Tel Aviv, Israel
“As much as we love cannabis, this is a non-consumption event.”
That admonition kicked off the first day of
presentations and roundtables at Cannatech, a three-day conference on
the marijuana industry held this past week in Israel. Instead of pot
edibles, hundreds of attendees munched on pita sandwiches and Turkish
bourekas.
As legalization slowly takes a foothold and entrepreneurs and cannabis enthusiasts drool over markets some estimate to be worth tens of billions of dollars,
the goal of Israel’s (second annual) Cannatech conference was to pitch
the tiny country as a hotbed of valuable know-how, translating Israel’s
reputation for spawning successful businesses in tech, medicine, and
agriculture into the cannabis industry.
“Everything is set up here to be the epicenter of cannabis research.” Israeli pot startups already generating a buzz include Syqe Medical,
which has developed a metered inhaler to control doses of cannabis and
recently announced a $20 million investment from Philip Morris. Eybna isolates and develops cannabis strains tailored to specific ailments. Medical cannabis grower Tikkun Olam has developed a plant that doesn’t get patients high. And Kalytera wants to develop medicines to treat osteoporosis by synthesizing chemical compounds from cannabis.
“We want to build cannatech like [financial]
tech, ad-tech, and all of the other technology areas Israel is well
known for,” said Clifton Flack, the co-founder of iCan, the conference
organizer.
“Everything that people know we know because of Startup Nation, they think that we are doing with cannabis.”
It was an Israeli, Rafael Mechoulam,
who first isolated the active psychoactive chemical in cannabis back at
the Weizmann Institute in 1964. A diminutive, grandfatherly figure,
Mechoulam held forth during the event on the need to lobby for more
clinical trials. The use of cannabis as a treatment in Israel was
legalized in 1993 and began to become widespread in 2007, though recreational use is still illegal.
Today, Some 22,000 patients in Israel have state-approved prescriptions to use medical marijuana. In January, Israel’s ultra-Orthodox health minister said
he wants to eliminate long waits to get the treatment by boosting the
supply of medical marijuana, making it easier to prescribe, and
increasing the number of authorized farms (there are currently only
eight) and retailers.
A factor in Israel’s favor—for now at least—is
that scientific research and clinical trials using cannabis are
permitted, whereas the federal prohibition on marijuana bans most such
studies in the US.
“Everything is set up here to be the epicenter of cannabis research,” Flack said.
The drawback, though, is that with a population
of only 7 million people, Israel has a much smaller patient pool for
clinical trials, as well as a small market for cannabis products. And
because it’s illegal to export plants or seeds, it can’t hope to sell
them abroad.
The opportunity, therefore, lies in exporting
know-how and techniques. The challenge is to match expertise developed
in Israel with companies that can bring it to foreign markets.
“The main big opportunity in Israel is for
[investment] funds to come in here, and get on the ground floor in the
scientific research being done. But that is a long-term play, and more
capital-intensive,” said Eli Gordis, a conference speaker who co-founded
the Alta Fund, a private equity firm.
“Our focus in the short term,” he continued, “is
to find companies that are using what has been going on here in the last
10 to 20 years , and finding companies in the States that are selling
to the medical or recreational markets that really want to tap into the
kind of [plant]-breeding methods that have been done here.”
As Bob Marley
played during a session break, small-time entrepreneurs mingled with
doctors and and scientists. Inevitably, some attendees looked as if they
had come from a campus hash bash. With bloodshot eyes, shirt tails
hanging, and tobacco breath, Izzy Chanin pitched his commerce website
“Weedsta” and then launched into a spiel on the influence of the plant
on Hasidic rabbis.
Jackie Subeck, an
aspiring cannabis businesswoman from southern California, sounded as if
Cannatech was a pot pilgrimage. “I dropped everything to be here. This
is a home—not just for the Jews,’’ she said. “All of the research is
happening here, but they can’t access the market. We all have all the
access, but can’t research it.”
The cannatech sector is still small in relative
terms. While in Israel’s renowned tech startup sector hundreds of
ventures raise billions of dollars of investments annually, the handful
of cannabis-related business in Israel have attracted investment in the
tens of millions of dollars, Flack said. Most of the money has come from
angel investors rather than venture-capital funds.
“Institutional investors will not touch it
because it’s illegal under federal law,” said Jeffrey Friedland, the
chairman of Intiva, a company in Colorado which has made seed
investments in several cannabis companies in the US, Canada and Israel.
“Slowly some small institutions are putting their big toe in the water,
and starting to get involved, but it’s a challenge.”
In fact, most of the venture-capital firms active
in Israel’s more traditional tech scene were absent from the
conference. That didn’t come as a surprise to Jack Levy, a co-founder
of Israel Cleantech Ventures, which focuses on agricultural technology.
(He didn’t attend Cannatech.) Levy told Quartz the vast majority of
venture-capital funds are not involved in agri-tech.
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