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/
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LifestyleTranscript
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♪♪