Cannabis in Connecticut

Face the Facts: Quasi-Public Agency Invests in CT Cannabis Industry

The vice president of marketing and communications for Connecticut Innovations explains why they're investing $1.25 million in the state's cannabis industry.

cannabis plant
NBC Connecticut

It could pump hundreds of millions of dollars into our economy when it's a full scale operation, but recreational marijuana is months, if not years, away from actually reaching that level.

Keeping an eye on who is investing in cannabis is part of the reason why state regulators want a slow, methodical rollout.

This week, we learned a Connecticut quasi public is one of the investors getting into the industry. But how - since the licenses haven't been granted yet?

Lauren Carmody, the vice president of marketing and communications of Connecticut Innovations, spoke with NBC Connecticut's Mike Hydeck about it.

Connecticut Innovations is a quasi public that invests billions every year and they just recently made an investment in this marijuana industry.

Mike Hydeck: "So recently, you announced that there was a $1.2 million investment in a company called 1906. That's a recreational marijuana company from Colorado. Why was that company chosen?"

Lauren Carmody: "Well, actually, as part of the investment, they did decide to move their headquarters to Connecticut. So they are now home in Connecticut. But what we liked about 1906 is, we usually say that as the state's venture capital arm, we're operating with a double bottom line. And what we talked about there is one, we're investing for a return and two, we're investing for create jobs in Connecticut. What we liked about 1906 is the potential to have both. So when we invest, we look for a strong management team, we look for traction in the marketplace, the ability to scale and also a strong syndicate of investors. So 1906 has doubled their revenue year over year. And we've joined this round with other really strong investors who have experienced in cannabis."

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Mike Hydeck: "So one thing that I find curious is Colorado is a huge state. Last year, I think they turned over something like $430 million in tax revenue. Why on earth would you move from a big state that already has the system in place to a small state that's still building one?"

Lauren Carmody: "If you talk to Peter, the CEO of 1906, he thinks the potential to grow in the northeast is what's key. He thinks, yes, it's in Colorado, it's been there. But he thinks the potential to grow is actually in Connecticut, and on the Northeast corridor."

Mike Hydeck: "So because quasi publics in Connecticut are notoriously opaque, very little oversight - can you explain what percentage of taxpayer dollars goes into this investment. I know, on the scale of all the investments your quasi public makes, this is a very small investment. But how are taxpayer dollars involved?"

Lauren Carmody: "So what we do at CI is, again, when we're investing, we get a return. We have not pulled on the state's money for a number of years. So what we do is when we get a return, which is through an IPO, or an acquisition, we then reinvest those dollars back into early stage startup. So I mean, $1.25 million in terms of an investment, but we haven't pulled down on state funding for a very long time."

Mike Hydeck: "So you're just taking the money that you earned and reinvesting it, it's not coming out of taxpayer dollars, right?"

Lauren Carmody: "Not for this one, and not for a number of years."

Mike Hydeck: "How are you certain that 1906 is going to get a state license? Because they're still issuing them. I mean, there's a bunch of state licenses, whether it's small cultivators or delivery, or whatever. What happens if they move here and they are not awarded a license? Are you sure they're gonna get a license? And how could you be?"

Lauren Carmody: "So we're certainly not sure. I am not in the game of guessing or odds or anything like that. I haven't even won a scratch off ticket in my life, so we wouldn't play those odds. And this investment was not contingent on them receiving a license. So what happens is, you know, if they do get a license, then they can expand and grow a little bit faster, the pace will be faster. But regardless of their license, they've been able to grow in other states by partnering, and they've seen such great success doing that already. So we expect that that will continue."

Mike Hydeck: "So their product, as it shows on their website, if deliverables are in states where it's already legal, and you're expecting them to continue that here - can they do that legally if they don't get a license, I wonder."

Lauren Carmody: "So they would take a different pathway, they would find a partner, and that's how they would continue to scale. And they've done that in other states."

Mike Hydeck: "So speaking of partners, social equity is a very large component of the Connecticut state law that surrounds cannabis. When it comes to sales, especially recreational sales, how does that kind of fold into the plan with 1906 when they're not from here? They're not going to know the neighborhoods in Hartford that were exponentially hurt by the War on Drugs. How does that all square with the state law?"

Lauren Carmody: "I mean, what happens here is they entered the general lottery so not the social equity lottery, they entered the general lottery. So I mean, we'll have to see the results of that. And the nice thing about this is I'm not as familiar on the lottery side, just because it wasn't part of our investment. We will reap the rewards if they are awarded a license. But we expect and we invest, I mean, we invest every day in companies and we take calculated risks in companies. This is just one of those things where we took this calculated risk and we hope to see the reward."

Mike Hydeck: "When do you believe that they'll be setting up shop here? Are they close to having a physical address here in Connecticut, or is that still underway?"

Lauren Carmody: "So they have established a presence in Stamford. We will see the CEO move here, as well. And we expect an immediate ramp up time upon you know, like, just as soon as they kind of get their grounds and set up shop in Stamford, then we'll see a little bit more. And if they get the license, it may expand to other parts of the state. For right now, they're in Stamford."

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