Minority-owned hemp businesses—particularly those on the capital-intensive processing side—often have trouble finding traction within the marketplace, notes Merida Capital Partners Senior Partner Mina Mishrikey.
“There’s a lot of obstacles for anyone entering into hemp and cannabis, especially among minorities” Mishrikey says. “Leaving aside broader commentary on the challenges minorities face in society, access to capital is a big hurdle as it relates to hemp.”
In an interview with Hemp Grower, Mishrikey elaborates on the difficulties encountered by minority growers and how programs like Merida's and the Minority Cannabis Business Association's i2 Accelerator are working to help this population navigate the pathway to success.
Douglas J. Guth: What’s the nature of the work you’re doing at Merida?
Mina Mishrikey: We have 50 companies in our portfolio representing about a half-billion dollars in assets under management. At least a quarter of those companies are minority- or female-owned.
DG: What are some major barriers to success minorities face in the hemp industry?
MM: Besides access to capital, political connectivity can be an issue as well. In some states, there’s a limited amount of licenses. Minorities might not have connections to lobby political leaders or regulators in setting ground rules that both allow for fair social equity programs and give smaller, minority-owned businesses a pathway to success.
DG: What are the funding issues that arise among hemp businesses, minority-owned or otherwise?
MM: The cannabidiol [CBD] business can be capital intensive if one is building out their production capabilities. Access to traditional capital is still challenging in the CBD space, but that may change as broader industry legalization leads to consumer adoption and institutional capital inflows into these businesses.
The [industrial] hemp side of the business can be very capital intensive, too, whether it’s buying farming equipment to separate fibers into their various components or taking processed hemp and creating end products. We’re getting pitches on using hemp for everything from textiles to construction and automotive materials to energy sources like battery production. Think about a small business owner trying to create a more sustainable version of a Duracell battery—that’s not as easy as putting CBD into a bottle and sticking a label on it. That’s a completely different use case and one people [outside the industry] don’t think about when they think about hemp.
DG: What kind of work did Merida do in helping minority entrepreneurs prior to creating the i2 Accelerator?
MM: That’s always been a focus since our inception in 2016. We have a history of working with local minority- and female-owned businesses, particularly in medical market operations in Maryland, Michigan and Virginia.
We offer business advice, funding and often serve as board participants. It is also important to partner with local representative groups that have ties to the community, whether a given state has a social equity mandate or not.
DG: What can you tell me about the accelerator program launch?
MM: Our purpose was to address equality issues, though it’s important to highlight that launching i2 had a selfish aspect as well. Our responsibility is to make great investments—the accelerator would not have existed if it was purely an altruistic exercise. We viewed this as a great way to find amazing businesses we could partner with and springboard into our ecosystem of portfolio companies. For example, we had a winner (James Henry) purchase flower for their products from [an investment] portfolio company [of ours] called Henry’s Original. It’s all about ecosystem connectivity.
DG: What were the parameters for inclusion in the program?
MM: We left it very open-ended. Applicants had to be a minority-owned business focused on areas encompassing hemp and cannabis. We received over 120 applications. When we first launched i2, the thought was to pick one or two winners. But we received so many strong business plans, we ended up selecting five.
We selected companies in the same way we invest in any business. It started with [each applicant submitting] a business plan and led to in-person interviews in our New York office. We grilled owners on what could go wrong while trying to align with their vision on what could go right. Whenever we make an investment, [we also ask ourselves,] are there any synergies with other companies in our portfolio? Can we de-risk an investment by plugging these businesses into some of our other companies, whether it’s a joint venture or customer relationship?
DG: What kind of programs and services do businesses have access to through i2?
MM: We gave companies consistent, high-level mentorship from our network partners and portfolio companies. Before COVID, participants had direct access to our offices and the executives in our network.
We collect data on the hemp and broader cannabis industry and gave entrepreneurs access to our database. On the training side, most of these companies were in their infancy. Though we impart our views on how to maximize the business, we try to balance that by staying out of the way so entrepreneurs can realize their vision and goals.
The cannabis and hemp industry is growing quickly and moving toward normalization, so it is imperative to think two to three years ahead and anticipate change. Like with ¡WEPA! [Farms, which went through the i2 Accelerator], they started out selling hemp flower and CBD products, an area that got commoditized with a lot of companies focused on the same thing. So we helped them pivot into some differentiated consumer products.
For example, we helped [¡WEPA! Owner] Luis [Vega] pivot from bulk flower sales to wholesale and retail sales. His products now consist of flower—mostly pre-rolls—and extracted products such as tinctures, capsules and gummies. From a retail perspective, he private labels some of these products and sells them under the ¡WEPA! brand. Luis is also playing in the mask space, an industrial application [of hemp].
DG: What other advice did you have for participating companies?
MM: Have a strong sense of your budget—it’s important to project forward 12, 18 or 24 months. Your numbers are going to be wrong—and you have to constantly evolve and update—but you must be prepared for a time when you won’t have much cash. You can’t manage your business like a personal checking account.
DG: What are you most excited about when it comes to the program’s future?
MM: The accelerator was really just a focused funnel into our broader portfolio and ecosystem. For example, we recently invested another $600,000 into High Road, a medical-focused delivery and fulfillment platform. (Editor’s note: Merida had invested $100,000 into High Road through the i2 Accelerator.)
We didn’t have the accelerator program in 2020 because of COVID, but it’s fair to say we’ll do it again this year, probably toward the back end of summer. We also want to curate a similar accelerator focused on supporting entrepreneurs in the developing Mexican cannabis market. Although we’re predominantly focused on investing in the U.S., we think that the Mexican market is ripe with great entrepreneurs who could benefit from our experience.