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♪♪
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