ImpactAlpha, March 21 — Who gets to shape the legal cannabis industry just as it’s taking root?
Lanese Martin is among the leaders seeking to ensure this multi-million dollar marketplace includes more than just the usual white suspects. Martin co-founded The Hood Incubator in Oakland, Calif., in 2017 to train minority entrepreneurs and advocate for policies to ensure historically underrepresented communities are prioritized as cannabis goes mainstream. In Oakland, African-Americans accounted for 77% of cannabis arrests as recently as 2015.
Racial and economic disparities in the emerging cannabis industry are becoming a political issue. At a House Financial Services subcommittee hearing last month, Rep. Alexandria Ocasio-Cortez pointed to industry data showing that 73% of cannabis executives in Colorado and Washington are male; 81% are white.
“It doesn’t look like any of the people who are reaping the profits of this are the people who were directly impacted,” said Ocasio-Cortez.
New businesses will need help to navigate a $9 billion industry that’s thriving in places like Colorado and California, but struggling elsewhere. Observers predict a cannabis glut in Canada. Overproduction in Oregon means about 70% of legal weed is going unsold.
Martin, who previously worked in political organizing and for a state legislator, launched the Incubator with co-founder Ebele Ifedigbo to provide apprenticeships and business accelerator services as a way to build inclusivity into the newly legal industry. The organization has nurtured two classes of entrepreneurs and inked a partnership with Eaze, a cannabis delivery startup with a valuation of $154 million. The incubator is considering launching, or helping others launch, an investment fund.
“What folks need more than anything right now is access to capital,” says Martin. Equity investors are popping up and increasing access to capital, she says. But with the kind of money that is needed, “a lot of the black businesses just aren’t seeing that, even with access to permits and licenses.”
ImpactAlpha caught up with Martin (on her way to South by Southwest) to learn about what Hood is doing to promote economic inclusion in the cannabis industry, and trends to watch out for. (The conversation has been edited for length and clarity.)
ImpactAlpha: What was the thinking behind Hood Incubator?
Lanese Martin: The co-founders, myself included, were witnessing a wave of legalization going across the country. What was exciting about the difference in California was that there was a new conversation about community reinvestment, equity, the relationship between legalization, prohibition and the drug war and what that meant for opportunities black communities that were harmed by the drug war should have access to.
At its core, The Hood Incubator is an economic development organization. We really serve to make sure that black communities benefit from legalization considering the harm that was done to our communities by the drug war. How we go about our economic development work so far has been twofold.
We house an accelerator. It’s more focused on access to resources, networks, business development, soft skills development, just help them be in the know – access to information and that sort of thing.
We partner with a local company in the Bay Area that does extractions [producing concentrated extracts such as hash, rosins, cannabis oil]. We believe lab jobs – extraction, testing, processing, those type of jobs – can be high-paying, career-type jobs and if black communities have access to them they could be a great workforce development tool to get folks out of immediate poverty into stability. We’ve placed three people at one company so far. That’s the pilot phase.
Q: How does Hood help cannabis entrepreneurs?
A: Helping people get licenses, permits, a better understanding of how to operate their business – the things that an accelerator does. We’ve accelerated 30 businesses – it’s been three years, so about 15 each year.
In 2017, Ebele, my co-founder, and myself, we taught the class ourselves and brought in a lot of professional experts to round out the education. Last year, we partnered with Uptima Business Bootcamp in Oakland, which is a business development training program, and we also partnered with Magnolia Wellness, which is a dispensary. Uptima took care of that general business development and the dispensary took care of cannabis education. In 2019, we’re looking at refining our model even more.
Q: Los Angeles, San Francisco, and Oakland have ‘equity’ programs that give preference to applicants who have been harmed by the drug war. What are the best practices in terms of policy?
A: The idea of this was to slow down the status quo – how everything in this country seems to happen where white folks seem to really benefit and thrive and black folks and brown folks are wondering, ‘What’s going on for me?’
When you don’t have first-come, first-served for permits, it creates access. Because who’s going to be able to do first-come, first-served? Probably folks that have the ability to have a lot of money, to have all the application requirements on hand at once, and to be able to project in advance what those are going to be. So highly capitalized applicants.
[The partnering requirement] creates space where you’re not just going to get through and have like a 90% – in this city at least – white-owned legal industry when we know that the underground unregulated industry is quite racially even. In that sense, it’s successful.
Legalization isn’t going to end racism. There are a lot of symptoms and externalities of racism that are at play that are making it hard for equity programs to have [their] intended impact.
Q: How does systemic racism come into play?
A: Redlining. Lack of access to real estate. There’s already a racist issue with real estate and black people having access to it. So you double that down with now it being a space for weed.
Access to VC [venture capital] funding. We’re not going to be able to go to banks and get loans. When you open up an industry that’s still federally illegal and folks need money to compete, there are very limited sources where that money can come from, and it generally tends to be angel or VC.
That money’s racist money because they tend to give to people that they know. So, creating an equity program didn’t change VCs to be like “Oh yeah, let me give to that stranger over there who yesterday I was calling a thug.”
Q: What kinds of policies are needed?
A: The Drug Policy Alliance says in 2017, 90% of marijuana convictions were for simple possession. So these are just patients.The majority of any equity programs that exist to date have only focused on the 10% [of arrests for] alleged commercial activity. That’s why they’re creating these programs trying to help folks start businesses.
While that’s important, you have to understand that the majority of folks affected by the drug war won’t become interested in starting a business. Those communities were harmed, and their taxes were being used to criminalize and tear their communities apart. Now the government wants to make money off that. Cannabis [is] being taxed at a heavier rate. They’re not just paying what a comparable non-cannabis business would pay. They’re paying a sin tax. That bigger pie right there belongs to the community.
I’m on the Oakland Cannabis Regulatory Commission. I raised that motion this month and the commission passed it, to recommend to the council that significant portions of the cannabis tax revenues go to continuing to fund the equity business program as well as community reinvestment via workforce development. We’re working to get that through city council. There’s a lot of pushback.
Q: How can racial equity be baked into the cannabis industry?
A: I think just understanding the space between legalization and recriminalization. You know, it’s legal to sell cigarettes, but Eric Garner was killed for that. [Cannabis is] not legal, it’s regulated. If you do it the way they say you can, you get to do it. If you don’t do it they way they say you can do it, then that means you interact with police, and you have an opportunity to be killed like Eric Garner and the thousands of other black bodies that are subject to police brutality.
I think it’s important that folks really know that this wasn’t legalized. This was regulated, and when you do operate in a regulated business, if you’re white, you’ll get fined. If you’re black you get choked to death.
If you start kicking people out of high school, middle school, they never finish [high school]. If you put people in jail and they can’t come out and get housing, and they’re removed from communities that have good community colleges and other programs. A lot of folks don’t have basic skills because they were found with a joint one day.
Q: Are you really raising a fund?
A: That’s on hold. It’s not on hold, it’s on indefinite beginning. What I mean by that is there’s so much work that we’re already trying to handle and a fund’s just another aspect. So it’s on indefinite beginning pause waiting for the right relationships and resources to align. In the meantime we’ve just got to continue working on the workforce development and the accelerator.
Q: How can impact investors plug into this industry? What do they need to know?
A; A fund would still be a good route for both an investor and black-owned business owners that have been harmed by the drug war. In this space, it’s hard for traditional investors to be able to identify expertise and experience of underground cannabis operators. What’s happening is the majority of investors that have never sold weed before, they don’t even smoke weed, so clearly novices are getting funded. It’s because money goes with [what] money knows.
Q: Some people say expertise from the informal market doesn’t matter because legal weed is a different market.
A: It’s also a different market because they want to change the rules in the game so it makes it more comfortable for them to play. There was no need for this industry to get regulated the way it did. It intentionally shut out folks. Why? because on a policy level you can shut out your competitor. You can’t compete, [so] you regulate them out of business.
[If] you don’t know how to smell weed – you can’t smell an OG [cannabis strain] from a citrus from a purple from a kush – what are you going to do? No smelling allowed. All products must be prepackaged before getting to the dispensary so the consumer can get the worst notes possible. You used to be able to walk into a dispensary and see the jar of weed and sniff it and smell it. Now it’s mandatory that it leaves the distributor and gets to the retail outlet prepackaged for final sale. Do you think the quality of weed has increased in the regulated market? All the best weed is in the illegal market. They wanted to change the rules so they could play.
It’s like if you were playing Uno and someone joined your game and was like “No, no, no, we don’t play wilds.” They just changed the game and now they’re saying you don’t know how to play.
Q: Why is so much of the policy work in the cannabis industry being led by women and people of color?
A: A black person trying to start a business, more likely than a white person, has maybe a personal or community relationship to the drug war that’s negative. That’s in the forefront of their mind. A white person, they’re just trying to start a business. And the last time I checked, these white business owners weren’t on the scene when folks were getting arrested … they wouldn’t even go there. So the responsibility is the government’s, and that’s why we’re targeting tax dollars.
I expect the government to redress the drug war. And for white folks that care and want to involve their companies in social responsibility, I think great. I see three easy ways: criminal justice [reform], patient services, or science research. But I’m not going to hold some CEO responsible for my family being devastated. That was the DA, that was the judge, that was the cop. That was tax dollars spent to [hurt] my people.
I would encourage people to get involved. Find out what’s going on in your municipality. Find out if your taxes are going to benefit those directly impacted by the drug war or if it’s going to a pothole that has nothing to do with the situation at hand. And then advocate.