Between legal barriers to traditional fundraising and few opportunities for mentorship, the landscape is still challenging
- Racial equity in cannabis startups remains low, even in states with the stated goal of “restorative investing” for communities impacted by punitive drug laws
- Impact investing with a racial equity lens needs to consider creative solutions to put capital in the hands of diverse founders
- Cannabis is projected to be high-growth as more states legalize, but the networks driving it remain predominantly white
Cannabis-related startups are a hot topic for investors as restrictions around the world continue to loosen.
The global market was valued at $10 billion in 2018 and is expected to hit $100 billion by 2026. In the U.S., however, the continued federal classification of marijuana as a Schedule 1 drug creates unique wrinkles in that process.
For one thing, the criminalization of marijuana in 1970 has had a disproportionate impact on people of color; even in the current reform era, Black people are arrested for marijuana-related offenses at three times the rate of white people. At the behest of activists, some new state and local laws recognize the need to ensure that the same communities who suffered under the criminalization of cannabis have the opportunity to make money in the new legal cannabis economy. According to a 2017 study
As it turns out, integrating racial equity into the legal cannabis economy is easier said than done. Because marijuana is still illegal at the federal level, most banks cannot provide loans or accounts to cannabis-related businesses. Online-only banks or local credit unions that aren’t barred from doing business with cannabis entrepreneurs may still not want to.
In Massachusetts, racial equity language was included in the state’s 2018 legalization bill. Ari Zorn will be the state’s second Black cannabis entrepreneur once his pending cannabis license application for Devine, the hemp retail store that he and his wife Heidi recently opened in the western Massachusetts town of South Egremont, is approved. The couple have spent more than a year navigating what they described as an overly complex process to get a license and raise capital.
Published: August 25, 2020