with hundreds of clients. Last year he hit $500,000 in sales and is on track to hire eight new employees this year.

"Five years feels like 20 years already," he said. "That's how fast everything is moving in this industry."

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