Case Studies
Resources for Aspiring Cannabis Entrepreneurs
Introduction to Case Studies
What follows are two written case studies and an interview with a Connecticut-based cannabis entrepreneur. These resources provide a summary of known players and important programs within the cannabis industry. These are intended to be stand-alone educational materials, offering insight into real-life examples of successes achieved by those in the cannabis industry, key challenges faced as part of that success, and specific resources that may help cannabis entrepreneurs succeed in today’s industry.
Available Case Studies
Viola Brands and its Community Impact
Introduction
In 2011, Al Harrington, former NBA star, founded Viola Inc., one of the nations’ leading producers and licensed wholesalers of premium quality cannabis products. The brand is named and inspired by Al´s grandmother, Viola, who suffered from glaucoma and diabetes before she passed. The possibility to offer other types of therapies in which sick people could find relief motivated Al to create this company. Viola´s mission is to increase minority participation and ownership in the cannabis industry. In Al´s words: “All of our work is invested in creating a brand that uses its platform and resources to create opportunities of empowerment, education, and inspiration for the people who have been most affected by the war on drugs. which primarily are black and brown folks.” Visit the Viola website here.
A brief history of cannabis in the US
The American cannabis industry began with hemp in Colonial Virginia, where the King forced landowners in the 1600s to grow and send hemp to England as a form of financial aid. Hemp was used to make different items such as rope and sails throughout colonial America. Hemp production continued until 1906, when Congress passed the Pure Food and Drug Act. The Act included cannabis among the various substances patent medicine companies were required to list on their labels so worried customers could avoid it, impacting medicinal cannabis production.
The Marihuana Tax Act of 1937 made hemp, cannabis, and marijuana illegal. Yet, for just three years (1942-1945), the US Department of Agriculture urged farmers to grow hemp for war purposes. For decades, these products remained illegal, but in 1969, after the Supreme Court determined the Marihuana Tax Act was unconstitutional, the Nixon administration created the Controlled Substances Act and categorized cannabis as a Schedule I drug (i.e., drugs with no accepted medical use and a high potential for abuse). Many policymakers now view this Act as a public policy that had a severe disparate impact on millions of black and brown individuals who have gone to jail from the 1970s onwards.
Since the legalization of recreational cannabis in Washington State in 2012, cannabis use has become legal in 18 States. Connecticut was the latest state to approve recreational cannabis through the state legislature in 2021.
Map of Cannabis by State as of December 2021
Cannabis in the US by the numbers
A Gallup poll (2019) shows that 12% of Americans are active users of marijuana. The rate almost doubled from 2013 to 2016, probably a result of the legalization of cannabis by various states.
Total revenue for the cannabis industry reached $18.3 billion in 2020, skyrocketing from $10.7 billion in 2019 (71% growth YoY). An increase in access, products offered, and the COVID-19 pandemic have contributed to this growth. As delivery and online ordering are preferred channels for buying cannabis, cannabis eCommerce gained market share during 2020 (Leafly).
Leaflink Insights Data shows the monthly sales by-product (edibles, pre-rolls, accessories, topicals, flowers, cartridges, and concentrates) from February to December 2020. Flower and cartridges remain the top selections by customers, accounting, on average, for more than 58% of total monthly sales.
Another study by Gallup showed that 14% of Americans use Cannabidiol (CBD) products (Exhibit 4) to relieve some medical costs issues. The most common reasons to use cannabis for medical reasons are pain (40%), anxiety (20%), sleep/insomnia (11%), arthritis (8%), and migraine/headache (5%).
According to Business Insider, the entire US cannabis industry is projected to grow to $100 billion by 2030, generating more jobs and access to cannabis. This promising growth is bolstered by observations that real numbers often exceed projections by far. For example, the Marijuana Business Daily shows that in Illinois, which legalized recreational sales in January 2020, total sales numbers – for both recreational and medical – topped $1 billion by December 2020. In addition, despite a decrease in cannabis capital raised during 2020 (likely due to COVID-19, North American cannabis companies rebounded, raising over $1.6 billion in January 2021 alone.
Background – Al Harrington
Albert “Al” Harrington was born in February 1980 to a humble Black American family in Orange, New Jersey. After losing his father at age 8, he was raised by his grandmother, Viola Harrington. In 1998’s NBA draft, Al was selected as the 25th pick of the first round by the Indiana Pacers, joining the NBA straight from high school. Over his 16 seasons in the NBA, he played for 8 NBA teams and was voted second for the NBA Sixth Man of the Year award for the 2003-2004 season.
Al became personally aware of the medicinal benefits of cannabis after suffering complications from knee surgery at the end of his career. His grandmother’s diagnoses of glaucoma and diabetes also pushed him to think about increasing cannabis access.
Viola Brands
After Viola´s death in 2011, Al Harrington and Daniel Pettigrew founded Viola Brands, a for-profit private Company in Denver, Colorado. As of December 2021, the Company's products are cultivated and processed in three different facilities across the country
Currently, the Company employs more than 35 people, with its headquarters in Los Angeles, California (PitchBook). Among their top executives have been Adam Wolf (Chief Operating Officer), Ericka Pittman (Chief Marketing Officer), Stephanie Akarel (Vice President of Strategic Planning), and Matt Hathaway (Chief Financial Officer). The Company is committed to diversity and inclusion efforts, successfully expanding recruiting networks, creating diverse selection committees, designing programs for women and minorities, and embracing a diverse culture.
The Company’s operations have expanded considerably over time. Products include different types of flowers (Indica, Sativa, hybrid), CBD oil, extract of different flavors, and pre-roll cannabis and is available for purchase in California, Colorado, Michigan, Oklahoma, Oregon, and Washington. In March 2021, Viola confirmed its partnership with Avicanna, a Canadian-based, cannabinoid-focused biopharmaceutical company. This partnership will allow Viola to explore the Canadian market, where the branch will open in Toronto. Al Harrington and the Viola team are thrilled about this opportunity: “We’re excited to announce our partnership with Avicanna to expand into the Canadian market. Becoming the first Black-owned multinational brand is a significant milestone for Viola, and we look forward to expanding our product offering and Viola’s mission into a new market” (Forbes). Company revenues have increased from an estimated $7.8 million in 2019 to an expected $15 million in 2021. The company closed its latest funding round in October 2019, raising $16 million with Gotham Green Partners.
Other Programs
The organization is passionate about ensuring equitable access to cannabis within historically marginalized communities. The solution was Viola Brands. In an interview with Forbes in 2020, Al stated: “I see first- hand how these communities suffer at the hands of nonviolent drug offenses, and it needs to change. That’s where my true passion lies - in creating generational wealth for these minorities and their communities.” Today, Al Harrington is a member of the Minority Cannabis Business Association (MCBA), the Cannabis Trade Federation, and Tidal Royalty’s Advisory Board.
As part of its impactful mission, Al Harrington has invested in various platforms, companies, and institutes to promote social equity in both access to and consumption of cannabis, especially for those minorities most affected by the War on Drugs.
The company’s initiatives include:
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Viola Cares: as stated on their website, “through education, expungement, community engagement, and comprehensible social good programs, the Viola Cares initiative aims to create more jobs, policy reform, expanded awareness, and industry diversity increasing representation. Viola Cares focuses on changing the industry dynamics of cannabis through strategic partnerships that allow for the increased participation of those most impacted by the War on Drugs and ensuring our communities reap the benefits of cannabis legalization. Viola Cares is committed to benefiting communities in need in ways including but not limited to food drives, community renovation projects, expungement clinics, and countless donations".
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The Viola Accelerator was launched in 2020 to provide operational support to black entrepreneurs in the cannabis market. In addition, sales, marketing, and fundraising resources are being provided. The ultimate goal of the accelerator is to create 100 new black millionaires from this ultra-competitive industry.
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The Harrington Institute was launched in September 2021. In collaboration with the Cleveland School of Cannabis, the Harrington Institute educates the community on cannabis issues. The Viola Build Scholarship offers $3,000 toward tuition for those interested in completing the 6-course program. The curriculum includes three educational tracks: horticulture, manufacturing, and dispensary operation. More than 650 people have graduated from the program, with a job placement rate of 65% (Cannabis Business Times).
Future Challenges
Viola is committed to minority ownership. The Company has applied for an additional 11 licenses in other states like Maryland, Missouri, and New Jersey (Cannabis Daily). It is crucial that the organization keep expanding its current operational strategy to other states such as Illinois and Connecticut. Doing so presents an essential step toward fulfilling its mission of creating opportunities for empowerment and education in black and brown communities.
Some questions that may arise from this case:
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Considering the highly competitive nature of the cannabis industry, how might Viola sustain organic growth in the years to come?
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In what other ways might Viola Cares continue to generate a lasting impact in communities? A potential option might include forging an intensive partnership with the National Basketball Association (NBA) which encourages former basketball players to increase engagement with Black and Brown communities across the country.
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What additional avenues might enable the creation of 100 new Black millionaires in the near-term?
New Haven's CannaHealth
Kebra Smith-Bolden is a true trailblazer, a respected healthcare professional with the vision, purpose and drive to transform the nascent cannabis industry. Trained as a registered nurse, Kebra leveraged her medical knowledge and decades of professional experience to create CannaHealthTM, the first and only Connecticut cannabis business owned by an African-American. CannaHealthTM is a division of The Healing Choice LLC and HK Smith Enterprises, LLC. Its innovative community-based business model offers disadvantaged communities disproportionately impacted by the war on drugs education about medicinal cannabis, as well as safe and legal access through medical marijuana program evaluations. She is an industry pioneer dubbed the “Marijuana Guru in CT.”
Social Equity Accelerator Programs
Introduction
The War on Drugs is a global campaign led by the United States Federal government to reduce the illegal drug trade. The initiative includes drug prohibition, military aid, and military intervention as means of disincentivizing the production and consumption of various drugs. Unfortunately, this war has had a profoundly negative impact on minority groups, black and brown communities.
As state legalization of cannabis moves forward throughout the U.S. and Canada, policies to democratize access to the industry and promote social equity through economic empowerment are being instituted. This case provides general insight into two such programs, the state of Colorado Accelerator program and Canada’s Leaf Forward program.
Social Equity Programs (SEP): An Overview
A recent Gallup poll, shows record high (68%) support for cannabis legalization in 2021. This support is pushing more states to legalize the recreational and medical use of cannabis. Currently the total industry is estimated to be worth more than $18 billion and is generating more than 320,000 full-time jobs (Reuters). However, despite the industry’s promising future a significant challenge remains: BIPOC ownership in the cannabis industry. According to Leafly’s Jobs Report 2021, Black Americans account for 13% of the total population in the U.S. but only about 1.2% to 1.7% of business owners in the Cannabis industry.
As this market evolves, states are beginning to focus on developing Social Equity Programs (SEP). SEP set aside a percentage of the state´s cannabis licenses for members of historically marginalized groups with the intention of increasing their participation in the industry and increasing their wealth and quality of life.
The Current State of Social Equity in the U.S. Cannabis Industry
Previously incarcerated individuals, those living in disadvantaged neighborhoods, women, and veterans are among the groups SEPs are trying to help. The National Association of Cannabis Business states:
“The goal of social equity laws is to ensure that people from communities disproportionately harmed by marijuana prohibition and discriminatory law enforcement are included in the new legal marijuana industry. Policymakers are working to address criticisms that outsiders are setting up legal cannabis businesses and profiting by doing the same things their less fortunate neighbors were arrested and given jail time for just a few years ago.”
SEP structure may vary across states, and participation is generally predicated on the requirement of residency in specific geographic regions in the state for a certain number of years and/or proof of affiliation with a historically marginalized group. Many states offer reduced application fees, technical assistance and links with incubators/accelerator programs to promote and succeed with this policy.
U.S. States with SEPs
Currently, 13 of the 19 states with legalized recreational cannabis – have developed SEPs to help marginalized communities become cannabis entrepreneurs. Some states, such as South Dakota, Maine, Montana, Nevada, Alaska, and Oregon, have not included SEPs as part of their state-legal cannabis programs.
States which have developed Social Equity Programs for cannabis:
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Arizona
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California
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Colorado
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Connecticut
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Illinois
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Massachusetts
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Michigan
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New Jersey
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New Mexico
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New York
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Vermont
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Virginia
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Washington
One of the main issues with SEPs is that even when applicants can succeed and get their licenses, financial success is not guaranteed. Here is where incubators and accelerators could play a significant role in helping marginalized communities overcome challenges and succeed in their entrepreneurship.
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Example 1: Colorado’s Accelerator Program
One example of a strong social equity accelerator program comes from the state of Colorado. In 2020, Colorado passed a law making it easier for social equity applicants to receive licenses for cannabis startups. The SEP provisions prioritize applicants who live in Opportunity Zones, have income below a specific income threshold, or those who have been arrested for cannabis-related offenses (Cannabis Law Blog). The State has also published a comprehensive “How to Apply” document for prospective SEP applicants, to provide information and access to information about the application process (Social Equity Application Colorado).
The state’s Cannabis Business Office (CBO) provides more tangible support to entrepreneurs in its accelerator. The CBO provides “business consulting, funding assistance, and technical assistance” to cannabis entrepreneurs (Rocky Mountain Collegian). The CBO is intended to help social equity applicants with many of the challenges they face in opening a business. For example, it has funds available for microloans and grants for business seed money. While still early, the CBO only began operating in 2021, this program has potential to provide substantive support to social equity entrepreneurs.
Example 2: Canadian Accelerator Program Leaf Forward
Leaf Forward, a private accelerator program in Toronto, also helps promote social equity entrepreneurs in the cannabis space. Leaf Forward aims to help cannabis startups in a few ways. Like a traditional accelerator program, Leaf Forward offers support with practical business skills—legal, accounting, finance, sales, and marketing— in which many social equity entrepreneurs may lack sufficient experience (New Cannabis Ventures). Unlike Colorado’s Cannabis Business Office, Leaf Forward does not directly offer loans or funding rounds to companies in the accelerator. However, it does connect entrepreneurs to prospective investors that are interested in financing the startups. Leaf Forward provides useful resources to Canadian cannabis startups.
Future Challenges
To promote a more inclusive industry, state legislation should somehow address the following challenges within their SEPs:
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Lack of funding needed to help social equity entrepreneurs navigate the complex application process
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Prohibitive cost of licenses
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Cumbersome application processes
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Lack of business education among social equity entrepreneurs
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Transitory nature of programs, the result of changing laws, rules, and institutions
Minority and low-income entrepreneurs face additional obstacles even beyond the typical pitfalls of a startup. Still, many within the cannabis industry are taking efforts to promote equity in the marketplace. Actions by state and municipal governments and private accelerators are a promising step forward toward the goal of achieving greater BIPOC participation in the cannabis industry.