Israel wants to be the tech hub for the world cannabis industry

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.

And, save for occasional patches of pungent air, the request to keep the event sober mostly worked.

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.

Israel’s entrepreneurial, risk-taking culture and its world-class plant studies programs position the country to attract attention from investors and multinationals involved in agri-tech, Levy said, but it will take a while because of the need to test potential medicines and growing techniques. “There’s less money involved, and it’s less fast paced, but it doesn’t mean we won’t end up with one or two significant companies in the next five years.”

Correction: This post was originally published with the wrong author byline. Some material has also been added.

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