Legal Pot Is Notoriously White. Oakland Is Changing That

Photo Credit: Mark Peterson

On a Friday in January 2017, the night of President Donald Trump’s inauguration, Ebele Ifedigbo and Lanese Martin welcomed several dozen people to a cozy office in a marijuana-friendly part of the city cheekily nicknamed “Smoakland.” As folks lounging on comfy couches lit joints and puffed from vape pens, the two business school grads explained they were launching a project of their own, a nonprofit that would do something no one in the nation had ever done.

As they put it, they were going to train black and brown people to start their own legal cannabis companies.

In the audience, Linda Grant listened intently. Grant, who once sold enough weed to help support her children, had gotten out of the illegal drug trade to avoid a lengthy prison sentence. Since then, Grant, a 49-year-old mother of six, had watched her hometown become one of the unofficial capitals of the state’s ever-expanding cannabis business—an industry projected to do $6.5 billion in sales statewide by 2020. Oakland, with its decidedly left-leaning political vibe, was rife with cannabis-related businesses, legal and otherwise. But Grant’s dream of becoming the first black female owner of a cannabis dispensary on the east side of the city, where she lived, still felt out of reach. What she was hearing from these two millennial activists was a way forward that she didn’t know existed.

Ifedigbo and Martin founded the Hood Incubator because they saw the recreational cannabis trade not just as a business opportunity but “as a way to correct the injustices of the war on drugs launched in the early 1970s. Though minorities like Grant had played an outsized role in building the marijuana market, they also faced a disproportionate response from law enforcement, as Martin explained to the crowd assembled that night in early 2017. As recently as 2015, Oakland officers arrested black residents nearly 20 times more often than white residents for cannabis-related crimes. Ifedigbo noted that black people had owned or founded less than 5 percent of cannabis businesses nationwide and, across all industries, black-founded startups had received just 1 percent of venture capital funding. For many years, while officials awarded more and more licenses for medical marijuana-related businesses, only one black Oaklander held a dispensary permit.

“The cannabis industry has an opportunity to make equity a core component of the industry’s DNA,” Ifedigbo said later. “Other industries have generally seen social impact [initiatives] as an afterthought.”

Oakland officials were already looking at how to use new regulations to help African-American and Latino residents get jobs more significant than what one longtime City Council member called the “security guard in the parking lot.” But Ifedigbo, 29, and Martin, 32, knew that giving these aspiring entrepreneurs permits without training—or training without permits—would likely spell failure. In January 2017, the Hood Incubator launched the nation’s first cannabis business accelerator for people of color. They began training a dozen or so aspiring entrepreneurs whose business ideas included everything from edibles, like cannabis-infused salsa, to delivery companies hoping to be the Blue Apron or Uber Eats of the weed business.

Over the course of the four-month program, Ifedigbo shared lessons learned in Ivy League classrooms with people who understood how to run a cash business but didn’t speak the formal language of the business world. One year later, the nonprofit’s first graduates are beginning to launch their businesses and it is now in the process of selecting its new class of trainees. It has since attracted multiple five-figure donations—from sources including Harborside, a local cannabis dispensary, and Echoing Green, a global nonprofit that supports social entrepreneurs—and is in the midst of a campaign to raise $500,000.

In this blue-collar city of 420,000 people, where officials acknowledge that the benefits of a recent development and jobs boom are not evenly shared across Oakland’s demographic groups, even the efforts of a relatively small outfit like Hood Incubator can help blunt the threat of gentrification that has stirred fears of displacement. Oakland Mayor Libby Schaaf foresees that cannabis equity measures will encourage new businesses, jobs and development after years of disinvestment. “I’d measure success in the families who have lived under intergenerational poverty come out of that poverty through business ownership,” Schaaf says.

Ifedigbo and Martin, while fine-tuning the Hood Incubator’s strategy in Oakland, have their eyes set on spreading the model to other cities statewide—and eventually to cities like Chicago, Detroit and Memphis. Ifedigbo and Martin believe they can rewrite the rules of corporate responsibility to make diversity more than just a goodwill gesture or publicity campaign.

“The Hood Incubator isn’t just interested in weed—or getting a few businesses off the ground—but in setting national standards,” said William Armaline, a San Jose State University sociology professor who studies drug policy reforms. “They’re interested in changing the power dynamics between communities and those doing business in and profiting from those communities.

Ifedigbo, a “middle-class kid who grew up in the ‘hood’,” never had to look far to see the signs of inequality in east Buffalo, New York. Ifedigbo’s father, a Nigerian-born architect, called attention to the contrast between their neighborhood’s check-cashing stores and bodegas, and the major banks and grocers that served the whiter side of town. By the age of 12, Ifedigbo (Ih-fay-DIG-boh) was encouraged to volunteer with organizations like Meals on Wheels. As a high school senior, Ifedigbo organized a student fundraiser that raised nearly $1,800 for Hurricane Katrina victims.

“Help didn’t seem to be getting there quick enough,” Ifedigbo told the Buffalo News in 2005, “so I decided to do something about it.”

Ifedigbo often thought about how racial justice could be applied to lessons economics major learned at Columbia University. Intrigued by classmates who were eager to work on Wall Street, Ifedigbo interned at Goldman Sachs and Ameriprise Financial. Private sector internships were followed by an NAACP fellowship focused on crafting state-level policies to close the wealth gap between whites and blacks. Ifedigbo, who identifies using the pronouns they or them, also worked as a peer educator with Lesbian, Gay, Bisexual and Transgender Community Center’s Gender Identity Project. After choosing Yale for business school, Ifedigbo used the coursework to study whether historically disenfranchised communities could actually benefit from capitalism.

“There was a lot of conversation about social impact,” Ifedigbo says. “But even all that still felt like the same old system with a few tweaks that lead to a few superficial outcomes. [I wanted to know]: Is there a way to shift that on its head?”

As Ifedigbo’s MBA program was wrapping up, hundreds of thousands of Californians had signed a petition to place Proposition 64 on the ballot. Ifedigbo began to read just about everything published on the burgeoning market. Ifedigbo conducted an analysis of Oakland’s cannabis industry on the cusp of it going mainstream. By that fall, with Proposition 64 destined to pass, Ifedigbo had become friends with Martin, an organizer for the progressive advocacy group Oakland Rising, after they were introduced to each other at a potluck. They brainstormed how to prevent the new economy from becoming dominated by older white men.

Martin, a Brooklyn native who had been adopted and raised by a wealthy black couple, understood that opportunity bred achievement. So, she sought insights from community members about what resources they needed to break into the legal weed business. From there, she urged Oakland council members—who were crafting cannabis business regulations—to build a program that provided the resources those residents needed most.

“The historical inequities weren’t going to disappear on their own,” council member Rebecca Kaplan said. “The permits had to deal with that.”

After a year of policy debates, Oakland officials last year created the nation’s first program designed to set aside at least half of its new cannabis permits for residents who had been targets of the war on drugs. To qualify as an “equity applicant,” residents had to make less than 80 percent of the city’s area median income—nearly $53,000 for a one-person household in 2016—and either had to have been convicted of a cannabis crime or lived for 10 years in a neighborhood where officers disproportionately arrested people for cannabis-related offenses.

Ifedigbo and Martin realized that permits alone wouldn’t help former cannabis dealers flourish as legal entrepreneurs. Enter the Hood Incubator’s business accelerator. It would help minority Oakland residents break into the legal industry with a twice-a-week boot camp run over four months. The fellows would be exposed to lessons out of an MBA textbook: the basics of everything from reading financial statements to writing a pitch deck, a snappy presentation used by entrepreneurs as they entice potential investors for funding. And they would hear directly from people in the cannabis industry, from owners to attorneys to advocates.

“It didn’t make sense to work just on policy but not have anyone pipelined in to be ready [to benefit from that policy],” Martin said. “It made sense to tackle all of it.”

In many ways, Linda Grant was exactly the kind of person the Hood Incubator wanted to get into the legal cannabis trade. Aside from brief gigs as a bank security guard and McDonald’s cashier, the only way Grant had ever made a living was selling weed, starting back in middle school, when she’d sell dollar joints to her classmates. On her best weeks as an adult she made roughly $2,000—which made life a bit easier for a family that relied on welfare, food stamps and housing assistance. But the risks—three arrests, fines she couldn’t always afford and the threat of at least a decade behind bars if she kept dealing—forced her out of the business by the mid-2000s.

“I didn’t have ambitions of being a nurse; I was never going to do a 9-to-5; I was never going to sit behind a desk and be bossed around,” Grant told me recently as she steered her black Chrysler 200 around East Oakland. “I wanted to sell weed.”

Even though she had attended that open house in January 2017, it took a while longer for her to act on her ambition. Last fall, having watched the first cohort of the Hood Incubator’s business accelerator graduate, she decided she needed her own permit. She already had a company name: Herbin Collective. Eventually, she wanted to start a dispensary, but dispensaries required a ton of capital. So, she started off small with a plan to build a delivery business.

Grant had lived for more than a decade in an over-policed part of East Oakland. But proving residency was easier said than done. Grant had never had property records because she had never owned land. She couldn’t obtain housing or utility records going back more than a decade because those agencies hadn’t kept records that long. Moreover, when it came to proving her income, she had no pay stubs or W2 forms to show city officials.

“I didn’t have that stuff,” Grant says. “Real equity applicants don’t have that kind of stuff.”

Since May 2017, Oakland officials have received nearly 800 cannabis permit applications. More than half are equity applicants like Grant. And while the vast majority have been approved, it has not always been easy to navigate the obstacle course of municipal bureaucracy. This is where the Hood Incubator’s assistance has extended well beyond providing high-end advice on launching a startup. For instance, Grant doesn’t own a printer, but needed to drop off a paper copy of her permit application at City Hall. So Ifedigbo let her use the one at the Hood Incubator’s tiny downtown office. Martin has also arranged for pro bono work from consultants and lawyers, so the program’s fellows can spend their money on other startup costs.

But the most valuable service the Hood Incubator has provided to the equity applicants is to help them overcome a lack of formal business training. Before becoming a fellow, Dejah Fortune had nearly two decades of experience making salts, lotions and oils— including a cannabis-infused product to treat his grandmother’s arthritis—but he had little idea how to pique investors’ interest. He got help tailoring his pitch to identify a specific market (health-conscious cannabis patients), products (organic high-quality cannabis extracts) and funding needs ($25,000). Esteban Orozco, who’d worked as a nutrition coach, had never read a financial statement, much less written one. The program taught him how to “pivot” from his original business idea—a line of cannabis-infused vegan edibles—to one that teaches cannabis newcomers how to integrate pot into a healthy diet.

“It gave me a lot of confidence,” said Aanya Gamble Hill, a former University of California-San Francisco employee whose startup, A+ Collective, delivers cannabis products throughout Oakland and caters specifically to seniors. “I left thinking, ‘I could probably do this.’”

The Hood Incubator hasn’t just rolled out a niche program serving a handful of entrepreneurs. It has built a network of more than 2,000 members—some paying $1,000 a year—for newsletters, clinics and webinars. Half of those come from California; the other half from cities as far away as Atlanta (which sits in a state that prohibits the growing or sale of medical marijuana) and New York. As Ifedigbo notes: “You’re going to get much farther along in this industry if you’re well-connected to the people who help write the laws, issue the permits, or other entrepreneurs within the space who are on the same trajectory as you.” They’ve also created apprenticeships through established companies so that black and Latino residents can be trained on the technical side of the industry.

But James Anthony, a local cannabis attorney, believes the biggest hurdle is the lack of capital available to black and Latino entrepreneurs, even as investors poured nearly $2 billion into the cannabis industry during the first two months of 2018, a roughly fourfold increase compared with the same period the year before. “If there’s no wealth in your community, and if you don’t solve that problem, you’re going to have a [higher] failure rate,” he says. Likewise, well-funded companies seeking permits have started making cash offers—including some that are five or six figures—to people who are eligible to get equity permits in exchange for them becoming token stakeholders who stay out of the daily operations.

“The intentions of a lot of people getting licensed in the Bay Area is more about money than cultural healing,” Fortune says. “People with access to resources, who are jumping ship from their current careers, have never smoked. There’s a disconnect.”

To offset some disparities regarding access to capital, Oakland has allowed larger companies who don’t immediately win “general” permits to get one by providing an equity applicant with rent-free space of at least 1,000 square feet for three years. Those companies could lose the permit, however, if the businesses they’re incubating fail. Beyond that, Greg Minor, assistant to Oakland’s city administrator, says the city will soon make available $3.4 million in interest-free loans to equity applicants.

After Linda Grant obtained her permits in January, she created an account on a city website that resembles a dating app to match investors with entrepreneurs. One potential backer offered $50,000 if she would agree to be a hands-off partner. She rejected it. Ultimately, two men behind an edible company called GummiCares offered her 1,500 square feet of space in their squat warehouse 15 minutes from her duplex. Grant clicked with one of GummiCares’ co-founders, Curtis Ohlson, a bass player who once toured with Ray Charles. Ohlson wanted to help Grant fulfill her dream of opening a dispensary. But first, they’d work on launching her delivery business, which requires less seed money than a dispensary.

“Before, cannabis suppressed her life,” Ohlson says. “Hopefully, now, cannabis will uplift her family’s life.”

Next month, Ifedigbo and Martin will announce the next class of Hood Incubator fellows, planting the seeds for dozen or so more cannabis startups to flourish. Of the Hood Incubator’s 10 graduates in 2017, six are still pursuing their business concepts. But the rest are employed in the industry. Ifedigbo says the Hood Incubator graduation rate, around two-thirds of its accepted fellows, is comfortably on par with other kinds of business accelerators.

Now the duo is taking on a broader mission to help other cities follow Oakland’s lead. Ifedigbo says elected officials and academics, hearing about the nonprofit’s work by word of mouth, have reached out for advice. In recent months, officials in Sacramento and San Francisco have looked into creating similar programs. The Hood Incubator’s work was even cited in a case study for the city of Los Angeles as officials there look to build their own equity program.

Keith Stephenson, for many years the only black dispensary owner in Oakland, fears the rising costs of breaking into the cannabis industry business might limit the impact of equity programs. He ultimately hopes these kinds of permitting measures, which he supports, don’t just lead to “photo-op moments.” Anthony, the cannabis attorney, thinks permitting reforms may have the unintended consequence of driving some minority-owned cannabis entrepreneurs out of operation. He believes Oakland’s equity program is “well-intentioned,” but, when asked whether the program would lead to an increase of black and Latino cannabis businesses, he replied: “It’s probably a wash.”

In response, Martin says the equity program wasn’t designed to help those most likely to succeed: “It’s there to help those most impacted by the war on drugs. If we wanted to help the most likely to make it, we’d be targeting a different group [with our services.]”

No matter how far the idea spreads, Ifedigbo and Martin do not expect equity permitting will correct all the wrongs caused by the war of drugs. But it could begin to erase arrest rate disparities and spur legal changes, such as the recent decision by the Alameda County district attorney to start dismissing thousands of pot convictions dating from the 1970s. Ifedigbo hopes the data will someday show that “everyone has an equal opportunity to not only enter the industry but thrive and be sustainable in the industry.”

Grant is waiting for those seeds of change to bloom—slowly. As GummiCares renovates what will soon be Herbin Collective’s headquarters, she is now training her fleet of four delivery drivers and negotiating with a supplier from Santa Cruz. Her drivers, who include friends and a nephew, aren’t the only ones waiting to see if cannabis truly helps their community.

Her 23-year-old daughter, Makala, was inspired to apply to the Hood Incubator’s accelerator program. The young college dropout is now perfecting her edible recipes, including a weed-infused banana pudding topped with Chessman shortbread cookies, for her business that she plans to call Majic, a nod to the #BlackGirlMagic movement that celebrates the beauty and resilience of black women. Like her mother, she sees her business as more than just an income stream.

“I want to make hella money,” Makala says. “But I want to focus on healing people, too.”