Finding private capital and real estate will be the biggest hurdle for a new bunch of cannabis entrepreneurs looking to break into Connecticut’s recreational cannabis business.
That’s according to a panel of experts who spoke Wednesday at the Hartford Business Journal’s “Business of Cannabis” conference.
“The availability of capital has sort of evaporated,” Paul Wimer, president and CEO of Greenrose Acquisition Corp., said.
He said over the past two years those private investors haven’t pulled back but the value of those investments have shrunk. He said you don’t want to take on too much capital because you’ll dilute your own ownership, but “treating that money just as dear as you would your own bank account.”
“The challenges are finding the money, but it’s more likely going to come from private pockets,” Wimer said.
That being said, the Social Equity Council is finalizing a contract with Oaksterdam University and reSet, the social benefit corporation in Hartford, to help run an accelerator program. It’s funded with $1 million. It could launch as early as late November or early December, according to Social Equity Council Executive Director Ginne-Rae Clay and Chair Andrea Comer.
There’s also another $50 million for a low-interest loan program that’s expected to be approved by the Social Equity Council by the end of November.
Recreational cannabis sales are still expected to start by the end of the year with the current medical providers expanding into the recreational cannabis space. However, it’s still a quick turn around for many businesses looking to get into the industry.
From the time a business gets a provisional license until the time it’s ready for inspection is only 14 months.
That’s not a lot of time to build a brand, find a location and hire the necessary staff.
Ben Zachs, COO of Fine Fettle which has three medical marijuana locations in Connecticut and one in Massachusetts, said he likes to have his real estate specific.
“I wanna know I have this license before I’m raising money without it because you can’t raise money on a hope and a dream anymore on cannabis,” Zachs said.
He said that may have been true three or four years ago, but is not the reality today.
“This is no longer a multiple of expected revenue three years out,” Zachs said. “Whether you’re a small guy or a big guy people want to see a return on capital and there better be a plan for that.”
Other hurdles will be brand identity.
Sarah Westby, an attorney with Shipman and Goodwin, said the packaging restrictions in Connecticut, especially for edibles “can impact your ability to build a brand.”
“There can be some significant consequences for violating those regulations,” she added.
She said everything from colors to warning labels could impact the brand identity.
She said Connecticut is different from other states and making a mistake could be expensive for a new business.
She said in Connecticut they’ve seen new compliance and regulations being written as the application process was unfolding, which makes it hard to stay on top of the law.
But at the end of the day, it’s like any other business, said Zachs.
“Yes, there is additional regulation. Yes, you have to be compliant,” Zachs said. “But you need to have a strategy and a plan and a goal.”
He said the goal is to grow and sell a good product, but “Bud Light does pretty well.”
He said there are different ways to approach this business and there’s a “niche” for different people in this space. There’s also other businesses that support this industry and 90% of them don’t touch the plant.