Business

Even With Programs in Place, Social Equity Potrepreneurs Still Need Funding

Difficulty generating startup capital is a barrier to entry for many new comers to the cannabis industry.
Difficulty generating startup capital is a barrier to entry for many new comers to the cannabis industry. Jacqueline Collins
Ensuring that individuals and communities negatively affected by the War on Drugs can benefit from legal marijuana has been a recent priority for state and local governments in Colorado, but financial barriers remain for entrepreneurs trying to take advantage of the new licensing programs.

Denver musician Jon Shockness, better known as Kid Astronaut, had sky-high dreams when he and a group of friends launched Golden Cloud Cannabis Company. Shockness is well aware of the racial disparities that exist around legal and illegal marijuana markets across the country, pointing to data from the American Civil Liberties Union that found that Black Americans are arrested for marijuana possession at four times the rate of white people in the United States.

A 2018 state Department of Revenue survey taken among Colorado marijuana businesses owners showed that only 2 percent identified as Black and 5 percent identified as Latino. Shockness hopes that more people of color, like himself, will own marijuana companies and benefit from the burgeoning legal market. Experienced with working alongside local nonprofits for issues such as affordable housing in Denver, he sees Golden Cloud Cannabis Company as a marijuana business that was “created for the people by the people.” Golden Cloud's founding team of creatives and entrepreneurs, all people of color, plans to produce flower and pre-rolled joints, and donate a portion of profits to organizations that advocate for communities impacted by the drug war and prisoners still incarcerated for minor marijuana crimes.

Shockness wants to mentor other minority entrepreneurs entering the industry one day, but first he needs to secure enough funding to start his own business. He's been struggling to find startup capital while facing roadblocks that are unique to the marijuana industry, which is typically barred from banking and loan access because of its federally illegal status.

“Once we do get off the ground and have the social impact that we want to have, we’re going to be setting up the platforms for other companies to get information and education, to empower other entrepreneurs and people who just want to know more about the cannabis industry, its pitfalls, or how difficult it is to get into," he says. "We’ll definitely be learning from all these experiences, and finding a way to make it at least more equitable for people in the future.”
click to enlarge Golden Cloud Cannabis Company co-founder Jon Shockness, better known as Kid Astronaut, has struggled to launch his business. - GOLDEN CLOUD CANNABIS COMPANY
Golden Cloud Cannabis Company co-founder Jon Shockness, better known as Kid Astronaut, has struggled to launch his business.
Golden Cloud Cannabis Company

In a 2020 study on marijuana-industry demographics commissioned by the Denver Department of Excise and Licenses, 77 percent of survey respondents named startup capital access as one of the biggest barriers to business ownership. The Colorado Department of Regulatory Agencies laid out a road map earlier this year for state banks to work with marijuana business owners, but many burgeoning cannabis companies still need to find alternative means of funding in the foreseeable future.


Golden Cloud quickly hit roadblocks with legal and licensing fees, Shockness says, so the team decided to crowdfund for initial money. The first campaign hosted on the platform Fundly was taken down after generating roughly $2,000, while the second attempt, this one on GoFundMe, was pulled by the website a couple days after it went live. Neither platform explained the reason for terminating the fundraisers, but Shockness suspects it was because the fundraising campaign was for marijuana business. Although he plans to produce and sell cannabis products in the future, Shockness insists the fundraising was just for early legal fees that are necessary to start a business.

“We’re just going to start to tap our resources and just see what’s possible,” he says. “It’s just disappointing, having that fundraising platform and then not being able to use it, even though we’re not directly selling or distributing cannabis.”

Colorado has created legislative language and a micro-license program for social equity business applicants in the state's pot industry, and local governments such as Denver and Aurora are considering social equity initiatives for future business licenses in marijuana's retail, production, hospitality and delivery sectors — but these prospective companies still need startup funds to succeed. To help business owners clear these hurdles, organizations such as the Color of Cannabis and the Black Cannabis Equity Initiative have called for grants or low-interest loans programs that are backed by marijuana tax revenue. During a November meeting hosted by the BCEI, Denver Excise and Licenses executive director Ashley Kilroy agreed with the need to create such a  loan program:

"Funding for these programs is going to be key. We know from all the work we have done and what other states have done, we can build a great equity program, but the number-one thing we [for successful social equity] need is access to capital," she said. "That's something we really look forward to working with the state on."

Another issue that Colorado's social equity program may face is awareness. Shockness has attended meetings hosted by national groups like Minorities for Medical Marijuana and the Minority Cannabis Business Association, but like many prospective business owners, he was not aware of state-level social equity programs like the  micro-license program.

As more towns and counties in Colorado open for recreational marijuana sales, delivery and hospitality once the pandemic is over, awareness of these new government programs is more important than ever for qualified social equity business owners.

“It's kind of like you’re running blind, in a way, with the cannabis industry, when you’re starting from the ground up," Shockness explains. Which is okay — I knew it would be challenging — but I’m just hoping that my company or companies that come after me don’t have to be met with these same problems."
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Clara Geoghegan is a recent graduate of the University of Colorado Boulder, where she majored in anthropology with an emphasis on public health. She worked at Radio 1190’s News Underground and freelanced for Denverite. She is now the cannabis intern at Westword.
Contact: Clara Geoghegan