How startups want to rake in many millions of euros with cannabis legalization

The planned cannabis legalization at EU level could still fail. How German startups are nevertheless preparing for the sale of THC - and what they will do if the dream is dashed after all.

At first glance, Bloomwell is a boring company. The start-up's office is located in a brown, angular office building between downtown Frankfurt and the Main River. A logo in the entrance area shows a green leaf that could just as easily come from a deciduous tree as from any other plant. From there, a door leads into a hallway that leads to several meeting rooms. A long table, white walls, a flipchart. All that's missing is a foosball table, and the cliché of a completely normal start-up is perfect.

But if you take a closer look these days, you can see what's behind the boring facade. Pink Kush, for example, is the name of the meeting room, which is named after a cannabis variety. And the founders Niklas and Anna-Sophia Kouparanis are not talking about fintechs or delivery services here either, but about what no one in Germany wanted to talk about for a long time: The legalization of cannabis and how it can rake in many millions of euros.

Will everyone be able to smoke pot now, the media are asking. How can you make a lot of money with it now, ask entrepreneurs.

Admittedly, the German cannabis industry is not really that big yet. But it has big plans. After all, Germany could soon become the largest cannabis market in the world, at least according to a twelve-page paper in which the German cannabis industry is putting all its hopes. Twelve pages that will decide whether or not a market worth billions will emerge here - and twelve pages that have it all. For the key points paper presented by the traffic light government in October stipulates that THC should not be classified as a narcotic, as has been the case up to now. In the future, adults will be able to buy cannabis in licensed stores, and cultivation for sale will also be possible with a license. Is smoking pot for everyone coming now, ask the media. How can you earn a lot of money with it now, ask entrepreneurs.

A lot is still open. The traffic light coalition cannot decide alone on the legalization of cannabis. It cannot do so without the approval of the EU Commission, which is still pending. Start-ups are therefore faced with a dilemma. On the one hand, they have to be prepared if legalization goes through, otherwise someone else will grab their market share. On the other hand, they could possibly lose billions if the EU overturns the matter and the twelve pages can suddenly be smoked in the pipe. And now?

A franchise concept in the drawer? Do German start-ups

Siblings Niklas and Anna-Sophia Kouparanis are two of the entrepreneurs who just have to plan for the unplannable. The man with the short hair, long beard and broad shoulders says, "It would be entrepreneurially negligent for us not to prepare for this market." He has long had plans in the drawer, copied from other countries, but of course not yet implemented. "We see in other markets that stores are very much in demand as a starting point," says Niklas Kouparanis. "That's why we will also work out a store concept. But we won't be the company that will have 200,000 stores in Germany." Bloomwell would much more like to focus on the online shipment of cannabis - at least if this should become possible. That's because the key points paper doesn't envision it yet, and a decision on it won't be made until later.

The start-up already knows its way around the cannabis business. According to Niklas Kouparanis, the largest turnover is currently generated by the telemedicine platform Algea Care, where 88 doctors provide cannabis to 11,000 patients. The second largest revenue is provided by Ilios Santé, the product procurement business founded by Anna-Sophia Kouparanis. Already, the dark-blond, tall founder imports medical cannabis from the Netherlands, Canada, Portugal, Denmark, Spain and Colombia. If cannabis is legalized, she wants to sell in Germany but continue to source cannabis from abroad rather than grow it herself.

"We can easily adapt the processes for online trade in the legal cannabis market"

Niklas Kouparanis, founder Bloomwell

Newly founded is Breezy Brands. In its online store, customers can currently buy vaporizers, cigarette papers and all sorts of cannabis-related items. Breezy would play the main role in legalization, at least if online trade is allowed, the two founders explain. One part of Breezy Brands in this regard is "Green Breeze," a marketplace for cannabis dispensaries. Patients enter the access code from their prescription there and can then choose the appropriate cannabis preparation. This is already legal today. The patient then sends the physical prescription to the online pharmacy. A delivery person then brings the ordered cannabis to the patient's home, checking ID. "We can easily adapt the processes for online trade in the legal cannabis market," says Niklas Kouparanis.

His co-founder and sister Anna-Sophia Kouparanis adds, "So all the very strict regulatory requirements that the legislature would reasonably like to put on regulations for online trade, we can cover." Can, if the EU agrees to legalization and the legislature decides in favor of online trade. But is that really realistic?

Synbiotic wants to invest as little money as possible so far - but also doesn't want to miss out on the hype

Hundreds of kilometers to the south, another founder sits in front of elaborate plans and the dilemma of uncertainty: Lars Müller, boss at Synbiotic. Asked in a video call whether legalization will finally happen, he says: "It is still unclear whether legalization will fail because of the EU or not. So he has to plan with uncertainty and is doing so cautiously for now: "Right now, everything is rather conceptual-theoretical with as little money involved as possible," says Müller.

With his company Synbiotic, he tries to cover the entire value chain around hemp, CBD and medical cannabis. To do this, he has bought other companies in recent months and is expanding them under the Synbiotic umbrella. Müller's company now has stakes in 16 companies, and Synbiotic holds either all or more than half of the shares in most of them.

Müller does stress that his company would function well even without legalization. But let's be honest: If cannabis were to become legal for consumption as well, Synbiotic would probably earn good money from it. Back in the spring of this year, Synbiotic founded a joint venture for this purpose together with the Enchilada gastronomy group to develop a franchise concept for cannabis dispensaries. Here's how it's supposed to work: The joint venture will provide the brand and a store concept as franchisor. Independent entrepreneurs would take over the concept for a fee and open their own cannabis dispensary - similar to McDonalds. "We already have various concepts that we just need to get out of the drawer and implement as soon as we are allowed to," says Müller.

"Pleasure cannabis will trump everything in terms of market size and will spread to a large part of our group"

Lars Müller, Green Synbiotic

Currently, 80 percent of Synbiotic's revenues come from the sale of CBD products, products containing the active ingredient cannabidiol, which are already sold legally. Another 20 percent comes from medical THC cannabis, which patients have been allowed to use on prescription since 2017. If legalized, THC cannabis would also be released as a stimulant. "Pleasure cannabis will trump everything in terms of market size and will become widespread in our group to a large extent," Müller believes. Already today, "Hemp Farm," one of the portfolio companies, grows industrial hemp - which is hemp with low THC levels that can be used to produce textile fibers, paper and insulation materials, for example. Should legalization come, the startup could switch capacity to recreational cannabis.

Müller also sees growth potential outside the German market. If the EU Commission approves legalization, he expects a kind of domino effect, with Germany leading the way.

What if legalization doesn't happen at all?

However, nothing is certain and in case of doubt, Müller would have to exist even without legalization, according to him no problem: "We are already active in areas that are not affected by legalization," says Synbiotic founder Müller. "If legalization doesn't come, our medical cannabis market in particular will once again become very important." He anticipates that the self-pay market would grow, meaning the market for patients who receive a cannabis prescription but for whom health insurers do not cover the costs. In that case, Synbiotic plans to expand its Hempamed RX brand and introduce new products soon.

Niklas Kouparanis in Frankfurt is also relaxed about his own company, but says clearly, "If we don't legalize pleasure cannabis, we have to be aware that this will be a bitter setback for the industry, some of which has now burst into euphoria. Nevertheless, we are optimistic that cannabis will be sold legally as a stimulant in Germany for the first time in early 2024."

"If we do not legalize stimulant cannabis, we must be aware that this is a bitter setback for the industry, which has now partially erupted in euphoria.

Niklas Kouparanis, founder Bloomwell

He suspects that Karl Lauterbach very likely has a Plan B and is not currently communicating it for strategic reasons. "If the European Commission says that a legalization of cannabis as a stimulant - as envisaged in the draft law yet to be drafted - is not to be carried out in conformity with European law, one could immediately call for a scientific pilot project in Germany." He already suspects a backdoor to this in the cornerstone paper. "When I read in the cornerstone paper that the law is to be evaluated after four years, that already sounded to me very much like a backdoor for such a large-scale and nationwide pilot project."

So, weed through the back door? Now it's the EU's turn.