HW Pick: Marijuana Entrepreneurs Aim For Diversity In Legal Cannabis Industry

At the monthly cannabis industry meetups that have sprung up around New York City since the state legalized medical marijuana in 2014, aspiring entrepreneurs often discuss solutions to a glaring problem: Only five companies are currently allowed to produce and sell cannabis in New York.

Some attendees are holding out for state and federal reforms to expand the market, while others plan to move to one of the states that appears to be on the cusp of legalization. Still others have managed to launch cannabis tech or accessory businesses that don’t require them to touch the plant.

Meetup regulars Kamani Jefferson, 25, and Nelson Guerrero, 24, have noticed another issue, which no one seems to be addressing: They are often among the only people present who aren’t white.

That recognition has led Jefferson and Guerrero to band together with two other young people seeking a way into the industry to start the Cannabis Cultural Association, a marijuana business accelerator for people of color.

“I was fortunate enough to be in an incubator [called the Long Island COMETS program] a couple of years ago for my first startup, and just being able to have those mentors is huge,” said Guerrero.

He has since co-founded a software development company in Manhattan called Norsu Tech, which plans to launch business-to-business tools for cannabis companies.

The association plans to hold meetups with panels of industry experts and opportunities for networking, with money generated from the events going into a seed fund for companies accepted into their accelerator program.

“We’re hoping to hold a pitch-off where pot startups will be able to compete for that money, equity-free,” said Guerrero.

Applications from startups and individuals seeking to participate in the incubator will be accepted on a rolling basis, and the association will attempt to match applicants with appropriate mentors, he said.

Since announcing its launch earlier this month, the Cannabis Cultural Association has already sparked interest from people working in legal marijuana and other industries, said Guerrero. Celeste Miranda, chief executive of the California-based Cannabis Marketing Lab recently agreed to join the advisory board.

The group also gained support from Manhattan law firm Newman Ferrara, which has several clients in the cannabis industry and hosts events put on by the Cannabis and Hemp Association.

“It’s one thing to educate the community, which is so important, but I think taking that extra step and actually helping to fund people of color in the industry is really what’s going to make a difference,” said Kristin Jordan, an attorney at Newman Ferrara, who will act as an advisor to the group.

Jordan noted that licenses and startup costs are far less affordable in highly regulated East Coast states than they are on the West Coast, raising a barrier to people from lower socioeconomic strata.

Some of the obstacles keeping people of color out of the legal industry cannot be easily addressed by the cultural association.

Blacks and hispanics are more likely than whites to be arrested for marijuana possession, despite using marijuana at roughly the same rate. A recent Buzzfeed investigation shows how that has helped keep them out of the legal industry in states across the country. New York is one of many states that prohibits people with drug-related felonies from applying for a marijuana license or gaining employment with licensed companies.

Seattle City Attorney Pete Holmes, speaking at a panel on cannabis enforcement sponsored by New York University on Monday, called such laws “institutional racism,” and other experts on the panel said those laws should be confronted as legalization progresses.

Asked whether that rule might be reconsidered in New York if the state opens up another round of applications, state Bureau of Narcotics Enforcement Director Joshua Vinciguerra was reluctant to comment.

“We are closely monitoring how the system is operating and keeping an open mind about how to improve it going forward,” Vinciguerra said.

For some investors, the idea of launching any cannabis accelerator in New York is preposterous.

“I have no idea how they’re going to do it,” said Robert Hunt, a principal at Tuatara Capital, which invests in legal marijuana companies. He said his firm has a policy of not investing in companies in New York, Illinois, Minnesota and New Jersey because laws in those states are too restrictive for marijuana businesses there to be profitable.

Guerrero acknowledged that many companies incubated by his group will have to launch in other states, but he hopes to tap New York’s wealth of resources for entrepreneurs and get companies to return if and when New York’s laws are eased.

That’s the route Jefferson plans to take into the industry. He and his business partner Sonia Espinosa, a senior at Harvard University, are laying the groundwork for an edibles company that they hope to launch in Connecticut, where a bill that would legalize recreational marijuana use is gaining traction.

Jefferson views Colorado and California as saturated markets, and is instead keeping an eye on East Coast states as regulations evolve.

In the meantime, Jefferson is working with a Connecticut company called Cannamark to learn the ropes of legalization and compliance, while Espinosa does product research on edibles.

Jefferson said people he grew up with in Brooklyn’s East New York don’t see the legal pot industry as a viable career choice, and he hopes the Cannabis Cultural Association will help to change that.

“We really just want to empower people who look like me and Nelson and Sonia, who don’t look like the typical investors and entrepreneurs in the space, to learn the skills and get the funding they need for their ideas,” said Jefferson. “Their ideas are just as viable and profitable as those of the white males we see in the space now.”

Via Crains New York