A conference was held in Williamsburg, Brooklyn discussing issues in the business of cannabis like access to capital and how it affects entrepreneurs, especially minorities.
It was held by the Business of Cannabis, a Canadian-based cannabis news site. Business of Cannabis President Jay Rosenthal reviewed the progress New York state is making with cannabis. He noted that it has been announced that those with cannabis convictions are supposed to get licenses first to applause from the room.
Minority Cannabis Business Association (MCBA) Executive Director Amber Littlejohn discussed the Social Equity Report they released last month. She explained that her organization seeks to build an equitable industry and graded the existing industry by several metrics.
“There seemed to be a trend talking about equity and companies making statements,” Littlejohn said. “But when it came to policy on the state level, there seems to be a disconnect.”
She noted her organization did an extensive analysis of state cannabis markets around the country. Littlejohn was very critical of most social equity programs in the cannabis industry. Her report spoke well of New Jersey’s program laid out in the interim regulations but noted the delays and limited medical cannabis market are serious issues that limit Social Equity.
She noted minorities own less than 10 percent of the companies in the cannabis industry.
“It was a bit startling,” Littlejohn said.
“We need to address the harms that have been done to our community,” she said. “Nobody is really advocating for minority business.”
Littlejohn called the work done by existing social equity programs “rainbow sprinkles of equity.”
She said that in the bargaining to pass cannabis legalization legislation, social equity programs are often left on the chopping block. Littlejohn noted that the need to find a location is exceedingly difficult. Thus, it is a significant issue in New Jersey and elsewhere as well. She said if there is the consolidation of the industry that cannabis policy experts see looming, there will be fewer ancillary opportunities as well few cannabis companies that would purchase their goods and services.
The Business of Cannabis and Access to Capital
A panel at the conference said access to early capital for any business of cannabis is key to success.
“There are so many things you find you need money for,” said Tahir Johnson of the U.S. Cannabis Council and a Trenton, NJ native as part of a panel moderated by Leafly CEO Yoko Miyashita.
While he said it is great to have low barriers to entry imposed by the state, “Lawyers and other fees, though add up,” he said.
Johnson noted there are many financial opportunities that are predatory in nature unfortunately that entrepreneurs need to avoid. There is also a lot of red tape.
“This is the most regulated and compliance-driven industry in America now,” he said.
“It’s never fast enough,” Tiffany McBride of the Parent Company said about the pace of the establishment of state cannabis industries.
“Dealing with the government is never going to be fast,” she added.
“Capital never comes fast enough,” McBride said. “We need access to more funds.”
She noted that local governments take wildly different approaches to regulating cannabis. For example, Oakland, California doesn’t have a cannabis department. Instead, the same department also regulates food trucks.
It was noted that the lack of access to capital in the cannabis industry has hurt a lot of entrepreneurs.
“People have lost their homes. People have mortgaged their parents’ retirement homes,” Willie Mack of Think BIG/Frank White said.
The main way to raise money for a business if you do not have sufficient funds yourself is to ask your family and friends, along with colleagues and acquaintances. To raise more money, one needs to become acquainted with Venture Capital firms and Angel Investors. One can ask for a loan or give out stock in the company in exchange for capital. Before raising money, you need to write a business plan and prepare a Pitch Deck.
Johnson explained how he is seeking a license in New Jersey and lamented how hard it is scraping together sufficient capital. He discussed taking money from his 401K retirement fund and a fund set up for his daughter. Johnson spoke of the need for a cannabis industry ecosystem to be established to support companies and grow the industry as a whole.
Barrington Rutherford of Park Jordan discussed the need for the SAFE Banking legislation to pass Congress and be signed into law so cannabis companies can access capital via bank loans and deduct the cost of doing business from their taxes. It is a very problem serious for plant-touching companies. Ancillary companies have an easier time dealing with those issues.
Rutherford noted the need for a financial planner advisor for financial projections in a business plan helps convince investors to fund your company.
“Come to the table knowing what you’re worth,” McBride said. “There’s nothing in this industry that’s easy.”
McBride said that for some legacy operators, it is a rocky road to legalization and understanding how to read and maintain balance sheets detailing Profits and Loss that are needed to conduct business. It may not be natural to those who are not familiar with it.
“The education needs to be there,” she said.
The room was filled with many minority entrepreneurs from New York along with New Jersey seeking capital for their respective cannabis companies.
“This is a marathon, not a sprint. Don’t feel this pressure about getting in. The cannabis industry is still in its infancy,” said Rutherford.