Hemp kingpin ditches Amsterdam for Denver

AMSTERDAM (CNNMoney.com) -- When American entrepreneur Adam Dunn moved to the Netherlands at age 19, his first business plan wasn't anything to write home about. He'd crammed 300 Rolling Stones concert T-shirts into his luggage, hoping to sell them for some quick cash.

That was in 1989. Today the 40-year-old native of Woodstock, N.Y., presides over a "hempire" that boasts more than $3 million in annual retail sales. With business partner Douglas Mignola, 41, Dunn co-owns three companies, all headquartered in Amsterdam. There's T.H. Seeds, which breeds seeds for marijuana growers; Hemp HoodLamb, a hemp clothing company whose signature jackets feature built-in rolling-paper dispensers; and Hemp Works, a brick-and-mortar store that sells all things -- you guessed it -- hemp.

After two decades of carefully tending his businesses, Dunn is making the most radical leap of his career. He's moving back to America.

Going home was once unimaginable. "The thing about America was they still had a very, very negative idea of cannabis," Dunn recalled during an interview this spring. "I was in a sort of dream world over here."

Amsterdam's dreamers are getting a rude awakening. In the past three years, new rules have arrived in town: coffee shops selling marijuana cannot advertise their wares, offer alcohol or allow their patrons to smoke tobacco. In March, a Dutch court levied a $13 million fine on Checkpoint -- a marijuana megamart on the Belgian border that once drew an estimated 3,000 customers each day -- for keeping too much weed on the premises. On Jun. 9, the day of the Dutch Parliamentary elections, a Haarlem coffee shop owner led his colleagues in a temporary strike to encourage patrons to vote for cannabis-friendly legislators.

At the same time, the legal market for marijuana is flowering in the U.S. In October, the Obama administration told D.E.A. agents to discontinue the practice of busting state-sanctioned medical marijuana businesses. Medical marijuana is now legal in 14 states. The city council of Washington, D.C., voted unanimously in May to bring it to the nation's capital.

Adding insult to injury, an offshoot of Amsterdam's infamous Cannabis Cup -- like the Westminster Dog Show, but for marijuana enthusiasts -- came to San Francisco this month for the first time.

"Amsterdam, I think, is going to go through a crisis time," Dunn reflected in March, sitting in his crowded basement office at Hemp Works.

He was surrounded by the tools of his trade: a microscope with a marijuana bud under the lens, dozens of crush-proof boxes for packaging seeds, a grinder for pulverizing pot. Upstairs, a glass showcase held two goblet-shaped trophies from the Cannabis Cup, both overflowing with pot seeds. Sold in ten-packs, the seeds cost anywhere from 20 euros for "Skunk XXX" ("Large fruity buds and classic stinky undertones," the catalog promises) to 100 euros for Lambo ("it transforms from an Amaretto inhale to a vanilla, metallic lime exhale").

Dunn had just returned from Spannabis, an annual pot trade show in Barcelona. His cell phone buzzed every few minutes. Between fielding business calls, he detailed his companies' next steps.

Mignola, his partner, would hold down the fort in Amsterdam, handling the European end of the business and Hemp Works. Dunn would set sail for the New World. He planned to hit THC Expose, a pot trade show in Los Angeles that bills itself as "The greatest cannabis show on earth!" Then he'd fly to Colorado, the future base for the American extension of his businesses.

"I want to be there," he said, "ready for the next wave."

Small businesses have become the latest engines for medical marijuana advocacy in the U.S., according to Dick Cowan, the former director of the National Organization for the Reform of Marijuana Laws (NORML).

"The thing that's really driving legalization is entrepreneurialism," he said. As the CFO of Cannabis Science, a pharmaceutical startup based in Colorado Springs, he has a vested interest in seeing the industry succeed.

"I think it's great that Adam is back here," Cowan added. "He's a very shrewd, successful businessman."

Part of entrepreneurial shrewdness is knowing when to seek out new opportunities. For the savvy weed farmer, some places in the U.S. offer possibilities that aren't available in Amsterdam.

Despite the Netherlands' status as a stoner Mecca, pot has never been legal here. Instead, it's regulated by what the Dutch call a gedoogbeleid, or tolerance policy. In practice, that policy is a confusing and contradictory affair. While Dutch authorities allow retail sale and possession of small amounts of pot, everything that happens backstage -- farming, wholesaling and bulk delivery -- is classified as criminal activity.

As a result, Dutch seed growers must outsource their work to other countries or risk prosecution. For T.H. Seeds, that means partnering with farmers in Spain.

In Colorado, however, Dunn can openly cultivate seeds for medical pot. Three months after he described the future from his Amsterdam office, he was shuttling around the state to set up partnerships.

In Denver, a new dispensary called the Mayflower will include Dunn's office and a showroom for Hemp HoodLamb. Sixty miles north in Windsor, another dispensary, In Harmony Wellness, has signed on to be the Colorado distributor for T.H. Seeds.

"Of the all the seed banks out there, Adam just has a reputation for quality," said Derek Cumings, co-owner of In Harmony Wellness. "I'm just happy to be able to supply Colorado patients with such wonderful genetics."

Dunn has been stunned by the openness of Colorado real-estate brokers, who ask bluntly about his grow-room requirements: square footage, access to water, the amperage he'll need to power UV lamps.

"You mean I can do everything I wanted to do in Amsterdam but couldn't do?" he marveled. "Everything is so much easier."

Well, maybe not everything. America's medical pot industry is still young. The rules are very much a work in progress, and as state lawmakers grapple with the outcomes of previously untested policies, revisions can come at a moment's notice. That's a big risk for entrepreneurs.

In Los Angeles, for example, city council members have ordered the closure of 439 of the city's estimated 574 pot clinics. And changes are happening in Colorado, too. Earlier this month, Gov. Bill Ritter Jr. signed two bills tightening restrictions on medical marijuana. The first bill authorizes individual towns to ban dispensaries; the second bars doctors from having financial relationships with dispensaries and requires them to give patients a physical exam before prescribing medical marijuana.

"If it was any other industry, we would probably go crazy. But at least we have one thing that can relieve anxiety at our disposal," Dunn said, laughing. "Thank god we have cannabis."

Self-medicating aside, he's got another strategic advantage: Dunn and Mignola haven't put all their businesses in one basket. Two-thirds of the partners' revenues come from Hemp HoodLamb. The clothing company's jackets sell for about $250 apiece and have gained a following among celebrities from Snoop Dogg to Woody Harrelson and Tommy Chong. Dunn and Mignola recently donated a bulletproof hemp jacket to Captain Paul Watson of the Sea Shepherd, whose efforts against whaling are chronicled in Animal Planet's Whale Wars series.

That kind of diversification makes their businesses more stable. But the hemp industry isn't a walk in the park, either. In a strange twist of fate, while growing medical marijuana plants is now permitted in parts of the U.S., industrial hemp remains prohibited under a federal ban. That ban is now being challenged by a handful of states, including North Dakota and Oregon.

Hemp HoodLamb's production is currently outsourced to China. Given the option, Mignola and Dunn say they'd prefer to use homegrown hemp from American farmers.

"It's still illegal to grow hemp, which makes no sense," said Dunn. "That's the next big push."