Well-intentioned government programs were supposed to lift barriers for Black entrepreneurs. But access to capital is still a big problem.
As cannabis legalization has swept through the U.S., nearly a dozen states have adopted programs intended to help marginalized groups enter the industry. But the so-called “social equity” initiatives have fallen far short of their goals, according to entrepreneurs they were designed to help.
Four Black founders of legalized weed businesses talked to The Business of Business to share their thoughts about why it’s been so hard for them to succeed in the industry, and why the popular programs do little to address the problems they face. Legalized cannabis for medical and recreational use is a swiftly growing business in the U.S. It hit $17.5 billion in 2020 and was projected to more than double to $43 billion by 2025, according to Forbes.
Still only a tiny morsel of that business belongs to Black Americans — a group that has long been deemed to have been unfairly targeted by the War on Drugs. According to data gathered by our parent company, Thinknum, of dispensaries listed on Leafly, only 26 of 9,487 locations across the U.S. are Black-owned. That’s fewer than 1%. Meanwhile Black people are more than four times as likely as white people in the U.S. to be arrested for pot violations, even through rates of pot use are about the same in both groups, according to the American Civil Liberties Union.
So why are social equity programs not helping? These Black weed business founders offered their thoughts.
Norbert Pickett
Cannabliss DC
Pickett is the sole owner of Cannabliss DC in Washington D.C.’s Deanwood neighborhood. The district’s social equity program for legalized weed has done little for Pickett and other entrepreneurs because the model “is broken and needs to be fixed,” he told us.
He blames what he calls “crony capitalism.” He believes that large cannabis companies, known as multi-state operators have better access to politicians, and that as a result “they’re the ones writing the laws and the laws only benefit them when they apply.”
Pickett has managed to find some success, though, and has designs on expanding. He is planning to submit an application for a cultivation license to become vertically integrated and better compete with large pot businesses. At the same time, he is making sure to provide a living wage for his employees — and he even led a movement to unionize his staff.
Edgar Cruz
Ekstrepe
Cruz is co-CEO of Ekstrepe, in Long Beach, California. He says the problem with social equity programs is that their organizers are “truly naive to the social equity aspect” of the legalized cannabis business as it currently functions. They are also poorly-funded and administrated, he said.
The city’s Office of Cannabis Oversight has just two employees, according to Cruz, and “the lady that’s in Cannabis Oversight now is handling everybody’s business licensing.” Indeed, a call to the number provided on the city’s “Cannabis Business Information” page goes to a directory for general business licensing. In a city with a population of half a million, that’s a lot for two people to handle.
Understaffing and underfunding can also lead to being undereducated in the specifics of what applicants to social equity programs are dealing with. For instance, a “Green Zones” Long Beach established where cannabis businesses could open, quickly created a bidding war for those properties that increased the price of retail space by $1.86/square foot, according to Cruz. That increase effectively prices any social equity applicant out of the game, no matter how much relief the city offers in terms of lowering fees or distributing licenses.
As a means of combating the issues, Cruz helped start the Long Beach Cannabis Commerce Council, an advocacy group that works to bridge the gap between the decisions of local government and the needs of social equity applicants.
For the time being, Cruz is focusing on his own brand again and plans to have Ekstrepe on shelves at dispensaries Gorilla Rx in Los Angeles and Catalyst in Long Beach within the next two weeks. Getting his own brand in stores will allow him to have more advice and assistance to share with the applicants who are still reaching out to him for guidance.
Rebecca Colett, LaToyia Rucker
Calyxeum
Rucker is COO and co-owner of Calyxeum, a cannabis cultivation company in Detroit. She said social equity programs fall short because they don’t take into account a holistic understanding of the applicant’s journey into business ownership.
“Social equity is this new buzzword,” she told us. It “doesn’t leave a dent in what you need to get started.”
The real problem for many Black cannabis business owners is “access to capital,” she said. Having enough money to properly grow the business is still challenging, even though Calyxeum is now sold in 25 retail stores.
“It’s challenging, it’s stressful,” added Calyxeum CEO Rebecca Colett.
“But we’re used to it–we from the D!”
The business partners are making do, though and finding ways to cope with the challenges. This month, to coincide with Women’s History Month, they are launching a crowdfunding campaign through online platform Mainvest. They hope to use the money they raise to purchase more equipment and hire more staff.