After a significant increase in the number of cannabis dispensaries statewide gave rise to conversations about Black and Brown individuals who spent time in jail for possession-related offenses, the state of California and its municipalities began developing Social Equity programs to help remedy systemic injustices caused by the War on Drugs.
While the programs were intended to help level the playing field, many individuals see them as deeply flawed and perpetuating harm in Black communities, as well as to Black entrepreneurs.
“Venture capitalists played a huge part, as I feel like they had relationships tied with the Department of Cannabis Regulation,” said Los Angeles cannabis entrepreneur Amber Vincent.
The state has appropriated over $40 million to the Bureau of Cannabis Control to disperse among several city programs since 2019.
While cities like Oakland were praised for creating legitimate pathways for success within the cannabis industry, the program in Los Angeles has faced controversy since it was introduced. It included venture capitalist funds like 4thMVMT, which partnered with Black entrepreneurs to obtain cannabis licenses that were seen as predatory.
“They knew they were able to get their hands on golden tickets, so that meant preying on us,” said Vincent, who worked with 4thMVMT and its CEO Karim Webb.
Vincent qualified for one out of three tiers the Social Equity program offered for individuals who wanted to participate. Since she had a prior drug conviction, Vincent was part of Tier 1, which included people who qualified as low income.
One of the biggest complaints about the Social Equity program in Los Angeles is that applicants must have a location before their license can be approved, which forces them to seek out significant sources of funding in advance.
“These venture capitalists were offering buckets of cash to people so that they could have their location to apply and be compliant with the city to get the license,” said Vincent. “I signed my life away.”
Vincent said her cousin, who is an attorney, reviewed the document and “basically said it was a BS contract.”
After that experience, she is now starting over with her own cannabis brand, Kijani Leaf. She has also since linked up with grassroots organizations who had related issues with Los Angeles’ Social Equity program.
Vincent spent at least $80,000 on a business she couldn’t even start due to the lack of a cannabis license. In cases like hers, once the money is exhausted waiting on licenses, venture capitalists like 4thMVMT can buy them out at a much lower price.
This is par for the course for Black-owned startups who attempt to secure funding across many industries. According to a Crunchbase report released last July, Black entrepreneurs received just 1.2% of the record $147 billion in venture capital investments through the first half of that year.
In the world of Los Angeles cannabis, Vincent also wasn’t alone. According to the Los Angeles Times, only 358 equity licenses were granted through mid-January of this year, despite there being 656 applicants in the first hour of the two-week open application window.
Vincent and others were able to sue the city of Los Angeles after gaining access to recordings of Social Equity program administrators allowing people to apply online before the open application period. State auditors found discrepancies, as well. This threw off the count of how many licenses would be granted, as well as different fees associated with applying (which can range from $10,000 to $18,000).
Additional licenses have since been given out.
“There's way more work that needs to be done,” she said. “It's still a fight, just for things like the taxes, or all these different fees associated with being in business on the cannabis side.”
She feels the program could be further improved by anything from investing in education to re-investing tax revenue into cannabis business.
“We need courses to show and train us on how one can be a businessman or businesswoman, she said. “I realized a lot of people that are doing this don’t have the basic skills to run a business, so you’re just awarding people these licenses and not even taking into consideration that you are giving them something that they’ve never had before.”
The Social Equity program is almost setting up Black and Brown Los Angelenos for wealth extraction and failure from the start, said Emery Morrison, co-founder of the online cannabis dispensary CampNova.
“It was never on track because they never set the system up correctly from the beginning,” said Morrison. “These venture capitalists put people in survival mode. You got bills to pay, loans to pay back and possibly family members that you have come in with you. So when they finally started getting their licenses, they already started in the negative.”
One of the loudest voices against the current Social Equity program in Los Angeles is storied cannabis entrepreneur Virgil Grant, also known as the Godfather of Cannabis. He’s the owner of the Los Angeles dispensary California Cannabis. Grant’s biggest issue is with the location requirement.
Virgil Grant at his California Cannabis store in Los Angeles. (Credit: Robin L. Marshall)
“Licenses should have been issued whether you had a location or not because that would have put the applicant in a very powerful position,” said Grant. “If I got a license in my hand, then investors are more likely to want to give money.”
That real estate requirement can leave applicants in less-than-desirable locations, Grant explained, like one without good foot traffic or without the size and space needed to operate.
There’s also the cost of renting out a building itself. The average monthly cost of rental space in Los Angeles is about $33.40 per square foot. In the more desirable west side, rents are higher, at $40 to nearly $100 per square foot.
“I would personally go in an area that was a little more upscale, like the west side, because your chances of making a decent amount of money are better than the inner city,” said Grant. “In the inner city, there are so many unlicensed shops that you’ll be competing against shops that shouldn’t be open.”
Grant places the blame on being pushed out of the process for setting up the program, which he feels is administered by people who don’t have ties to the cannabis industry or any legitimate cannabis business experience.
According to the Los Angeles Department of Cannabis Regulation, Social Equity Program Director Dr. Imani Brown is an urban policy and planning expert with more than 25 years of experience in everything from small business development to government policy and economic development.
“How can you govern something you know nothing about?” questioned Grant, who blames egos within the Social Equity administration. “We, as the industry, thought it would continue to lean on us and use us as a support system to get this program up and running. But basically, what they said without verbally saying is, we don’t need y’all. We know what we doing and we could do this by ourselves. It’s obvious that they don’t know what they’re doing.”
Black people have been historically criminalized for marijuana despite legal reform benefiting white entrepreneurs entering the industry. President Biden’s recent federal pardon is a step towards undoing decades of harm. California had already earned an unmatched reputation nationally following 2016’s historic passing of Proposition 64.
But the work is far from done, said Vincent, who underscored the need for reform, education, support, and money for individuals trying to access Los Angeles’ Social Equity program.
“Funding needs to be available,” she said, “because the state is making beaucoup money off of us.”