The cannabis industry is an exciting business filled with interesting people, Curaleaf executive Patrik Jonsson said, but it's also extremely difficult and unforgiving.
"I wake up every morning knowing I'm getting slapped in the face," Jonsson said, quoting a business partner. "I don't know by who, and I don't know when, but I know I'm getting slapped in the face."
Speaking at an event hosted by the Hartford Business Journal in Farmington on Wednesday, Jonsson, Curaleaf's regional president for the Northeast region, talked to an approximately 150-person audience, including people interested in entering the state’s recreational marijuana market.
He was joined by Shipman & Goodwin lead cannabis group attorney Sarah Westby, who said those starting a marijuana business today can find some banking opportunities and private investors, but they should consider segments of the industry with less overhead and complications than production.
That banking is an obstacle for cannabis industry businesses is well-known, as the substance remains federally illegal, and banks regulated by the Federal Deposit Insurance Corp. (FDIC) are forbidden from working with these companies. Jonsson said this issue was especially acute a few years ago when he was starting a grow operation in Massachusetts.
"When we first started, we got an account with Bank of America, it took us probably about two months, and that account got shut down, and they held our money for quite a while," Jonsson said. "Two years after that my personal bank account with Citizens Bank … got shut down because I got paid by Curaleaf."
Westby, who represents a growing list of clients in the cannabis industry, cited the risk financial institutions take in banking marijuana companies.
On the other hand, credit unions are overseen by the National Credit Union Administration (NCUA), which released guidelines in 2019 allowing that industry to provide services and even lend to legally-operating cannabis companies. But credit unions that serve the industry have stringent reporting requirements, and even if a credit union makes an honest mistake in a filing, or fails to catch some type of illegal activity, it could lose its federal insurance, effectively forcing it to close.
Providing services to cannabis companies used to be a third rail for financial institutions, Westby said, but that's starting to change.
"My firm does work with one bank in Connecticut that is willing to take on cannabis clients," said Westby, who didn't name the bank. "There are slowly but surely some players in the finance industry who see the opportunity and are willing to take on the risk."
Finding real estate can also be a difficult process, Jonsson said, noting that some landlords with bank mortgages are restricted from leasing to companies that make or sell a federally illegal drug. That's compounded by some municipalities banning or setting a moratorium on the industry.
That's why Jonsson said it might make sense for prospective businesses in Connecticut to wait for some aspects of the market to mature before laying down roots. He cited his own experience in Massachusetts, where Curaleaf opened dispensaries wherever they could early on, and ended up with suboptimal locations.
"We went with the early cities that allowed us to get stores up pretty quickly, in hindsight, those stores are pretty terrible," Jonsson said. "There's something to be said for waiting."
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Curaleaf executive talks cannabis industry challenges - Hartford Business
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