To address access to capital (or finding money) for cannabis entrepreneurs, the New York Cannabis Social Equity Investment Fund was established. New Jersey can learn from their experience.
New York set up the Cannabis Social Equity Investment Fund to help cannabis companies with millions of dollars via loans. NY Governor Kathy Hochul (D) recently announced that Chicago Atlantic Admin, LLC is investing $150 million in the New York State Cannabis Social Equity Investment Fund.
“I welcome Chicago Atlantic’s participation in this program and applaud their recognition of the value that New York’s cannabis program will provide to so many,” she said.
New York State will put in the remaining $50 million from cannabis tax revenue. So there is now $200 million in the fund. Previously, New York had problems fully funding it through tax revenue without private investment.
The Social Equity Servicing Corporation (SESC), a subsidiary of the Dormitory Authority of the State of New York (DASNY), is working to help develop dispensaries via the Cannabis Social Equity Investment Fund.
The NJ Cannabis Regulatory Commission (NJ-CRC) seeks to fund such program from adult use cannabis tax revenue as well.
Chicago Atlantic is a large wealthy company that has invested in cannabis companies elsewhere in the country by providing loans.
New York Cannabis Social Equity Investment Fund Issues
Unfortunately, the New York Cannabis Social Equity Investment fund is run by private companies that have questionable practices.
The firm Social Equity Impact Ventures, LLC, a minority-owned investment firm, was given permission by New York to manage the Social Equity Cannabis Investment Fund.
However, they may have inflated their resume. The firm’s private investment fund in cannabis entrepreneurs and development in Detroit never materialized.
Co-owner Chris Webber, a former NBA Basketball player, had a conflict of interest with ties to the cannabis corporation, a Multi-State Operator (MSO) Cookies run by the rapper Berner. He had a deal with them in Michigan for them to carry Webber’s NBA-related cannabis products.
Webber’s partner Lavetta Willis didn’t pay state and federal taxes several times from 2006 through 2016. It led to more than $110,000 in judgments and liens against her in two states.
According to the New York Post, Webber was indicted two decades ago for lying to a grand jury about a financial deal involving money laundering while in college. He ultimately pleaded to a lesser charge of criminal contempt.
Siebert Williams Shank (SWS) is one of the nation’s leading minority- and women-owned investment banking firms. CEO Suzanne Shank and former New York City Comptroller William Thompson lead them. They own part of the Social Equity Impact Ventures firm. Thompson was also the 2009 New York City Democratic nominee and narrowly lost to Michael Bloomberg (R).
It’s no surprise a politically connected firm got the contract. Giving such a large amount of money to a private firm to manage in a place like New York is likely to have such problems.
Few NY Cannabis Entrepreneurs Eligible
Only “justice-impacted individuals who have received Conditional Adult Use Cannabis Dispensary (CAURD) licenses” are eligible for the money. They want to help 150 such companies.
These are like New Jersey Social Equity cannabis licenses. However, unlike New Jersey Social Equity cannabis licenses, they need to be serial entrepreneurs.
The New York effort resembles the pilot program the NJ-CRC is rolling out with the NJ Economic Development Authority (NJEDA) and the NJ Business Action Center (NJBAC). Their representative acknowledged to Heady NJ that the program is small, with only $10 million set aside. They also plan to give out loans to more applicants once the pilot program is successful.
State Real Estate Assistance in New York
DASNY has been actively involved in the land war of finding viable real estate that the NJ-CRC has not touched. The DASNY says it has found 10,000 properties, according to the State.
The New York Cannabis Social Equity Investment Fund will be used to secure, lease, design, construct and furnish the CAURD dispensaries. The properties will be subleased to eligible licensees.
The Fund will help licenses pay for leasing locations and the spaces’ design, construction, and fit-out.
Governor Phil Murphy’s (D) political appointees are pushing forward on cannabis. But he is not taking the lead in public like Hochul.
Hochul became Governor after former Governor Andrew Cuomo resigned due to a scandal. Since he only very reluctantly half-heartedly supported cannabis legalization, she has made it a cornerstone of her administration.
Despite Hochul’s excitement, New York is not moving much faster than New Jersey on access to capital issues.
