Pubdate: Sun, 12 Jan 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Steve Raabe

THE FAMILY (MARIJUANA) BUSINESS

Many Colorado Shops Are Run by Regular Folks Chasing a Dream

Colorado's burgeoning marijuana industry is big business, yet so far 
it is maintaining a quaint mom-and-pop character.

Many of the state's medical marijuana dispensaries and recreational 
stores are owned by family members who pooled their savings in order to open.

Others operate with a handful of partners who leaned on friends and 
business acquaintances to raise startup capital.

For an industry that some perceive as sordid and illicit, insiders 
say it's the opposite: run largely by regular folks embracing a 
ground-floor opportunity or advocates passionate about marijuana's 
medicinal benefits.

With reports of booming sales since recreational pot became legal 
Jan. 1, industry analysts wonder how long it will be before the 
sector becomes the target of big corporations and chain ownership.

"But now, it's still predominantly family," said Betty Aldworth, 
Denver-based deputy director of the National Cannabis Industry Association.

Business partners Ean Seeb and Kayvan Khalatbari started a bare-bones 
version of the Denver Relief dispensary with $4,000 and a half pound 
of marijuana. They then borrowed heavily from relatives and friends - 
mostly in $5,000 and $10,000 increments - to finance the $600,000 
build-out of their retail and plant-growing operations.

Like other entrepreneurs, they found that bank loans were unavailable 
because of marijuana's illegal status under federal law. In addition, 
Colorado regulations forbid equity investment in cannabis enterprises 
from people who have not been state residents for at least two years.

Those financing hurdles make family investment not only a 
clan-building concept but a necessity in many cases.

Denver Relief's lenders included Seeb's parents and Khalatbari's 
mother and uncle.

Borrowing from his parents was "definitely uncomfortable," Seeb said 
- - but not because of any social squeamishness about marijuana and its 
negative perception in some circles.

"I'm sure they were nervous as hell," Seeb said of his parents. "They 
were worried about whether they would be repaid, and that their son 
was in a business that's in conflict with federal law."

Sisters Robin and Cheri Hackett pooled their entire savings, 
liquidated retirement accounts and offered 12 percent interest rates 
on loans from family and friends to finance their Northglenn-based 
BotanaCare Medical Cannabis Center.

The Hacketts have used loans instead of outside equity investments to 
maintain their exclusive ownership stake, with one exception. They 
offered 10 percent of the business to a friend who had cashed in his 
individual retirement account and refinanced his home mortgage to 
help the dispensary get started.

"Some (friends and family) have given more than they could afford, to 
be honest, but they believed in us," Robin Hackett said.

Brooke Gehring, a former commercial banker, parlayed her knowledge 
and connections from running a marijuana consulting business to open 
a company that operates four Denver-area marijuana stores and two 
cultivation facilities that operate under the names Patients Choice 
and Bud Med.

She and two partners capitalized the business with a combination of 
personal savings, family loans and a $500,000 loan from an unnamed investor.

As with Seeb's family loans, Gehring said her family's backing was 
accompanied by concerns over federal illegality and safety issues 
stemming from the risks of operating businesses that generate large 
amounts of cash.

"There was some uncertainty," she said of the family-backed loans. 
"But me consulting for a year really made them feel comfortable that 
I was approaching this knowledgeably and professionally."

Gehring said she and her partners in Colorado 7 Investment LLC are 
focused for now solely on operating their existing business.

But the investment and expansion climates could change dramatically, 
she said, if banking laws are reformed to allow marijuana businesses 
access to accounts and loans, and if cannabis eventually is legalized 
under federal law.

Gehring said investment and ownership by big corporations is "pretty 
much a certainty" under those scenarios.

"We're approached by millionaires every day who want a piece of the 
action," said Robin Hackett of BotanaCare.

But she and her sister are unlikely to consider selling out.

"For us, the passion is providing medicine to people who need it," 
she said. "Any money we make from recreational sales is going to go 
right back into the medical side of the business."
- ---
MAP posted-by: Jay Bergstrom