The following conversation was conducted over email and edited for flow and clarity.
We had the opportunity to chat with Jerel Registre, Managing Director of Curio WMBE Fund, to learn about private equity investing through the Cannabis and Wellness space. This interview was filled with so much valuable information that we had to break it up into two parts. In this first installment, we cover what private equity investing looks like, how Curio Wellness Center is taking up necessary space in the Cannabis industry, and how Jerel got started in this industry and his goals for the future.
Asha Atkins of Wealth Noir (WN): Thank you, Jerel, for taking time to talk with us at Wealth Noir. I’m excited to dive right into this conversation. We would like our community members to get to know you better. Can you tell us about yourself?
Jerel Registre, Managing Director, Curio WMBE Fund: My name is Jerel Registre, I am the Managing Director of the Curio WMBE Fund based in Baltimore, MD. The Curio WMBE Fund is a private equity fund created to provide diverse entrepreneurs (women, BIPOC and disabled veterans) access to capital in order to establish clinically focused cannabis dispensaries in many of the most attractive state cannabis programs. I work in close partnership with Curio Wellness, Maryland’s leading Medical Cannabis Wholesaler, to support diverse entrepreneurs who aim to establish cannabis dispensaries through Curio’s innovative franchise model.
Asha Atkins of Wealth Noir (WN): For those who don’t know, can you provide a general understanding of what private equity investing means and how it works?
Jerel Registre, Managing Director, Curio WMBE Fund: Private equity, at its most broad, is a way for investors to supply capital directly to companies or entrepreneurial endeavors that are either too new, risky or complex to be available via the public markets like the New York Stock Exchange. Generally, a private equity investment is an agreement between a company (or an entrepreneur with an idea for a company) that needs capital to grow and an investor or fund seeking to participate in the financial gain of that growing business by owning a piece of the company.
There are many ways these investments can be structured that accommodate the needs of investors and the companies that receive investment. Typically, all but the largest private equity funds will have a particular area(s) of expertise that dictates what and how they invest. A few of these dimensions include specific industry, company size, business phase (startup, growth, turnaround), or security type (direct equity, convertible debt, other structured securities). Many times, a fund will establish a mandate or thesis based on several or all of these dimensions.
Asha Atkins of Wealth Noir (WN): Tell us how you got into the medical marijuana business, specifically as the managing director of Curio WMBE Fund.
Jerel Registre, Managing Director, Curio WMBE Fund: I began working in the cannabis industry in February of 2019 when Michael Bronfein, the CEO of Curio Wellness, asked me to partner with him to create a funding mechanism to remove the access to capital barrier that is often cited as a leading cause of the lack of diversity among cannabis business owners. I’d met Michael earlier in my career when he hired me to work with the portfolio companies of Sterling Partners, a large private equity fund he’d co-founded, and served at the lead for the healthcare services investing team. While with Sterling, I worked as a finance consultant for the companies in which Sterling invested, helping with capital allocation decisions and other strategic issues tied to driving the financial performance of the companies.
Joining the cannabis industry as I did, to create the Curio WMBE Fund, is a great illustration of how broad the need is for all manner of business skill sets in the industry. I frequently speak to people about how best to ‘get their foot in the door’ and I always respond with a question about what work they are doing now or what skill set they are able to bring to any growing company/industry. The cannabis industry has a tremendous need for all manner of professional talents from finance to marketing to agriculture and supply chain management.
In reflecting on why I was excited to join the industry, having worked in private equity for several years, I saw the Curio WMBE Fund as a way to have an impact on both the growing cannabis industry and private equity. Both have well documented challenges promoting diversity. On the cannabis side, limits to traditional banking services, and, importantly, the structural challenges tied to cannabis’s problematic regulatory history, create a need for a dedicated mechanism to promote business ownership by diverse individuals in the space.
From a private equity standpoint, the industry is just beginning to acknowledge the disparities that exist in who receives private investment. Crunchbase, a tech and venture capital focused website, estimates that one percent of all VC funding goes to diverse entrepreneurs. A driving cause of the lack of investment in diverse founders and entrepreneurs, according to Morgan Stanley’s 2019 report “Beyond the Funding Gap,” is the lack of diverse investment professionals and VC funds’ lack of diverse Limited Partners. In a general sense, diverse entrepreneurs and founders have difficulty securing investment from private equity funds because they don’t have enough in common with the gatekeepers to these sources of capital.
The Fund represents an opportunity to support talented, diverse cannabis entrepreneurs who, until now, have struggled to identify adequate capital sources to build successful businesses. The Fund directly addresses both sides of the diversity challenge in private equity. As we raised the funds to invest in diversely owned businesses, we took extra care to seek investments from diverse sources of capital. Both in the cannabis industry and the broader investing community, this is important as we look to ensure that diverse people benefit financially from growth in the industry.
Asha Atkins of Wealth Noir (WN): How is Curio WMBE Fund structured as a private equity investment?
Jerel Registre, Managing Director, Curio WMBE Fund: The Curio WMBE Fund is structured to only invest in cannabis dispensaries franchised by Curio Wellness and owned by diverse franchisees. The Fund provides capital via a combination of equity and debt financing that is structured to support the launch of the franchise and, over the course of 3-6 years, generate an attractive return for investors and transition the diverse franchisee to 100% ownership of the business.
Asha Atkins of Wealth Noir (WN): What is the most common question you get asked or you see come across from investors interested in private equity investing?
Jerel Registre, Managing Director, Curio WMBE Fund: Maybe the most frequent question I receive is about prioritization. How do we balance our commitment to supporting diverse entrepreneurs with our fundamental goal of generating strong financial return for our investors? Personally, I love this question because it cuts straight to what will make the Fund successful.
As a Fund Manager, I bear an explicit responsibility to be a steward of my investors’ capital. My primary objective is to successfully select and manage investments on their behalf to both protect and grow their investment dollars. I believe the best way to do that is to invest in talented, diverse founders looking to build successful dispensaries in partnership with Curio’s franchise opportunity. I believe this for three main reasons:
- States are increasingly focused on identifying capable diverse business owners to prioritize in licensing.
- The franchise model provides a level of support that enables entrepreneurs to focus on growing their business while leveraging the proven business systems that Curio has developed since the inception of the Maryland cannabis program. The Curio Franchise Services team has more than 100 years of retail/franchise experience concentrated in relevant industries like pharmacy, nutrition and consumer retail.
- The Fund’s partnership as a source of capital ensures these talented entrepreneurs are able to launch and grow businesses successfully.
Asha Atkins of Wealth Noir (WN): Curio Wellness is the largest cultivator and manufacturer of cannabis products in Maryland. Share with us how the company was able to achieve that.
Jerel Registre, Managing Director, Curio WMBE Fund: Curio Wellness has been able to position itself well through a strong commitment to its brand promise of delivering ”safe, effective and reliable” treatments to patients throughout the Maryland market. It drives everything from the marketing and product innovation teams to the operations and logistics of predictably making products available to our dispensary retailers that consistently meet or exceed our incredible commitment to quality.
Curio Wellness is one of a select subset within the cannabis industry – and the only wholesaler in Maryland – to have obtained cGMP Certification, the quality standard required by the FDA for food and drug manufacturing. That means that all of our equipment, ingredients and operational processes are designed to ensure the safety and quality of the products produced by our facility.
Asha Atkins of Wealth Noir (WN): Part of the Curio Wellness mission is to create investment opportunities for diverse entrepreneurs. Why is this important to the brand? How do you define “diverse” in this case and in what ways are you working to accomplish this goal?
Jerel Registre, Managing Director, Curio WMBE Fund: Before I joined Curio to work on the Fund, Michael Bronfein, Curio’s CEO, and I sat down to talk about the lack of diversity among business owners in the cannabis industry with one of our key investors, Theo Rodgers. Theo is a long time real estate developer and friend of Michael’s with a lifetime of experience in company and institutional governance (he’s sat on the Board of Directors for public companies and institutions like Johns Hopkins Medical School). As they talked about solutions to the challenges that were becoming increasingly apparent, they recognized that legislation and regulations were only part of the solution to enabling more diverse entrepreneurs to establish businesses and find success in the industry. So they decided to put their money where their mouths were and partner with others who believed like we do that diverse entrepreneurs are more than capable of building thriving businesses and that solving for the lack of investment may indeed represent an opportunity for exceptional investment return. That return would accrue to investors, entrepreneurs, and the communities where the businesses are located.
The cannabis industry as a whole also benefits from a more diverse marketplace by leaving behind its difficult past that, to say the least, treated diverse people poorly and adding diverse voices to its ranks that are able to represent the interests and needs of the communities served by our industry.
As Jerel mentioned, diversity is a necessary component for a thriving business. While Black and Brown people are perpetually not included in conversations where cannabis can prove financially beneficial, in part two of our conversation, he shares the ways in which our community can play a role by investing in the cannabis and wellness industry, tips for investing, resources, and expected challenges.