As Thailand's cannabis market starts to take off, the biggest opportunities for entrepreneurs may be in technology and services surrounding cannabis, as opposed to cultivating the plant itself.
"We think the market is going to grow very quickly starting now and are looking at an investment timeline of four years," said Douglas Abrams, managing director of the Southeast Asian venture capital firm Expara. "I think Thailand could be the cannabis tech hub, not just of Southeast Asia but of the world."
Expara, headquartered in Singapore and with an office in Bangkok, is raising US$30 million (920 million baht) to invest in cannabis-related startups, mostly in Thailand but also other areas of the world where marijuana is legal. The firm is in talks with one Thai company that builds LED lights for indoor grow houses and another that makes homegrown bioforming devices that control the lights and temperature for cannabis plants.
Mr Abrams said the fund is banking on Thailand and Asia following the same trends as parts of Europe and North America, where changing attitudes about the usefulness of marijuana led to legalisation of medical use and eventually recreational use. Then the growth of the market could be astronomical.
According to the Asia Cannabis Report, Thailand's legal cannabis market for both medical and recreational use could be worth $661 million by 2024, while Asia's market could reach $5.8 billion.
"I think cannabis tech is going to be big in the next 5-10 years, and companies built around it can create huge returns for investors that move early into this space," Mr Abrams said.
He compared cannabis tech to trends like peer-to-peer apps and ride-sharing services that grew from small startups in 2009 to massive international unicorns like Uber and Grab. His own company was able to get into the fintech craze early in 2008, way before the digital payments market exploded in Southeast Asia in 2016.
Expara sees the same potential in cannabis tech and plans to do most of its primary investing over the next four years.
BETTER THAN GROWING
Kitty Chopaka, founder of Elevated Estate, a consultancy, event organiser and incubator for cannabis startups, says legal cultivation of marijuana is less profitable than it appears and there are better opportunities in businesses that support growing.
In some legal markets, a mix of over-regulation and taxation has kept margins thin for growers, leading many operations to continue dealing in the black market.
California, for instance, expected $1 billion in tax revenue after legalising recreational marijuana, but only managed to rake in $345 million, mainly due to high taxes that made legal operations unable to compete with the black market.
For savvy investors, the real money is in everything around cultivation, whether it be soil, sensors, lights, packaging or even blockchain tracking technology.
"Instead of fighting for a piece of the pie, I'm just going to have ice cream," Mrs Kitty said. "While it's probably going to be tough for the little guy to get into cultivation, you could make much more money with all the other businesses that touch cannabis. Growing it doesn't make much money, but the guys selling the soil are making a lot."
Moving into a large excise industry like cannabis could be difficult, especially for a small startup, which could rely on obtaining expensive government concessions along with all the palm greasing that entails.
Much like the beer market, where Thais in effect have only three options (Chang, Singha and Leo), marijuana growing could end up wholly controlled by a small, well-connected group of corporations.
So far the government has issued 334 permits to mostly hospital and research facilities to develop medical extracts from cannabis, according to the Food and Drug Administration.
"The money is in innovation, but a lot of what's coming out of Thailand right now is just copy and paste," Mrs Kitty said. "A lot of new ideas could simply be about combining two existing things. Like we have lights and we have sensors, why not combine them into a product that does both."
According to Mrs Kitty, cannabis is a finicky plant and requires careful attention to climate and lighting in order to grow properly, leading to a constant demand for innovation to simplify and reduce costs in the process.
But she says too many fledgling startups are pitching stale ideas, such as seed-to-sale blockchain tracking, a method of tracking cannabis production from when it is sold as a seed to its final endpoint sale to the consumer, cataloguing each transaction on the blockchain.
This technology is useful for regulating cultivation and preventing product from ending up in the black market, but the technology is already widely available and not particularly lucrative territory for new SMEs.
Mrs Kitty says some large Canadian companies have expressed interest in Thailand as a potential market, and even possibly for exports of cannabis, taking advantage of lower Thai wages to produce cheaper per-kilo value than what can be made in Canada.
Canada's Canopy Growth, considered the world's largest cannabis company, already has a presence in Asia-Pacific with an office in Australia (a country with legal medical weed).
"We obviously only operate in countries where it is federally legal, so before we get involved in a new market our investment has to be based on local demand," said Renee Shingles, who manages Asia-Pacific communications for Canopy Growth.
"In Thailand it's still very early," she said, "but we see opportunities, local demand and have partners to work with us. It would definitely be a consideration."
BOOM OR BUST?
Daragh Anglim, managing director of Prohibition Partners and author of the Asia Cannabis Report, said the world is already seeing a consolidation in the cannabis industry, whereby large companies, usually from Canada, are starting to move into Europe to buy up cannabis companies or going to Latin America and Africa to acquire low-cost cultivation operations. He says the trend will likely continue in Asia.
"It will be difficult for countries to be able to shift towards low-cost, high-yield production of cannabis," Mr Anglim said. "Instead they should look into more value-added products and extraction branding where different nations can carve out a niche for themselves."
If big players like China and India move in, alongside the large multinationals, it could be difficult for Thailand to compete.
Thailand must develop a niche, perhaps with its own strains native to the country, that can be marketed as a geographically indicated product. Cannabis could also be combined with other popular Thai food and medicinal products.
Even with the Asia Cannabis Report's generous growth forecast for Thailand (with $237 million worth of medical marijuana), Mr Anglim said success still depends on access.
"There is a rush to maybe adopt legalisation, which is great," he said. "But these countries also need to make sure doctors are educated, because in many countries doctors aren't prescribed to relevant conditions or are reluctant to prescribe."