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September 7, 2023

CT cannabis startups make pitch to investors

SHAHRZAD RASEKH / CT MIRROR Entrepreneur Zayna Francis fields a question after pitching her cannabis brand Lorrain's CT to investors. Francis graduated from a 10-month business accelerator program sponsored by the state's Social Equity Council.
By Erica E. Phillips, CT Mirror

In a Norwalk hotel ballroom Wednesday morning, seven entrepreneurs pitched investors on their startup ideas in a startup industry — cannabis. 

The presentations, each a tight six minutes in length, were the culmination of a 10-month, $1 million state-sponsored business accelerator program led by cannabis educators from Oaksterdam University and social enterprise trainers with Hartford-based reSET. Thirty entrepreneurs entered the program last fall, and 21 earned their graduation certificates. 

Those selected to present their ideas Wednesday had secured licenses and reached the point where they’re “actively raising capital,” said Sarah Bodley, executive director of reSET.

“They are working as hard as they can to get their doors open,” Bodley told the crowd of investors, business coaches, attorneys and other industry leaders.

Connecticut legalized recreational cannabis in 2021, but the state’s deliberate licensing process and careful oversight of local growers expanding their operations meant the first adult-use retailers didn’t open until January of this year. Since then, the recreational market has brought in nearly $70 million, with sales steadily rising each month.

Several medicinal retailers were approved for hybrid licenses and became the first outlets to sell recreational products. New entrants to the market — including the entrepreneurs who presented at Wednesday’s pitch event — submitted applications to the state’s Department of Consumer Protection and were selected via lottery last year to apply for a limited number of licenses.

Connecticut’s Social Equity Council, responsible for promoting equity in the state’s fledgling adult-use industry, established the accelerator program to provide technical assistance and coaching to cannabis entrepreneurs. Council Executive Director Ginne-Rae Clay said seeing the participants complete the program this week was like “putting your kids through college.”

The seven businesses included two that make bespoke cannabis products, two that offer packaging and logistics services and three grower-retailers. 

“I’ve seen these folks from the very beginning, from them being names on a piece of paper — their applications,” Clay said. “Today is just a beautiful thing, it’s an historic day.”

Before kicking off his pitch, Luis Vega, founder of cultivator-retailer Nautilus Botanicals, said starting his cannabis business was a “lifelong dream.” Growing up in a Puerto Rican family in New York City, Vega ultimately landed in Connecticut where he became the first-ever Latino hemp farmer in the state. Now he’s taking the next step. “Where we come from, this is an opportunity that very few have,” he said.

Vega emphasized his connections to “the legacy market,” meaning people who consumed cannabis regularly before it was legal. He said his company intends to reach a wider swath of customers — particularly legacy customers — by offering delivery. That will also make it possible to reach customers in “cannabis deserts,” towns that don’t allow retail outlets.

“I come from the legacy market, that’s the biggest part of it,” he told the room of investors. “I have a lot of guys we were able to pull in… They have a lot of people they sell weed to,” Vega said. “That goes a long way.”

One of the event’s sponsors, Arcview Group, advises and invests in cannabis companies. Jeanne Sullivan, Arcview’s chief investment officer, said it’s a challenging time for startups to be seeking funding — particularly in this sector. Traditional banks and wary investors won’t lend to cannabis entrepreneurs as long as pot remains illegal at the federal level, and strict regulations and operational complexities can make it difficult to turn a profit. 

Sullivan told the group of startup founders to hang in there. “There really is money and financing out there,” she said. “There’s plenty of us right in this room, who are here and want to help and are willing to help.”

One of those investors in the room was the state’s Social Equity Council, which recently launched a $10 million loan program for social equity marijuana businesses. Participants in the accelerator program are eligible for a discounted interest rate.

It can take two to three years to get a cannabis business up and running, said Oaksterdam University Executive Chancellor Dale Sky Jones. So offering a 10-month training program and ongoing assistance can help entrepreneurs “take it to the next level,” she said. “It’s been a long haul for the folks that are already doing it successfully.”

But Jones called Connecticut’s accelerator “groundbreaking” among state-sponsored programs. The pitch event, she said, was “like having the ‘Shark Tank’ sharks coach your participants.”

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