In late 2021, we learned of a rising trend in the United States (US), where some states have changed the structure of the legal cannabis market to support small cannabis operators by offering micro-business licenses.
Micro-business licenses require much less capital to start and run a small, factory-touching business. We are positive about this branch of the cannabis industry and believe that some of the most famous brands started out as small operators.
The new structure is part of an effort aimed at making the cannabis industry a more diverse market. The reason for the change is primarily related to how the recreational cannabis markets are saturated with large, well-funded, multi-state operators (MSOs), leaving little room for mother-and-boy-type operators to create profitable businesses to become.
The trend is starting to be alluring and three states have started licensing out micro-businesses. The states are California, Massachusetts, and Michigan, and we think these are high profile markets that are great candidates to lead change in other states.
In recent years, several states have passed laws allowing the sale of recreational cannabis. Although most of the new recreational cannabis markets have not yet issued licenses, some of them have developed micro-business and / or artisanal growing programs. These states include Connecticut, Illinois, New Mexico, New Jersey, New York, Vermont, and Virginia.
An interesting trend within the micro-enterprise vertical relates to how states are allowing these operators to vertically integrate in order to make them more economically viable. We believe this aspect of the license is a key benefit of the program and will monitor how it benefits operators.
California is a leader in the micro-business licensing trend, having issued more than 300 micro-businesses, according to state data tracked by Cannabiz Media. Michigan and Massachusetts have issued seven and six micro-business licenses, respectively, and we expect more licenses to be issued in 2022.
While the model is not perfect and some states have already had to make structural changes to further help small operators, we are pleased that states are proactively following the trend. In 2022, we expect the micro-business licensing trend to grow and watch how it affects large MSOs.
If you would like to learn more about states with microbusiness licensing models, please email firstname.lastname@example.org with the subject “States with microbusiness license models” for inclusion in our mailing list.
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Michael Berger is a Managing Partner of StoneBridge Partners LLC. SBP continues to raise awareness among leading cannabis industry companies in the United States and abroad.