Investor Sees Opportunity in Cannabis Growth Industry
YOUNGSTOWN, Ohio – A Boardman native who made a successful living in the toy industry and now as a venture capitalist is returning to the Mahoning Valley to pursue a business venture that’s truly homegrown.
“This has all happened in the last eight weeks,” says Brian D. Kessler, whose venture capital firm has helped finance what may become one of the first legal marijuana farms in Ohio.
Kessler, who was born and reared in Boardman and spends most of his time these days in Los Angeles, sold his company, Youngstown-based Maui Toys Inc., several years ago and developed SBL Venture Capital LLC. Among the industries he’s targeted for investment are legal marijuana interests in Connecticut, Nevada, and now, possibly Ohio.
In an interview with The Business Journal, Kessler says he’s invested about $1 million thus far in these cannabis ventures, none of which have paid off — yet. However, the proposal to legalize pot in Ohio for both medicinal and recreational use contains regulations and a business model that he thinks will work.
It all hinges on voters approving Issue 3 in November, a constitutional amendment that would designate 10 sites earmarked for the commercial cultivation of marijuana. ResponsibleOhio, an organization that backed the initiative, raised $20 million to place the issue on the ballot by selling shares in the 10 growing sites that would be created.
The issue is opposed by business groups including the Ohio Bankers League and the Youngstown Warren Regional Chamber. In announcing its opposition in August, the chamber cited for concerns: difficulty in recruiting drug-free employees; implications for workplace safety; impact on workforce productivity, quality and costs and the resulting effect on employer liability.
Yesterday Kessler met with the chamber’s government affairs council to explain his involvement in the growth industry. The meeting was closed to the press.
Proponents say passage of the constitutional amendment could eventually create 10,000 jobs and generate $554 million in taxes annually for state and local governments. Opponents dismiss both numbers as greatly exaggerated.
Kessler says polls he’s seen show Issue 3 has “more than 50%” support. But one person who will not be voting for the constitutional amendment is Ohio Secretary of State Jon Husted who has launched an investigation related to allegations that a group supporting Issue 3 committed voter fraud in securing petition signatures.
Yesterday Husted asked Franklin County Common Pleas Court to enforce subpoenas of key members of the Strategy Network, which circulated the documents.
“We know from our investigation that ResponsibleOhio that the Strategy Network’s petitions contained signatures of dead people,” Husted said in a statement. “We know from our investigation that practices used in putting this marijuana monopoly on the ballot were at best, questionable, and at worst, fraudulent.”
In addition to Kessler, former NBA great Oscar Robertson and fashion designer Nanette Lepore, a Youngstown native, have also invested in growing sites across the state.
“The reason I became attracted to Ohio is that there’s 10 restricted grows,” he says. That means the industry will be brought online slowly, he explains, allowing regulators and officials to establish best practices on how to manage the industry and ensure its safety.
Kessler and his investor group created Riviera Creek LLC to operate the proposed 27-acre marijuana farm in Alliance selected as one of the 10 growing sites. The opportunity to invest in this location came when a group of Chicago investors backed out, leaving the options open.
“We’re going to compete on price and quality, and go after as much market share as we can,” Kessler says. “We do plan to have partnerships, which is the right way to go after the market.”
Much of the growing would be indoors, and the entire Alliance operation could cost upwards of $50 million, Kessler estimates. The build-up would include a new building that could one day have the capacity to grow 50,000 pounds of marijuana annually, based on projected demand across the state.
Realistically, though, Kessler says that even the most productive farms in other states produce at best just 5,000 pounds per year. “That’s a big facility doing well,” he says. For the Alliance facility to satisfy production of 50,000 pound, it would require multiple growers at the site.
The Alliance facility, Kessler estimates, could lead to between 50 and 100 jobs, plus additional positions needed for downstream processing, testing, sales and distribution.
Should Issue 3 pass, the industry would expand at a measured pace, Kessler says. This allows time for manufacturers to set up testing, processing, distribution and retail partnerships that would enable the industry to operate safely and efficiently.
Moreover, the state would appoint a governing body that would provide oversight to the industry in order to maintain controls and implement regulations.
“Colorado has 1,500 manufacturers,” Kessler says. “Last year, they had to burn 60,000 pounds of the product because it didn’t pass testing.”
Ohio’s business model provides a safe alternative to the existing environment across the state in which marijuana users resort to underground dealers, Kessler emphasizes.
While many critics of the measure argue that marijuana is considered a “gateway” drug that leads to the use of harder and more damaging substances, Kessler notes that it’s not marijuana that people should be concerned about. Instead, it’s how the product is distributed that poses the biggest risk to public safety.
“I’m primarily an inventor,” says Kessler, who has created more than 2,500 products in his lifetime. “When I look at this marketplace and look at this opportunity, I feel like there’s a great chance here to take a product and a business that’s had its issues and make it safer.”
Pictured: Brian D. Kessler
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