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March 18, 2024 Startups, Technology & Innovation

Women-led cannabis startup looks to make its mark in Connecticut

PHOTO | CONTRIBUTED The Soulstar team includes (from left): Chief Operating Officer Fran DeRogatis, CEO Amanda Rositano and Chief Administrative Officer Katie Covett.
Soulstar at-a-glance
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A women-led, multistate cannabis startup is moving into the Connecticut market, eyeing a retail location in East Lyme.

It also plans to open a grow facility in the state as well as an additional dispensary.

Soulstar is one of the few women-led cannabis companies operating in the country, but that’s not the only thing that makes it unique. It recently raised private funds to pay Connecticut state regulators a $3 million provisional license fee, which has been criticized for being a barrier to entry into the industry.

Soulstar has been pursuing a disproportionately impacted area (DIA) cultivator license, which requires it to team up with a social equity partner, or someone from a community that has been disproportionately harmed by cannabis prohibition and enforcement.

Of the 26 companies that have been selected as DIA cultivators by the state’s Social Equity Council, half have paid the $3 million license fee, and only one company has been issued a final license and is operational, according to the state Department of Consumer Protection.

Soulstar is one of a dozen companies that has been issued a provisional DIA cultivator license, which is the final stage before a company can open for business.

‘Something different’

Soulstar is led by CEO Amanda Rositano, Chief Operating Officer Fran DeRogatis, both of Massachusetts, and Chief Administrative Officer Katie Covett, of West Hartford. The company recently opened its first dispensary in Bloomfield, New Jersey, under the brand name “Nightjar.”

Soulstar won its Connecticut license through the state’s Social Equity Council, and raised funds to cover the license fee from a single, private investor — a Massachusetts woman “who was inspired by our team and our ability to do something different” in the cannabis industry, Rositano said, declining to name the individual.

Raising that kind of capital, especially under social equity guidelines, is challenging, Covett said.

To do it, the company founders said they conducted hundreds of meetings and calls with possible investors, including larger investment firms.

Of that pool, “there were very few female investors,” Rositano said.

The partners also participated in a months-long social equity training program created by California-based Oaksterdam University, which offered courses on all aspects of the business, including delivering a solid pitch to gain investor interest.

The trio eventually took part in a pitch contest, promoting their all-female platform and diversity and inclusion mission, which attracted the one investor, they said.

Soulstar this spring plans to open its first Connecticut retail site, under the Nightjar brand, at 15 Colton Road, in a property owned by East Lyme resident and company partner Laurie Zrenda.

Zrenda, who previously owned and managed a Connecticut medical marijuana dispensary in Montville, bought the East Lyme property for $700,000 in 2021; a year later, the space won town approval to operate as a cannabis dispensary.

Under its license type, Soulstar can open a grow facility and two dispensaries. Locations for the cultivation plant and second retail site have not yet been chosen, the founders said.

They plan to become profitable within the first year of opening their East Lyme dispensary, the founders said.

Costly undertaking

Robert Lickwar, a partner in national accounting firm UHY LLP’s Farmington office, said establishing a cannabis retail business is a costly and time-consuming undertaking.

Beyond license fees, there are also real estate, attorney and other startup costs, not to mention high tax rates that can erode profitability.

In addition to the $3 million license fee, Soulstar anticipates another investment round of about $10 million to help finance its Connecticut expansion, the founders said.

Finding investors is a challenge, Lickwar said, because a DIA cultivator license requires the social equity partner to maintain 65% ownership of the company.

Lickwar said he’s seen applicants unable to raise enough money to cover the license fee, or surprised by the cost of the license and other startup expenses. Some applicants, he said, have turned to crowdsource funding or angel investors.

Soulstar’s DIA license was issued to a Bridgeport resident who is the group’s social equity partner.

DEI mission

Soulstar’s leaders all hail from the Northeast, having met while advocating for cannabis legalization, and working for a Massachusetts marijuana company, NETA, which currently operates three dispensaries in the Bay State.

In Massachusetts, “we launched one of the busiest cannabis businesses in the country, and led the transition from medical to the first recreational market on the East Coast,” said Rositano, who has spent most of her adult life advocating for cannabis policy reform and access, starting in Massachusetts and expanding into other Northeast states.

Women are an underrepresented group in the cannabis industry, she said, so being an all-female team highlights their social equity mission.

Rositano said when adult-use sales became legal in states like Massachusetts, New Jersey and Connecticut, existing operators serving medical cannabis patients, including mainly large corporations and investors, had an advantage when it came to expanding.

“Social equity was put into place to give applicants (like Soulstar) a leg up,” Rositano said.

“Instead of corporations, we are building more impactful, sustainable partnerships,” Covett said. “We are social equity. We are women. We don’t come from money, and we want to make more space for diversity and inclusion in this industry.”

Bringing more women into the sector “is a huge piece of what we’re trying to do with our company,” Rositano said.

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