Joint Venture

With I-502 now in effect, Seattle has become ground zero for the state’s recreational pot market

Jim Willett has never smoked pot.

His teenage sons think he’s a square. A former Navy pilot, he spent a year doing drug interdiction flights along the Washington coast, checking for ships carrying bales of marijuana. For the graying retiree, voting against the state’s legalization of recreational weed (Initiative 502) was pretty much a given.

In January, Willett did an about-face. After learning about The ArcView Group, a San Francisco–based angel investment network for the marijuana industry, he signed on. “I was puttering around looking for things to do and this hit me like a lightning bolt,” says the 62-year-old Woodinville resident, who ran a waste recycling business for two decades. He has since invested more than $1 million in Washington’s and Colorado’s legal weed market. Think real estate, grow equipment, security systems, inventory tracking software and cannabis oil extraction devices—“basically everything except the plant.” Financing the production and sale of cannabis poses too great a risk for him. “I’m not a crusader,” he says. “I’m just in it for the money.”

Welcome to the green stampede. If all goes according to plan, the Washington State Liquor Control Board will begin accepting license applications from pot retailers, growers and processors this month and grant them to qualifying companies in December. Recreational stores could start cropping up early in 2014.

You’ve likely read about some of the region’s more high-profile “potpreneurs.” Butcher William von Schneidau, proprietor of BB Ranch at Pike Place Market, now sells bacon made from pot-fed pigs. Brendan Kennedy, CEO of Seattle-based private equity firm Privateer Holdings, which invests in ancillary cannabis companies, has become a media poster child for the squeaky clean, suit-and-tie-clad pot professional. Microsoft manager turned ganja convert Jamen Shively, who held a press conference with former Mexican President Vicente Fox this spring, boasted that his premium marijuana brand, Diego Pellicer, will “mint more millionaires than Microsoft.” Even Grey’s Anatomy star Patrick “McDreamy” Dempsey, who recently bought Tully’s, joked about selling cannabis at the coffee chain. (Above: Former Navy pilot Jim Willett, now an investor in the recreational marijuana market, photographed at his Woodinville home.)

These entrepreneurs aren’t just blowing smoke. The potential profits could be sky high. Trade publication Medical Marijuana Business Daily foresees national revenues from legal weed rising to $1.3 billion–$1.5 billion this year. (For those who haven’t been keeping score, medical marijuana is now legal in 18 states and Washington, D.C.) Add in the recreational pot shops opening in Washington and Colorado next year and those figures could jump to $2.5 billion–$3 billion, the publication reports.

How much cash the state’s 25 percent excise tax on licensed sellers, cultivators and makers of pot tinctures, balms, edibles and beverages will yield remains to be seen. The Liquor Board estimates it will collect “anywhere between $0 and $2 billion” in tax revenue during the first five years of legalization. The generous spread accounts for the fact that no one can predict whether the federal government—which still forbids possessing, growing and selling pot—will shut down the adult-use party.

“This is the greatest business opportunity since the falling of the Berlin Wall and the opening up of the free market in Europe,” says Steve DeAngelo, longtime marijuana activist and president of The ArcView Group, which drew “cannabusinesses” from around the country to two pitch slams in Seattle earlier this year. DeAngelo runs Harborside Health Center in Oakland, California, considered the world’s largest medical marijuana dispensary and featured on the Discovery Channel show Weed Wars. Harborside recently made headlines when the City of Oakland sued the federal government for trying to shut down the dispensary.