California’s social equity programs for cannabis companies vary widely in effectiveness by municipality.
And even cities that have awarded social equity licenses are still lacking the capital support those businesses need to succeed in a hypercompetitive market.
There are only a handful of social equity programs in the entire state – in a tiny fraction of the 100-some cities and counties that have licensed marijuana businesses.
“The catch-22 is how will you get money from someone and still control your company?” said Marie Montmarquet, co-founder of MD Farms, a vertically integrated cannabis brand based in the San Francisco Bay Area.Industry analysts complain that many of the licenses that have been issued so far are plagued by corruption, including predatory investors. A common ploy is defrauding regulators by falsely propping up as owners people from areas disproportionately affected by the war on drugs or with criminal marijuana convictions.
“I’ve thought about this and banged my head against the wall.”
Montmarquet said if one looks into many of the businesses designated for social equity licensing, the applicants often are pushed around too easily by the company’s board.
“People have already partnered with people who are going to screw them over one day,” she added.
Local social equity
Social equity applicants have begun to operate in certain cities such as Oakland and Long Beach.
But other major markets, including the massive Los Angeles cannabis industry, are still working on their social equity programs.
“All the real social equity work is taking place at the local level,” said Lynne Lyman, a Los Angeles-based consultant.
And while that’s true, not one municipality has social equity completely figured out yet, according to Bo Money, the executive director of the National Diversity Inclusion and Cannabis Alliance.
The social equity applicants who have started businesses weren’t properly incubated, Money said, and began without enough funding, support or mentorship.
The No. 1 hurdle to success for social equity applicants in any state market is a lack of access to capital, and that’s true in California as well.
Money said many predatory investors have taken advantage of the situation, knowing that these applicants are not well-educated about business.
“When it comes to things like regulations and compliance, they just can’t keep up,” she said. “It’s very competitive, and that’s where we’re getting all this predatory behavior.”
Published: July 23, 2020