This Fintech Startup Is Powering The Cannabis Industry

Forbes

Green Check verifies $1 billion in legal marijuana sales every month through its banking compliance software. Inside the company that’s cashing in on an industry where cash is king.  Read the full story on Forbes: https://www.forbes.com/sites/willyakowicz/2024/10/13/green-check-fintech-startup-powering-cannabis-industry/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Today on Forbes, meet the fintech startup powering the cannabis industry.

00:07In February 2016, Kevin Hart, the former CEO of Apple Computer Repair Outfit TechServe,

00:13found himself standing inside an Oakland, California vault filled with many millions

00:18of dollars in cash.

00:20The vault belonged to one of the country's first medical marijuana dispensaries, Harborside,

00:25and the cash, derived from state-legal medical marijuana sales, was nonetheless considered

00:30illegal drug money under federal law.

00:33Hart, who is now the 65-year-old co-founder and CEO of Florida-based cannabis banking

00:38compliance company Greencheck, was there to help Harborside build a payment processing

00:44system.

00:45Hart, who is not related to the famous comedian, says, quote,

00:50It's a big vault.

00:51It made the scene in Breaking Bad look like I knocked over my granddaughter's piggy bank.

00:54That's how much money was there.

00:57Hart turned to his host at the bank, the legendary California cannabis activist and entrepreneur

01:02Dress Wedding, who founded Harborside in 2006 with Steve D'Angelo, and asked why the hell

01:09they kept so much money around.

01:11Wedding explained that the dispensary could not get a bank account because marijuana was

01:15still illegal at the federal level.

01:18That is when Hart realized that Harborside and other state-legal cannabis companies had

01:23a huge problem.

01:24They had nearly no access to America's mainstream financial system.

01:29Even though marijuana is legal in 38 states, 25 of which allow for recreational sales to

01:34adults 21 and older, the drug is still illegal under federal law.

01:40This means that most banks and payment processors have policies forbidding them to work with

01:44pot providers.

01:46And most payment processors, including the big ones like Visa and MasterCard, similarly

01:50do not allow cannabis transactions on their networks, which has forced the industry to

01:55conduct most of its sales, about 75%, in cash.

02:00For an industry that is expected to generate nearly $35 billion in sales this year, according

02:05to cannabis data firm BDSA, that means billions of dollars are transacted the old-fashioned

02:11way with paper currency.

02:14Hart says, quote,

02:15That was a thunderbolt moment for me.

02:17That was it.

02:18I was on a mission to solve this problem.

02:20I realized that it was a data problem, not a money problem.

02:25On the flight home to Connecticut, Hart took out his notebook and started mapping out how

02:29state-licensed cannabis companies and banks, two highly regulated industries, could work

02:34together.

02:35And for the next three years, he worked with three of his co-founders, Paul Dunford, John

02:40Gadea, and Michael Kennedy, to develop a compliance software product that could convince

02:45banks to work with state-licensed but federally illegal cannabis companies by proving every

02:51dollar and every product was made and sold according to state law.

02:56The result is GreenCheck software, which plugs into a dispensary's payment operating system

03:01and aggregates inventory, purchase orders, and sales to ensure cannabis companies are

03:06following hundreds of rules and regulations.

03:10In doing so, it collects a lot of financial data.

03:13The software then feeds that information to banks to make sure financial institutions

03:18do not break anti-money laundering rules or run afoul of the Bank Secrecy Act by doing

03:23business with a federally illegal business.

03:27Every month, GreenCheck's compliance software verifies the legitimacy of roughly $1 billion

03:32in cannabis sales across the country, meaning it processes about 40% of the US's $30 billion

03:38in 2023 annual sales legal marijuana market.

03:42It has sold its software to more than 150 financial institutions to help more than 11,000

03:48cannabis companies, from retailers to growers and manufacturers, get and maintain a bank

03:54account.

03:55The banks, which are looking to get in on the ground floor of a growing industry, pay

03:59about $5,000 a month.

04:01Cannabis companies get the software for free.

04:05It's not a lot of money for GreenCheck.

04:07The company booked $8.3 million in revenues last year and is looking at around $12 million

04:12this year.

04:13Since 2019, they raised $19 million at a $90 million valuation from the likes of Mendon

04:20Venture Partners, Flatiron Venture Partners, and Fenway Summer Ventures.

04:26For full coverage, check out Will Yakowitz's piece on Forbes.com.

04:31This is Kieran Meadows from Forbes.

04:34Thanks for tuning in.

04:37♪♪

Category

Transcript

Recommended