The following conversation was conducted over email and edited for flow and clarity.
For the second installment of our exciting interview with Jerel Registre, he takes a deeper dive into the cannabis industry and the ways in which Black and Brown people have been ostracized from monetarily capitalizing in this space. This is particularly important because he provides a brief education on state programs and how to work around limiting structures, and is transparent about the challenges that come with working in this industry.
Asha Atkins of Wealth Noir (WN): In an interview with Franchise Times, you said, “Within the cannabis industry, there are various structures in place that are intended to skirt or pretend to address diversity but really are an avenue for a different group to acquire a license.” Can you talk more about that? What are some of those structures?
Jerel Registre, Managing Director, Curio WMBE Fund: State programs and their regulators are getting better at identifying efforts by unscrupulous actors to gain an advantage in what can be significantly competitive licensing processes. In the past, there have been instances where the majority owners (diverse individuals) of a cannabis business license did not receive economic benefit in line with their ownership. There are more ways to attempt to ‘dupe’ the application process than can be listed out.
Asha Atkins of Wealth Noir (WN): How do you advise people affected by those limiting structures to work around the limitations?
Jerel Registre, Managing Director, Curio WMBE Fund: A few recommendations to understand if a partnership is designed to take advantage of a diverse person’s ability to qualify, but not allow them to benefit proportionately are:
- Understand who receives the most money for their involvement in the business. How does this compare to the ownership structure of the business?
- Do the diverse owners presented as the face of the business have managerial control?
- How do the operating agreement and other corporate documents provide for transitions in ownership over time? Does one group of owners have the ability to remove another?
Asha Atkins of Wealth Noir (WN): Thank you for that. I believe that our readers who are new to this will find that useful. Oftentimes, the lack of exposure and knowledge can affect our ability to be successful in this space. Speaking of this space, it’s clear you’re incredibly passionate about the work you do and, while the work is important and revolutionary, I imagine you have your fair share of challenges. Can you share what some of those challenges are and how you overcome them?
Jerel Registre, Managing Director, Curio WMBE Fund: Thanks, I am passionate about our growing industry. I’m excited about playing a role in the growing ability of patients and consumers to gain access to products that safely improve their quality of life. Most personally, I am most driven by the Fund’s ability to create entrepreneurial and investment opportunities for diverse individuals. As entrepreneurs, diverse people tend to have a more difficult time raising capital, which means more of their energy is spent sourcing capital than focusing on building and growing their business. From an investment perspective, diverse people are not as well represented as they should be within the private equity community, either as investors who benefit from the incredible opportunity the asset class represents or as investment professionals who allocate capital to entrepreneurs.
In terms of the challenges I’ve personally faced in the cannabis industry, they’ve mostly fallen into two buckets: first, regulatory complexity and, second, clearly communicating how compelling the opportunity to invest in diverse entrepreneurship can be in the cannabis industry.
On the regulatory side, to accomplish our goal of investing in franchised cannabis dispensaries, we’ve developed an innovative solution that touches three highly regulated industries; finance, franchising and cannabis. Each possesses significant regulatory oversight to ensure the rights of the various stakeholders (investors, franchisees, cannabis consumers/patients) are protected. It has taken more than two years to establish this offering in a way that balances the various regulatory requirements of each to bring this opportunity to market.
On the communication side, one of the most frequent questions I receive is related to the thesis of the Fund itself. Investors often want to understand if our commitment to increasing the diversity of the cannabis industry will interfere with our ability to generate financial return. This is an honest concern asked by all my investors, including those from diverse backgrounds. Helping investors to understand the reason they’ve not seen more successful diverse entrepreneurs is because this group is more likely to be overlooked when seeking capital can be a delicate conversation. Fortunately, most investors are focused on the facts that support this reality and appreciate a straightforward conversation about how the Fund is structured to make our solution to the dearth of capital access a profitable and repeatable process.
Asha Atkins of Wealth Noir (WN): Within the past few years, the legalization of marijuana in this country has become increasingly high (no pun intended). While that is true, there are still misconceptions about the positive impact of marijuana. What are some that you hear constantly and what is your response to them?
Jerel Registre, Managing Director, Curio WMBE Fund: Awareness of the mischaracterization of cannabis as a dangerous product is growing faster than the industry forecasted even as recently as five years ago. The misconceptions I am most concerned about stem from supporters of the industry who, often with the best intentions, oversell the benefits of cannabis by claiming it is a cure-all treatment.
There is a growing body of research that documents a wide variety of positive uses for cannabis that play a role in improving an individual’s quality of life in areas like mental health, sleep and pain management. Allowing cannabis to thrive within well researched use cases will have an enormously valuable impact, both to consumers and the businesses that best serve their needs.
Asha Atkins of Wealth Noir (WN): Earlier this year, you were interviewed by Black Enterprise and you mentioned there’s a need for talent in the cannabis industry. How does someone position themselves to do that, especially with minimal exposure or knowledge?
Jerel Registre, Managing Director, Curio WMBE Fund: As cannabis matures as an industry, it’s important to recognize that individual businesses make up the industry. All the roles and responsibilities that exist within a corporation or small business are now in great demand within cannabis companies. If you have a skill set that helps a business grow or run smoothly, you have a skill set that is applicable in the industry.
From an employment perspective, companies need marketers, finance and accounting expertise, human capital experts, IT leaders, supply chain managers, and many of the other functional areas that a corporate entity needs to grow and organize the business.
Within the operations of cannabis companies, there is enormous demand for functional expertise in retail, agriculture, manufacturing, chemistry and logistics, depending on what part of the industry a given business serves. My favorite example of a skillset that translated well to a manufacturing role at Curio is restaurant cooks and chefs who have been very successful making our manufactured products – like medicated chews – because of their ability to produce products consistently over time.
From a business ownership standpoint, there is significant opportunity to sell products and services into the industry. If your business serves the business-to-business market, there are often customers for you in the cannabis industry, particularly if your business is in competition with large national firms. Larger companies have been slower to transact with the industry because of the federal prohibition, so smaller firms have an opportunity to build relationships now while the market is underserved.
Asha Atkins of Wealth Noir (WN): What advice would you give to our readers who are solely interested in investing in this industry? Do you need to be a cannabis enthusiast to be a successful investor?
Jerel Registre, Managing Director, Curio WMBE Fund: Thanks for this question, I think about it everyday. You do not have to be a cannabis enthusiast to successfully invest in the industry. The state based fragmentation of the industry makes it difficult to invest based on an enthusiast’s view of the marketplace. It would require significant effort to stay abreast of product developments in states you do not visit frequently.
Investing in cannabis is more like investing in other fast-growing industries than most believe. Taking time to learn the basic industry structure is the first step and then learning about the industry’s players and developments by following the news coverage is the right path to becoming knowledgeable about the space.
The biggest difference is how important it is to maintain awareness of the regulatory environment at the state and federal levels, as well as internationally, if you are interested in Canadian listed public cannabis companies. The pace of regulatory change is swift in cannabis and many companies, particularly the publicly listed Canadian stocks, react significantly to regulatory news.
If you are seeking private investments, like the Curio WMBE Fund, it is important to meet people in the industry and share your interest in identifying attractive opportunities. Discuss the industry and any opportunities you find with your financial advisor or find others who have the expertise to evaluate the merits of a specific investment opportunity. Remember to balance the expectations for financial return against your liquidity needs and the overall risk of the investment. Oftentimes, private investments are illiquid, meaning it is difficult to sell the investment until a triggering event happens with the company or fund in which you’ve invested. It is important to understand the structure and features of the investment because even the best prospective investment may only be suitable for some investors.
Asha Atkins of Wealth Noir (WN): Are there any exciting products or offerings you have coming up? Anything you are currently working on now?
Jerel Registre, Managing Director, Curio WMBE Fund: There is a lot to be excited about at the Fund and Curio in the upcoming months. We are preparing for the official launch of the franchise opportunity during the fourth quarter of 2021! We’ve refreshed the branding for the franchises and are excited to unveil what will be an exciting and energetic look and feel for both prospective franchisees and their patients/customers. For those following the industry more closely, the Curio team will be exhibiting at MJBizCon, another large industry conference in October.
As the brand is launched, we will roll out the franchise opportunity across selected states with attractive cannabis programs, with a particular focus on states with upcoming licensing opportunities. Please reach out if you are interested in learning more about either the Fund investment opportunity or about the process of becoming an owner/operator of one of our franchises!
Asha Atkins of Wealth Noir (WN): Jerel, thank you so much for your time with Wealth Noir. Where can our readers find you if they want to learn more about Curio WMBE Fund?