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Black Entrepreneurs Face Tougher Entry Into Medical Marijuana Industry

Members of the REAL Cannabis Co. ownership team (from left) Justin Gage, Cheryl Watkins-Moore and Derek Mays stand in what they hope will be their flagship medical marijuana dispensary. They are one of few minority-owned businesses seeking a license. 7/29
Corinne Ruff | St. Louis Public Radio
Members of the REAL Cannabis Co. ownership team (from left) Justin Gage, Cheryl Watkins-Moore and Derek Mays stand in what they hope will be their flagship medical marijuana dispensary. They are one of few minority-owned businesses seeking a license.

Cheryl Watkins-Moore has a vision.

Even though the building she’s standing in is empty, she points to spots where she can see a trendy coffee bar beneath a vaulted ceiling, retail shopping in the window front ⁠— and a medical marijuana dispensary in the back.

“People can come into the dispensary, take care of what they need to take care of and then be able to go on about their business,” said Watkins-Moore, the chief strategy and marketing officer of REAL Cannabis Co.

She pictures the dispensary as a place of community, especially for people of color. That’s important to the African American ownership group that includes Watkins-Moore.

The legal marijuana business is a market that people of color have had trouble breaking into. Just 4% of licensed cannabis companies nationwide are African American owned and operated. For people of color, there are a lot of unique barriers to entry — from a lack of generational wealth and connections, to past history with what’s been an illegal drug.

“Our community, especially African American communities, have been decimated through the war on drugs,” said Watkins-Moore. “And a lot of folks who were involved in the illicit form of marijuana sales have now been shut out of this industry in many ways.”

Watkins-Moore, who is a biologist and entrepreneur, isn’t drawing from her own experience. The REAL Cannabis ownership team is well connected, which helped them raise plenty of capital early on. 

All of that puts REAL Cannabis Co. in a strong position to get the licenses they’ll need in a competitive field. Over 550 businesses have already pre-filed applications with the state of Missouri and paid nonrefundable fees totalling more than $4 million. 

Blind applications

Unlike in some other states, Missouri won’t take minority ownership into consideration when it begins reviewing applications on Saturday for the nearly 350 licenses available. The process is blind, so race, gender and any other personal details will be redacted.

Lyndall Fraker, director of medical marijuana regulation for the Missouri Department of Health and Senior Services, said the state didn’t have the option to create a social equity program to ensure participation from minority groups. That language wasn’t included in the constitutional amendment passed by voters last November.

“It’s not specific in the amendment; it didn’t call out that we were to look at specific race and gender, but it does mention diversity, so we do have some questions that align with that,” he said.

The state has received some pushback on the blind application process, but Fraker said there will be consideration for how applicants will address diversity, whether through hiring or location.

REAL Cannabis hopes to put their locations in predominantly minority communities in the St. Louis region and hire in those areas. Watkins-Moore said she’s encouraged that this strategy should boost their application, which seeks licenses for five dispensaries as well as a cultivation-and-processing center.

But there are other barriers that minority-owned businesses face that come long before the application process.

Coming up with the green

From a financial standpoint, REAL Cannabis is better positioned than most minority-owned businesses looking to get into the marijuana industry. CEO Derek Mays says that’s in part thanks to the connections and expertise he’s built up as an intellectual property lawyer and compliance attorney.

The company has raised more than $1 million from more than 15 investors, and it’s hopeful about bringing in $15 million this fall.

Plus, Mays said the company found a local bank willing to work with them, which makes a big difference. Most banks aren’t willing to risk association with something that’s still illegal on the federal level. 

“When you tell an investor that you’re in this space and you’re banked, that gives you a level of credibility that a lot of other organizations just don't have,” Mays said. “So it enabled us to go out and raise more money.”

Access to capital is the biggest thing standing in the way of most people of color getting into the marijuana industry, according to Chanda Macias. She knows from experience. 

The former medical researcher was one of the first African American women to receive a medical marijuana business license in the country, and she said it didn’t come easily. When suppliers demanded above-market prices from her in the beginning, she said she couldn’t get a loan from a bank so she had to mortgage her house to find the money.

“It’s set up for people who have generational money or access to private equity funds for the long-term goal,” she said. “In the short term, it will weed out a lot of minority owners who have equity because they can’t sustain it long term.”

Now, Macias has dispensaries in several states, and she’s the CEO of Women Grow, an organization working to increase female representation in the cannabis industry.

“Now everyone wants to give me supply at the best rates and bargains, but I don’t forget the challenges that they presented in front of me,” she said. “It hurt, because I believed in the medicine, not knowing it was really the people, their attitudes and the privilege that kept me from progressing the way other white counterparts were able to.”

Helping minority-owned businesses get ready 

Roz McCarthy wants to improve the odds of minority-owned businesses in Missouri getting a license.

In 2016, she founded the advocacy organization Minorities for Marijuana, which now has chapters across the country. When medical marijuana passed in Missouri, McCarthy said she saw the opportunity to help get people of color involved from the onset.

Provided on 07/29/19
Credit Minorities For Marijuana
Advocacy organization Minorities for Marijuana hosted its first ever boot camp in St. Louis in April to give applicants a better shot at getting a license from the state of Missouri.

That’s when she got the idea to offer a boot camp aimed to teach minorities specific skills so they’d have a better shot at getting a license.

“It's not easy,” McCarthy said. “If we look at a social equity that's been harmed by the war on drugs now to say, 'We want you to transfer whatever skills that you have, but now you have to be able to compete in this highly regulated market and be successful.'”

In April, she flew to St. Louis to direct the four-week educational program, during which she helped 55 attendees hone their business plans and meet with investors ready to sign checks.

While some participants ultimately dropped out of the program, McCarthy said she’s encouraged that more than 30 people are still planning to apply for a license. 

For McCarthy, these boot camps are just one solution to the lack of minority representation.

“There are several pieces of the puzzle,” she said. “The goal is you bring these pieces together and form this beautiful picture — a better, a more inclusive industry.”

It’s this idea that drew resident Justin Gage to the position of chief relationships officer for REAL Cannabis. The former two-sport Mizzou standout and Chicago Bears wide receiver is in charge of community outreach. 

“Ultimately, the more we educate the people in those communities and give them an understanding of what we're doing and how we’re growing, then that same knowledge they can take back into whatever craft or whatever trade they're doing and help them become their own individual boss, and pass that same information on to the next generation.”

It’s not a process that will happen overnight, he said, but over time he hopes it will help more minorities see medical marijuana as an opportunity.

REAL Cannabis and other candidates have two weeks to submit their applications. Then, they’ll have to wait 150 days to find out whether they’re going to be a part of the first wave of medical marijuana businesses in Missouri.

Follow Corinne on Twitter:@corinnesusan

Send questions and comments about this story to feedback@stlpublicradio.org

Corinne is the economic development reporter at St. Louis Public Radio.