Jay-Z Joins Push To Boost Minority-Owned Cannabis Businesses
Jay-Z launches fund to invest in minority-owned cannabis startups to boost black participation in the industry.
The rapper and entrepreneur says he’s motivated by an imbalance in the marijuana business: people of color, who have been disproportionately punished for their involvement in drugs where it is illegal, are only a small number of those who are making money in the multibillion dollar market. pot legalized.
“It’s really amazing how this can happen,” said born musical artist Shawn Carter. “We have been hit hardest by the war on drugs, and America has turned around and created a business worth billions.”
In the 25 years since medical marijuana was first legalized in California, cannabis has grown into a $ 20 billion legal business in the country that could surpass the $ 70 billion US wine market by 2030, according to an estimate by the New York investment bank Cowen & Co.
““We have been the most affected by the war on drugs. ““
Carter, who is starting his fund with $ 10 million in seed money received as part of a merger, is joining a wider campaign for fair economic opportunities in the cannabis industry as studies show that minorities have been punished more than whites for using drugs.
A 2017 study for the National Institutes of Health found that blacks were incarcerated at rates between five and seven times higher than whites convicted of similar drug-related offenses.
In November, voters in Arizona, Montana, New Jersey and South Dakota approved the recreational use of marijuana, while Mississippi approved medical use, bringing the number of marijuana to 35. States that have legalized cannabis in some form. This month, New York Governor Andrew Cuomo announced a legalization proposal for the state, including creating an office to target licensing and business assistance for people of color.
New York is following a model used in other states, including California and Illinois, which have created programs for minorities in the cannabis industry.
In Massachusetts, where cannabis has been legal since 2016, less than 6% of the nearly 7,000 agents registered to sell or cultivate cannabis in the state are black. In Denver, where cannabis sales have been legal since 2014, black ownership of cannabis companies is less than 6%, while in Washington state the share is around 3%, according to statistics from the State. About 10% of businesses in the United States were owned by black people in 2017, the most recent year for which figures are available from the census.
According to the American Civil Liberties Union, blacks were almost four times more likely than whites to be arrested for possession of marijuana in the United States in 2018, despite statistics showing whites have higher rates of cannabis use. bred for life.
Mr. Carter’s fund arose out of the $ 575 million acquisition in December of California cannabis companies CMG Partners Inc. and Left Coast Ventures Inc. by Subversive Capital Acquisition Corp., a special purpose acquisition company based in Vancouver. In October, Carter launched the Monogram cannabis line, which will be a joint venture with the merged company, to be named TPCO Holding Corp.
As part of the Subversive deal, TPCO will contribute $ 10 million to Mr. Carter’s fund and then inject an additional 2% of net income each year.
The fund will be managed by Mr. Carter and Desiree Perez, managing director of Mr. Carter’s entertainment conglomerate Roc Nation and beneficiary of a pardon of
on the last day of his presidency. He will invest up to $ 1 million in each cannabis startup of his choice.
“I wanted to do something in a real, tangible way where I do my part,” Carter said.
Mr Carter said he and Subversive chairman Michael Auerbach were influenced by investor Robert Smith’s ‘2% solution’, a proposal for companies to funnel 2% of their net income to businesses. belonging to blacks.
Spurred on by a nationwide debate on systemic racism after the George Floyd murder, companies including
pledged over $ 35 billion towards racial equity last year in programs aimed at creating more economic opportunities for minorities and creating wealth in their communities.
announced last week will invest $ 35 million in early stage venture capital firms that finance minority-owned businesses, among other measures.
Legal cannabis differs from other companies because of its associations with the War on Drugs, Carter said. He knows several people who have spent time in prison for marijuana-related crimes, including Kareem “Biggs” Burke, one of the co-founders of Mr. Carter’s label, Roc-A-Fella Records, who was incarcerated for almost five years.
“This is not a spreadsheet, these are real people,” Carter said.
Amber Littlejohn, executive director of the Minority Cannabis Business Association, a business group based in Eugene, Oregon, said most independent cannabis entrepreneurs struggle to access capital and meet regulatory requirements. California requires individual businesses to sign showcase leases before they can apply for dispensary licenses to sell weed. In Nevada, license applicants need at least $ 250,000 in liquid assets to qualify.
These amounts are difficult to access for small business owners, not least because national banks will not lend to a cannabis sector that remains illegal at the federal level. Aspirants are also not eligible for Small Business Administration loans.
Ms Littlejohn said many minorities find it difficult to reach networks of investors with deep pockets, making it more difficult to finance their fledgling businesses.
Whitney Beatty, 42, grew up in Detroit in the 1980s at the height of the war on drugs. Seeing police breaking into neighbors’ homes and making arrests for possession of marijuana was common, she said, adding that friends had spent time in jail and their lives had been wasted at because of that.
Today Ms Beatty is trying to start a dispensary in Los Angeles and runs an online store called Apothecarry, selling high-end humidifiers for storing marijuana. Her family tried to talk her out of entering the business because they feared she would be in trouble even though pot is legal in the state, she said.
“They told me it was just something for white people,” she said. “These thoughts are going to keep us away from this huge company that has just come online.”
Write to Vipal Monga at [email protected]
Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8