Subversive Capital Acquisition Corporation, a New York-based cannabis investor, plans to close a transaction tomorrow that will rename and provide funding to California’s largest cannabis company.
This newly minted entity, The Parent Company, plans to allocate $10 million in capital to invest in minority-owned cannabis businesses. The company’s Chief Visionary Officer, Sean “Jay-Z” Carter, will guide investments. Ongoing, the company, previously known as Caliva, says it will allocate 2 percent of its net income to invest in minority businesses and restorative justice programs for those adversely impacted by cannabis prohibition.
“If you are a Black or brown entrepreneur with a record,” The Parent Company CEO Steve Allan explained to Grown In last month, “you will find it difficult to access funding.”
Allan said he hopes investments of between $50,000 and $250,000 will serve as “anchor funding” for California entrepreneurs needing to raise upwards of $750,000 to open up a dispensary in that state.
While The Parent Company is focused on California-based cannabis startup investments for the foreseeable future, Allan encourages other leaders of vertically-integrated cannabis companies with resources and scale, like The Parent Company, which has hundreds of millions on its balance sheet, to invest more than they currently do in corporate social responsibility initiatives.
“They should step up in a more meaningful way,” he said. “Corporate venture capital and corporate social responsibility are melding together. We all as cannabis companies need to recognize that we have a responsibility to provide opportunity and a platform.’
The two largest cannabis companies in the Midwest, Green Thumb Industries (GTI) and Cresco Labs, also invest in corporate social responsibility programs. Specifically, each allocated more than a million dollars to support minority-owned cannabis companies in Illinois. However, much of those Illinois investments are legally required since GTI and Cresco own medical licenses that gave the companies a year’s head start in the state’s $1 billion market.
For a myriad of reasons, to date no minority-owned businesses supported by the $1.2 million GTI allocated for its LEAP New Business Accelerator and the $1.5 million allocated through its Social Equity and Development Initiative (S.E.E.D.) program have obtained a commercial license to sell or cultivate cannabis.
They are not alone. Since the state’s social equity-infused recreational laws were passed more than 18 months ago, no minority-owned cannabis business has obtained an Illinois license. Currently, 75 dispensary licenses and 40 craft grow licenses are held up due to a series of lawsuits against the state.
Incumbent medical marijuana cannabis license holders, which include GTI, Cresco and dozens of other entities, are required by Illinois statute to invest in state-approved social equity-based organizations (which also include programs run by community colleges including Oakton and Olive Harvey) in order to operationalize recreational initiatives in which they are designated first-movers.
Representatives from GTI and Cresco both note that their investments are above and beyond what is required by statute.
Assuming minority entrepreneurs do obtain Illinois licenses, at least one local investor with experience funding a minority-owned cannabis business in the state is encouraged by the possibility of more corporate social responsibility investments in cannabis startups.
“BIPOC [Black, indiginous, and people of color]-owned startup businesses benefit from receiving capital and competency,” said Kara Wright, CEO of Chicago-based Green Equity Collaborative Company, a minority and women-owned impact investing platform.
Prior to Illinois legalizing recreational cannabis, Wright invested in a minority-owned business with a license to operate a dispensary on Chicago’s South Side. That business was acquired by Arizona-based multi-state operator 4Front, which opened up the Mission Dispensary in 2017.
Wright currently has an interest in one of the 21 license finalists announced by the State of Illinois last summer. An advisor to Chicago-based cannabis industry business accelerator Gromentum Labs, she also advocates that investments in minority-owned cannabis ventures should be coupled with coaching.
“The capital should also come with competency including training, mentorship and coaching and industry and business insights to arm leadership with the knowledge required to launch, grow and sustain a successful business,” she said.
It’s ultimately about the equitable distribution of access, says Cresco Vice President Mykel Selph, who oversees S.E.E.D.
“For too long, minorities have been shut out of the rooms where information is shared, alliances are formed, and handshake deals are made,” said Selph, who noted that SEED has incubated more than 40 applicant companies. “We welcome Steve Allan’s call to action. We have been actively engaged in the mission he describes for the last two years.”
GTI spokesperson Linda Marsicano says her company is looking “forward to welcoming a new generation of entrepreneurs to the industry when the social equity license winners are announced” and added that GTI also supports numerous social causes ranging from criminal expungement to breast cancer awareness.
While The Parent Company for now is focused on backing California businesses, its Chief Mergers and Acquisitions Officer Drew Kornreich in 2010 co-founded Chicago-based “open source” financial services company HighTower Securities.
Wright among others is hoping that the company’s hybrid social and financial investment approach combined with the celebrity and worldview of its chief visionary officer will be adopted by more cannabis companies.
“When you have someone like Jay-Z with his stature and success, who also has insight and a connection to this community, but now has vast resources and relationships—this seems like a formula that can really create change,” she said.