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Dispatches from public radio's correspondent at the Washington Legislature. Austin Jenkins is the Olympia correspondent for the Northwest News Network. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) weekly public affairs program "Inside Olympia."

Washington Marijuana Legalization Draws Yale MBAs With Big Ideas

SEATTLE, Wash. – As Washington moves to legalize marijuana, pot entrepreneurs are lobbying in public forums and behind the scenes. These business interests want to shape the new marijuana marketplace. Among them, a Seattle-based private equity firm called Privateer Holdings. The company has hired a top Olympia lobbyist and is making the case for large marijuana grows to state regulators.

Brendan Kennedy remembers the moment he decided to get into the pot business. It was May of 2010. He was driving in the Bay Area. On the local public radio station was a debate over Prop 19, a measure to legalize recreational marijuana. Kennedy was a successful investment analyst and had just met that week with a potential client – a tech firm focused on medical marijuana. Something clicked. He picked up the phone and dialed his Yale business school buddy Michael Blue – a private equity guy in Little Rock, Arkansas.

“And called him and told him I need you to quit your job and come join me in the cannabis industry,” Kennedy says.

Michael Blue remembers that call well.

“My initial reaction was I was shocked by it,” says Blue.

Blue says he and Kennedy had talked about a lot of business ideas. But marijuana? Blue had never even smoked weed - says he still hasn’t to this day.

“You know I grew up in an incredibly conservative household in the south. And it just wasn’t something I’d ever given any thought to at all,” Blue says.

But after some long family conversations, they both quit their jobs. Blue joined Kennedy in Seattle where they founded Privateer Holdings. Today, along with a third partner, they run a successful website for medical marijuana users called Leafly. It’s often described as the Yelp of medical marijuana. It’s got user reviews of various strains and info on local dispensaries. But now that recreational pot use is legal in Washington and Colorado, Privateer Holdings is looking to expand. Kennedy carries with him a PowerPoint presentation that compares cannabis to corn as a cash crop.

Here's how Kennedy describes it: “If you go Nebraska, if you go to Lincoln, Nebraska and you look at corn there’s corn banks and corn insurance and agricultural supply houses and corn associations and high fructose corn syrup and there’s hundreds of sub industries around corn and all of those opportunities will exist in the cannabis industry.”

For now, it’s those kinds of ancillary services Kennedy wants to target in the cannabis market.

“Companies that are in advertising and security and staffing and software and professional services and equipment,” Kennedy says.

For the past year, Kennedy and his partners have crisscrossed the country making the pitch to would-be investors. Primarily for opportunities in the medical marijuana market. To date, they’ve lined up a modest nearly $7M for an initial investment fund. Even so, Kennedy thinks it’s enough to acquire six to ten cannabis subsidiary companies. Long-term though, Kennedy is banking on marijuana becoming legal nationally. As the laws change, he wants to be poised to make a move.

“The tide is going out and every time the tide goes we take a step forward and we have very good legal counsel that costs us a lot of money and their job is to make sure our toes don’t get wet,” says Kennedy. 

At this point, Kennedy says he isn’t getting into the marijuana growing business. But what about the future? It is a cash crop after all. Kennedy recently submitted a memo to the Washington Liquor Control Board – the agency writing the rules to implement the state’s new pot law. In his memo, Kennedy urges state regulators not to limit the size of marijuana grow operations in Washington. He makes the case that large marijuana farms can generate economies of scale that drive down the legal price of pot and drive out the black market. Kennedy has also retained a top lobbyist to represent the company’s interests before Washington lawmakers, the governor, the Liquor Control Board and the state Department of Agriculture.

Alison Holcomb led the campaign to legalize recreational pot in Washington. She’s also Drug Policy Director for the ACLU of Washington. Holcomb views Privateer Holdings as a major player.

“You know I think what they’re thinking of is really completely revolutionizing what the marijuana market in the United States looks like,” says Holcomb.

Holcomb recently wrote her own letter to the Liquor Control Board warning of “Big Marijuana” interests in general entering the market.

“Large industries that have large overhead and are interested in maximizing their profits are going to target their advertising in ways to promote marijuana use, not simply meet current demand where it currently exists,” Holcomb says.

Holcomb is especially concerned about advertising aimed at young people. Kennedy says that’s not his focus. His wants to develop a market for what he calls connoisseur recreational users and chronically ill patients who use marijuana as medicine. But there’s another aspect to his strategy. For Kennedy it’s not only about attracting a new brand of customer, but a more professional workforce.

“Part of how you win is by attracting smart MBA students from Carnegie Mellon or Wharton or Harvard into this space and we’re starting to see it,” Kennedy says.

“So you are corrupting the youth,” I say.

“Ya," he responds. "No comment there.”

Kennedy says over the past three months, Privateer Holdings has received more than 100 resumes from what he calls blue chip MBA students who want a job or a summer internship.

On the Web:

Privateer Holdings - official site

Since January 2004, Austin Jenkins has been the Olympia-based political reporter for the Northwest News Network. In that position, Austin covers Northwest politics and public policy, as well as the Washington State Legislature. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) Emmy-nominated public affairs program "Inside Olympia."