David Dinenberg’s Philly accent is as thick as a cheesesteak, and one of his biggest financial backers is the daughter of the owner of pro hockey’s Philadelphia Flyers. But he had to leave his native Keystone State for a place where marijuana is at least sort of legal so he could take advantage of what he thinks is the next gold rush.
Newly flush with $2 million raised from investors last month, Dinenberg is now in Hollywood, running financial services startup Kind Financial, which he hopes to turn into a sort of a GE Capital for marijuana businesses.
With banks unwilling to work with cannabis businesses, marijuana retailers can’t get business loans and often can’t accept credit or debit cards, leaving them to deal all in cash – and presenting obvious security risks. That’s what Dinenberg wants to change.
Though he hopes Kind will eventually offer loans, insurance, equity investments and other services to pot peddlers, Dinenberg’s first step will be next month’s planned launch of a payment system designed specifically for marijuana retailers.
He describes the system as a smartphone app linked to a prepaid debit account – not a bank account – that will allow dispensaries to accept electronic payments from customers and pay suppliers without hauling around a briefcase full of cash.
“We want to be able to do anything a cannabis business needs other than actually taking a deposit,” he said.
Dinenberg, 42, built his career in Philadelphia as a commercial real estate broker and eventually became the chief operating officer and a partner at developer Grasso Holdings.
But after he got “crushed” in real estate during the financial crisis, he said he decided to look elsewhere for his next act. A “60 Minutes” special in October 2012, focused on the economic potential of the marijuana industry, sparked an idea.
“You have a budding industry with nearly $3 billion in revenue and it’s still not being taken seriously because you don’t have the banking institutions embracing this,” he said.
Dinenberg started Kind and raised a round of seed funding last June. The second funding round, for $2 million, closed Feb. 25 and brought Lindy Snider into the fold. Snider, daughter of Flyers owner Ed Snider, is a longtime advocate for the legalization of marijuana. She also founded Lindi Skin, a skin care company focused on the needs of cancer patients.
In addition to the cash, Dinenberg felt he needed a buttoned-up legal team to give Kind credibility. He retained white-shoe law firm Venable after being introduced to Edward Wilson, a partner in the firm’s Washington, D.C., office.
“When I first met them, they were wearing suspenders and bow ties on a Friday afternoon,” Dinenberg said. “I thought, ‘This is exactly who needs to represent me.’”
Aaron Justis, who owns Studio City marijuana dispensary Buds and Roses Collective, said the lack of financial services is the main obstacle facing his industry.
“The entire industry is still looking for the right to freely open bank accounts,” he said. “I think we all know that’s the big issue. We know that because banks are federally regulated and it’s still federally illegal.”
Last year, the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, said prosecuting banks doing business with marijuana companies in states where the drug is legal is a low priority. But that guidance doesn’t give banks civil or criminal immunity, so banks have stayed away.
Abraham Finberg, a West L.A. CPA who has clients in the marijuana industry, said this guidance is preventing banks from participating.
That guidance is also creating opportunity for Kind. As long as banks stay out, dispensaries will have little choice but to use alternative finance firms.
But dispensary owner Justis believes it’s only a matter of time until the regulatory haze clears and bigger banks move in. Still, Kind could carve out a viable business in the interim, he said.
“I think they may be able to grab some market share in the meantime or possibly get acquired,” he said.
But Dinenberg insists he’s in it for the long run. He wants to create a complete financial services platform for the industry. It’s an ambitious goal, but he’s hardly the first person to come to Hollywood with big dreams.
“At the end of the day, I’m a businessman,” he said.
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