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Cannabis [Illustrative].(Photo by: INIMAGE)
Cannabis start-ups pave the way for the rise of a ‘Spark-Up’ Nation
By NIV ELIS
03/08/2016
In Israel, where pot innovation runs deep, companies seek first-mover advantage.

  
 





The way Prof. Raphael Mechoulam remembers it, the toughest part about experimenting with cannabis was taking it on the bus.

“We went to the police and they gave me 5 kilos of hashish and I went on the bus and everybody smelled something and said, ‘What the hell is going on, what kind of smell is that?’”

Unlike hordes of college students who excuse their drug use as a passing phase, Mechoulam was quite literally experimenting with marijuana. As a researcher at the Weizmann Institute of Science in Rehovot, he was part of the team (alongside Yechiel Gaoni) responsible for the discovery of THC, the main psychoactive ingredient of cannabis, as well as much of the foundation research in the pharmacology of cannabinoids.

When he realized, too late, that he lacked the authority to obtain the research cannabis from the police, he says, he simply apologized to the Health Ministry and got it right the next time.

“If it were the States, I would have ended up in prison,” he said on Monday at the second annual CannaTech conference in Tel Aviv.

As Mechoulam’s story illustrates, Israel’s flexibility and increasingly progressive regulation have made it a world leader in marijuana research.

Because reliable, repeatable, clinical tests are necessary to advance cannabis as a medical drug, research is among the crucial next steps.

“My recommendation for people in the US is to come here,” said Dr. Mark Rosenfeld, CEO of ISA Scientific. In the US, cannabis is still classified as a Schedule 1 drug, which throws huge barriers in front of researchers.

Because the US Food and Drug administration accepts Israeli research standards for trials, he says, researchers would be well-advised to start their trials in Israel, where the regulations allows it.

Should the US change cannabis’s schedule classification, research done in Israel will be “in the front of the line,” Rosenfeld said.

Today, as the mainstream stigma associated with all things cannabis has begun to fade and new regulations begin to take hold, Israeli start-ups are racing to get a first-mover advantage in an industry projected to be worth anywhere between $14 billion and $30b. by the end of the decade.

“There’s a lot of new money coming into the scene, but it’s a very early stage in the scene itself. Now is the time to enter the market, specifically for Israeli VCs,” said Barak Goldstein, CEO of early stage venture capital fund Tera Labs.

At CannaTech, which kicked off its second year in Tel Aviv on Monday, there were marked disagreements about where the marijuana market was headed.

“The ancillary services are the No. 1 hot areas to be in,” said Rick Gilchrist, co-founder of US-based New Frontier, which uses big data to do market research on cannabis and also tracks regulation. Companies providing products around consultation or agricultural methods such as lighting were the growth areas, he said.

Jennifer Hanser, the VP of business development at Privateer Holdings, a company that invests in marijuana, disagreed.

“We believe that mainstream medicine will eventually embrace cannabis as medicine, and that that’s the main market,” she said.

The companies popping up in Israel represent a wide variety of angles in the market.

CanoMix, for example, provides a platform for breeding plants using specific genetic markers.

Another company, Eybna, focuses on mapping terpenes, the substance that creates the flavor profile of different strains of cannabis, which could affect the way the other chemicals affect users.

Pharmaseed, which has been in the field for 13 years, focuses on simply carrying out clinical trials on marijuana.

Another company, DryGair, has created a system for sapping humidity from the plants.

“It’s a medicine. Unlike vegetables that you can wash and clean, you can’t use any fungicides or pesticides, you have to prevent the disease before they even get there, and that’s what we do,” explained Hadar Fuchs-Rubal, the company’s marketing manager.

There is still much reform needed – both in Israel, which is considering a looser, more organized regulatory regime, and abroad where there are larger markets for cannabis – before the industry can fully bloom. But at CannaTech, at least, investors, scientists and entrepreneurs alike expect that change is just around the corner, and preparing accordingly.

“Today the market is not very competitive, but in the future, the bigger it will become and more knowledge that will be in it, the growers will have to be one step ahead,” said Fuchs-Rubal.
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