Anyone with experience in the legal cannabis industry will tell you that, given the steep regulatory costs, it typically takes north of $1 million to open a marijuana business in California.
And with cannabis still illegal under federal law, it’s also notoriously hard for industry entrepreneurs — and particularly entrepreneurs of color — to borrow money to cover those startup costs.
Those two factors are behind another often-quoted industry statistic: an estimated 81% of marijuana business owners are white.
James Shih, who’s Asian American, said he experienced both hurdles firsthand when he decided six years ago to pivot from a career as an investment immigration attorney to pursuing cannabis business licenses in California and Colorado. After initially feeling shut out because he wasn’t part of the “old boys club,” Shih said he and his dogs were sitting on his couch two years ago when he asked a key question about his new industry: “Why aren’t we doing shared cannabis work spaces?”
Today, Shih and his team are a few months away from opening My Green Network, an incubator and membership-based coworking space for cannabis manufacturers that they’re developing inside an industrial building in Santa Ana, a couple miles from South Coast Plaza.
They hope the concept will help entrepreneurs who want to make legal cannabis products but have struggled to find their footing in the complex industry launch or expand their businesses. Shih believes a shared workspace will help them cut overhead costs, streamline compliance issues and connect with a network of industry professionals.
So far, 17 members have signed on, with companies from as far as South Africa ready to start using communal kitchens, offices and packaging stations to make everything from cannabis-infused pizzas to candles.
“It’s a fabulous way for startups such as us to network and learn and observe,” said James Hunter, who, with his wife, Vicky Hunter, plans to launch their Highbridge line of cannabis-infused “faux beer” this fall with help from My Green Network.
The Hunters are from Colorado but are hoping to reach California’s much larger market. They caught word of My Green Network and liked the idea that they could get help navigating California’s licensing process and connect with suppliers while avoiding the massive up-front expenditures needed to build their own manufacturing facility.
The Hunters eventually want to make Highbridge a multi-state operation. Shih also is working on plans to open My Green Network facilities in other states and countries. So James Hunter said he hopes they can grow together, with Highbridge relying on My Green Network to ensure they’re complying with regulations that can vary widely from state to state.
Cannabis entrepreneurs pay around $50,000 to join My Green Network. That covers costs for Shih and his team to secure state and local licenses for the entrepreneur’s business, which are streamlined “type s” licenses created for manufacturers using shared-use spaces. Given that most of the licensing process is dependent on My Green Network’s compliance, Shih said they’re guaranteeing licenses for members who pass background checks, and promising to refund the costs of anyone who is turned down.
Members also pay monthly membership fees that range from $1,450 to $7,400 depending on the level of access, raw materials, support and perks they want to receive. Entry level members, for example, can use the standard kitchen, packaging and office work stations for one 24-hour shift or two 12-hour shifts a month. Top-tier members can use manufacturing facilities four days a month, plus they get use of a conference room, advertising perks, and 500 milligrams of cannabis extracts to use in their products.
All members have access to communal space, where they can network, attend classes or host events in the planned showroom. The facility also provides things like concierge services, mail handling, internet and security.
My Green Network can host seven businesses working at one time and up to 44 members total, who will work in rotating shifts.
The coronavirus pandemic has not only delayed the opening of the facility, according to Shih, but it has made the communal aspect of the business a bit more complicated.
Cannabis manufacturers already had to follow strict protocols for sanitation while making products. Now, Shih said, they’re adding additional cleaning requirements between each member’s shift.
Bo Money, who runs the National Diversity Inclusion and Cannabis Alliance out of Los Angeles, said there’s a definite need for more creative solutions to help aspiring entrepreneurs of color make their way in the industry.
Money and others pointed to shortcomings of existing state and city funded “social equity programs” aimed at helping minorities get priority access to licenses and breaks on licensing fees. While cities such as Oakland have showed some success with their programs, Los Angeles hasn’t gotten its equity program off the ground. But Money said that hasn’t stopped moneyed investors from preying on minority entrepreneurs to get to the front of the line for licensing, often taking a controlling stake in the minority owner’s business. And once equity applicants do get licenses, Money said, they’re largely left to fend for themselves.
So, while Money isn’t familiar with My Green Network, she said she’s skeptical of any company promising to “guarantee” licensing and charging significant fees for incubation or other support for minority business owners.
Shih pointed out that My Green Network doesn’t take an ownership stake in any of its member companies. Members each get their own license, which reduces liability for his company and other members while letting entrepreneurs retain full control over their brands.
To promote their concept and take steps to boost industry diversity, Shih and his partner, Ken Hwang, are running a contest for minority-controlled cannabis businesses called Green Quest 2020. Over the next couple months, entrepreneurs will go through a three-round vetting process that includes submitting a video statement and a business plan plus a public vote. The winner will get their state and local licensing fees paid by My Green Network, plus subsidized rent at the Santa Ana facility for one year, as well as legal assistance and branding work.
“Not a lot of people want to help the next person,” Shih said, echoing other industry veterans who lament the loss of a more collaborative environment that some say existed before legalization.
Shih said they hope to bring some of that camaraderie back when their coworking facility opens, hopefully this November.
Source: Orange County Register