Social Equity Incubator: Why Do We Need It?


Respect for Diversity

There is a huge diversity gap growing within the cannabis industry. MJBizDaily recently reported that women and minorities are a small make-up of cannabis businesses, where 75% of leadership roles are held by men. The number of women in executive positions, in cannabis-based businesses, has fallen 9% between 2015 and 2017.

Growing Talent recently published “Competencies of the Successful Cannabis Entrepreneur”, where we stated that only 1% of America’s dispensaries are black owned and 80% of individuals with a stake in the cannabis industry are white. Only 19% of cannabis-based businesses are owned by a person of minority

Because of social equity programs, this number is growing.

Cannabis entrepreneurs owe the cannabis industry a fresh start. Instead of “whitewashing” the industry, business owners should seek to diversify their workforce, and build equitable cannabis structures.

What is Social Equity?

Social equality is a state of affairs in which all people within a specific society or isolated group have the same status in certain respects, including civil rightsfreedom of speechproperty rights and equal access to certain social goods and services, such as cannabis. It also includes equal opportunities and obligations, and so involves the whole of society.

Social equality requires the absence of legally enforced social class or caste boundaries and the absence of discrimination motivated by an inalienable part of a person's identity. For example, sex, gender, race, age, sexual orientation, origin, caste or class, income or property, language, religion, convictions, opinions, health or disability must absolutely not result in unequal treatment under the law and should not reduce opportunities unjustifiably.

"Equal opportunities" is interpreted as being judged by ability, which is compatible with a free-market economy. Relevant problems are horizontal inequality − the inequality of two persons of same origin and ability and differing opportunities given to individuals − such as in (education) or by inherited capital. Therefore, someone who grew up targeted by the “war on drugs” should have equal opportunities, in the cannabis industry, to someone who was raised in a white, middle class family.

Who Qualifies for Social Equity?

Social Equity aims to level the playing field within the cannabis industry. Persons who qualify for social equity programs typically fall within one of three categories: those persons targeted by the “war on drugs”, persons from ethnically diverse communities, and persons who live below the poverty line.


What is a Social Equity Incubator?

The main purpose of an incubator, like the program at Growing Talent, is to help start-ups to grow. They are collaborative programs which help people solve problems associated with launching a start-up by providing a space to work, seed funding, mentoring, training and other benefits.

A Social Equity Incubator is a business model used within the cannabis industry, which has three tiers. Tier 3 businesses “incubate” tier 1 and 2 businesses. Tier 3 businesses seek easier access to cannabis licensing if they agree to be an incubator, which includes providing rent-free space or technical business assistance to tier 1 and 2 businesses.

Tier 3 businesses also agree to enforce certain equity standards within tier 1 and 2 businesses, with some laws mandating that 50% of employees qualify for social equity programs. This allows for a diverse workforce and a more level playing field within the cannabis industry.

Tier 3 businesses agree to be an “incubator” for a period of time, and both the incubator and incubatee must sign appropriate documentation, including leases and business agreements. This allows business owners who may not have start-up money or resources to enter the cannabis industry with a “grace period”. In essence, it levels the playing field for all individuals seeking to work in the cannabis industry.

Incubators make money when the start-ups they take an equity stake in get big and successful. The best exits for an incubator come when one of their start-ups is acquired. The path to getting acquired path is shorter than the path to going public which would also allow the incubator to divest of their investment.


Why the Cannabis Industry Needs the Incubator Model

The cannabis industry is intense, it’s sink or swim. Small start-up companies are facing growing challenges and regulations to entering the market. The Social Equity Incubator Model reduces some of these challenges through diverse hiring, rent-free business space and technical assistance for the “little guy”, providing guidance as they enter a fast-growing market.

Both start-up companies and the incubator company benefit from this model. It allows bigger companies to invest within their industry, while profiting as start-up companies become successful. The incubator model also promotes diverse hiring and opportunities for persons who qualify for social equity programs.

Hopefully, as the use of this business model grows within the cannabis industry, our dispensaries will better represent the intricate and diverse social tapestry that is America.