For Savvy Cannabis Entrepreneurs, Opportunity Is Rising in the East

The West Coast has pioneered the national cannabis industry, with California, Oregon, and Washington leading the way in decriminalization and legalization efforts, and that trailblazing reputation has contributed to the impression that market concentration may be skewed toward the Pacific Ocean. However, it’s companies that have been established in the more restrictive, under-the-radar medical cannabis markets of states like Massachusetts, New York, Pennsylvania, New Hampshire, and Ohio, that may have the best long-term positioning and highest valuations.

The reason for this might be counter-intuitive: West Coast states have been much more liberal in issuing licenses to operate cannabis businesses, which has created a market saturated with retail, cultivation, and processing licenses, which, in turn, has created more competition for increasingly smaller market shares. States on the East Coast typically have stricter rules, and companies there must jump through a number of hoops before being granted a license to operate. So while markets in these states is, therefore, limited, given the relatively few licenses granted and high barriers to entry, there is also less competition than out west. The more highly competitive application process also creates an environment that has resulted in eastern companies being some of the best capitalized in the country. The selectiveness regarding licensure has created a better-organized ecosystem that some experts believe has a strong chance of reshaping the cannabis industry as a whole.

A recent article on Forbes.com found a striking discrepancy in the number of licenses issued in states in the West versus the East, revealing that, in Colorado, Oregon, and California, there are hundreds—in some cases, thousands—of dispensaries and production facilities competing for market share, while Illinois, a state of nearly 13 million people, has granted only 60 dispensary and 20 cultivation/production licenses. Likewise, New York and Florida, both states with around 20 million people, have granted only 10 vertically integrated licenses. Pennsylvania and Ohio, both with around 12 million people, have granted 30 and 39 licenses, respectively. The companies that have obtained these licenses have high market values and operate with a great degree of professionalism, with net values ranging from $10 million to $500 million.

Eastern markets also provide additional benefits in terms of their potential for expansion, something largely not available in the much more mature western adult-use markets. States like New York, Florida, Pennsylvania, and Illinois are poised to pass further legislation that would increase cannabis legality (possibly completely). If and when that happens, companies there would be already established and operating, and would have the lion’s share of the new market. So while the West may seem like the easiest route, for those cannabis entrepreneurs with the business acumen, connections, and capital to enter the game, the best advice may just be: Go east, young man […or woman]!