CT Innovations, the state’s quasi-public venture capital arm, has invested in 1906, a Colorado-based retail cannabis company that specializes in fast-acting edibles and is expanding into Connecticut.
But the investment isn’t sitting well for marijuana activists and would-be entrepreneurs in Connecticut, who see it as the state putting money behind an established multi-state company as they struggle to navigate the state’s social equity law and compete for a limited number of licenses.
CT Innovations invested $1.25 million into 1906 in February of this year, according to Lauren Carmody, vice president of marketing and communications for CT Innovations.
The investment was part of the company’s third round of capital funding, which has secured a total of $33.4 million for 1906 since 2017.
Connecticut’s investment, however, spurred some heated back and forth between 1906 CEO Peter Barsoom and Jason Ortiz, former president of the Minority Cannabis Business Association, during an online forum hosted by Arcview. The exchange, fiery at times, was posted on Facebook.
During the conversation, Barsoom said he has not yet put in his application for a Connecticut cannabis license but said he does intend to apply for multiple licenses.
Although his company would only be eligible for general licenses, which are much more expensive. Connecticut law does allow 1906 to partner with social equity applicants, potentially taking up some of those social equity spots.
“There’s no way that any dollar that came from the Connecticut legalization scheme should be helping folks from out of state take up licenses,” Ortiz said. “If I’m applying for that same lottery license, you’re going to be able to put in a thousand lottery tickets and I can put in ten, using CT Innovations money to squeeze me out. That is ridiculous.”
However, Carmody says that CT Innovations investment is a signal to the market that they are willing to invest in cannabis and that 1906 has established a presence in Connecticut, filing with the Secretary of State’s office.
“It’s not a one and done,” Carmody said. “We have the opportunity to explore the cannabis market and invest more. To us, it’s the first of what could be many.”
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Competition for cannabis licenses is fierce with only 56 available licenses for a variety of cannabis-based services. The Department of Consumer Protection has received over 3,000 social equity license applications and over 1,600 general license applications.
Applicants are then subject to a lottery to determine who gets a provisional license to start producing, selling or delivering recreational marijuana in the state.
Although much of the language in the authorizing bill focused on equity for groups disproportionately harmed by prior marijuana laws, some feel the law still benefits larger and established cannabis businesses and medical marijuana growers.
With the odds so low, the idea that Connecticut’s venture capital arm invested in an out of state company intent on procuring licenses created tension.
“It’s become abundantly clear that Governor Lamont never intended for anyone other than his super-wealthy friends from owning the entire cannabis market,” Ortiz said when reached for comment. “He used the suffering of poor communities to create yet another avenue for the wealthy to own everything in Connecticut, even programs specifically meant for working class families.”
Carmody says CT Innovations sees the issue from an investment standpoint, looking at the management team, the potential to grow jobs and the potential to earn a return on the investment – 1906, checked all those boxes.
“We’re evaluating it from an investment perspective,” Carmody said. “There’s more potential here. This is not the end for us, this is the beginning, and we want to explore it more.”
But for Connecticut’s social equity applicants and cannabis activists, the law, as it stands now, is creating more headaches and disparities for those trying to break into this emerging market.
“The whole thing has been sickening to watch unfold,” Ortiz said.
