🔒New accelerator program seeks to help launch social equity cannabis startups

On Jan. 10, recreational cannabis sales officially became legal in Connecticut.

Already, consumers age 21 and older have shown there is demand for adult-use pot products. Through the end of February, recreational cannabis sales surpassed $12 million.

As the marijuana industry gears up to meet that growing demand, the state’s Social Equity Council has helped create a new accelerator program, which is offering technical business assistance and entrepreneurial support to qualified social equity cannabis startups.

The eight-month accelerator, funded by $1 million in state support, is being run by reSET, a Hartford-based nonprofit business accelerator program operator, and Oakland, California-based Oaksterdam University, the nation’s first cannabis college.

Sarah Bodley, executive director of reSET, said the program will assist 35 participants who have received provisional licenses from the state Department of Consumer Protection. Companies awarded a provisional license have 14 months to complete the necessary steps to earn a final license and open for business.

Those steps include lining up financing, raising investment capital and finding a location — areas the accelerator, which kicked-off in mid-January, aim to address.

“This program is a bit more complex because we are looking at an entirely new industry,” Bodley said.

She noted, for instance, there are 14 different cannabis licenses under different industry categories, including cultivation, manufacturing, sales, and delivery and transportation.

“We want to make sure that each license type gets the specific information they need,” Bodley said.

‘Solid foundation’

To ensure that participants understand both the business and regulatory requirements of the cannabis industry, the accelerator will have three phases, according to Dale Sky Jones, executive chancellor of Oaksterdam University.

The first phase will provide online education about the history and business of cannabis.

“We want to teach (participants) about policy and advocacy so they have a solid foundation,” Jones said.

Since its 2017 founding, Oaksterdam has educated more than 80,000 students from 110 countries about the cannabis industry.

The second phase, scheduled to launch this month, will feature a number of workshops and one-on-one coaching from industry experts, said Tamika McPhail, the accelerator’s program manager.

“We will explore (topics like) legal documents, business formation, strategic partnerships, workforce recruitment and social impact,” McPhail said.

The accelerator also includes the involvement of the Minority Cannabis Business Association and International Cannabis Bar Association to help provide legal expertise.

A core focus of the program — and of Connecticut’s Social Equity Council — is to try to address the negative impacts the war on drugs has had on certain minority groups.

To ensure communities that have been disproportionately impacted by drug arrests benefit from the economics of recreational cannabis, customers must pay a 3% sales tax — on top of the state’s existing 6.35% sales tax — that benefits the host community.

Some have criticized Connecticut’s recreational marijuana program for not doing enough to help social equity entrepreneurs, and favoring large, multistate operators that have controlled the medical cannabis market.

The accelerator is one way the state is offering assistance to social equity startups.

Growing opportunity

As the state’s cannabis industry grows, it will have an economic impact, the extent to which is still uncertain. 

According to the Office of Fiscal Analysis, the industry is projected to generate $26.3 million in state and local taxes this year, with that number growing $73.4 million by fiscal year 2026. 

Part of that money will go to the social equity and innovation fund, which will provide access to business capital and technical assistance for cannabis startups.

The state has also authorized up to $50 million in general obligation bonds for the Department of Economic and Community Development and Social Equity Council to help support the cannabis industry.

The money will be available for various purposes, including low-interest loans for social equity applicants looking to rehabilitate or develop unused or underused real estate for a cannabis establishment. It can also be used as capital to establish a cannabis business, or for training programs developed by the Social Equity Council.

That state funding will be important as cannabis startups — and even later-stage companies — continue to struggle to access capital, mainly because marijuana remains illegal under federal law, said Ginne-Rae Clay, executive director of the Social Equity Council.

Even in Connecticut, industry constraints exist. For example, licensed cannabis companies are subject to municipal zoning approval, which has made it challenging to find real estate.

Earlier this month, the town of Simsbury banned retail cannabis sales for 18 months, joining more than 50 municipalities that have either prohibited or placed moratoriums on the marijuana industry.

“It’s a heavy lift to stand up a business that has so many restrictions and regulations,” Clay said.

But venture capital investors — both in Connecticut and nationally — have been warming to cannabis-related companies.

Last year, Connecticut Innovations (CI), the state’s quasi-public venture capital arm, invested $1.25 million in 1906, a recreational cannabis company moving its headquarters to the state.

Alison Malloy, managing director of investments for CI, said cannabis businesses continue to be evaluated for potential investment.

“We are looking at companies addressing all areas of the market, including product manufacturers, growers, retailers, drug-delivery platforms and other high-growth areas,” Malloy said. “Our cannabis portfolio is still in its nascent stages, but we recognize the opportunity and continue to identify scalable, science-based companies in the industry.”

McPhail, the accelerator program manager, said she hopes some of those companies will be homegrown through Connecticut’s newest accelerator program.

Later this summer, as part of the program’s third phase, accelerator participants will have an opportunity to pitch their businesses to venture investors. ArcView Group, a San Francisco-based venture capital firm that specializes in cannabis-related businesses, will be part of that pitch event.

“With our accelerator, we are creating a foundation for our (adult-use) cannabis culture and strengthening the foundation of the cannabis community,” McPhail said.