by Dwain Hebda
There’s nothing that meets the eye that gives away Dan Roda as a leading figure in the state’s cannabis industry, except maybe his signature long beard. But even that’s a stretch. The Philadelphia-born, Villanova University-educated lawyer and entrepreneur blends in easily with the late-afternoon coffee shop crowd, a few doors down from the North Little Rock headquarters of Abaca, the company he co-founded in 2017 and serves as CEO.
“As a company, we’re very clear with people that we are a financial services company solving a problem with a niche market,” he says. “Look at my three business partners. Greg (Ellis) and John (Foley) are former bankers, Brian (Bauer) has been running accelerators, the venture side. They are very, very strong in financial services.”
By the same token, somebody on the team has to be the cannabis advocate, so that’s the role that I’ve had and always had.”
Roda is as fervent as anyone about the virtues of medical marijuana, of which he’s literally a card-carrying proponent and consumer. There was a time when that would have marked him for some not-so-welcome attention, but times have changed. What passed for radical or kooky 20 years ago today bring him accolades as one to watch in the industry and capital investment to Abaca for its suite of financial services solutions for cannabis-related companies.
That the $10 billion national cannabis industry has made such strides toward public acceptance is both gratifying to Roda and an odd space for Abaca to operate.
“It’s a double-edge sword,” he says, stirring his iced coffee. “Mainstream acceptance of cannabis is very important. The growth segments in the industry aren’t going to be your 20-year-olds and your 30-year-olds. It’s going to be inventing a cannabis product that gets your average soccer mom interested, or the retiree. That’s what they’re really looking for to grow the industry. And if it wasn’t for that increased acceptance of at least the medical applications of cannabis, this wouldn’t be a growth market.”
By the same token, if this were not illegal under federal law and if this were not highly stigmatized by many, including by many banks, there would not be a [business] opportunity out there. It cuts both ways for us.”
The cannabis industry is a study in contradictions. In the strictest sense of the word, every business operating in this space is breaking federal law, and openly so, even as more states legalize medical marijuana and in a couple of instances, recreational pot. And, in fact, in the early days of legalization the risk of being raided and shut down by the federal government was very real for any company in the cannabis food chain.
What’s happened instead has been a growing reluctance by the governement to go after such companies, another byproduct of changing attitudes. In 2013, the Cole Memorandum was issued by the U.S. Justice Department that instructed U.S. Attorneys to lay off states that had passed legalization measures, provided those states enforcing certain guidelines, such as restricting sale to minors and safeguarding against growers supplying criminal weed dealers. And even though then-U.S. Attorney General Jeff Sessions rescinded the memo in 2018, there’s been no apparent effort to step up enforcement.
This helped the industry establish itself, but also presented growers and dispensaries with interesting operational quandaries. Most banks are still skittish about serving an industry that’s simultaneously illegal and not illegal which opened a whole host of problems. Simply holding a bank account, if they can be had at all, are prohibitively expensive for cannabis-related companies and access to capital was all-but non-existent. Enter Abaca, which bridges these gaps.
“If somebody comes into the board room and says, ‘I’ve got this really great idea. We’re going to get into this new business. We’re going to make tons of money. There’s only one problem. It violates the federal laws of the United States. That’s all,’” Roda says. “You just can’t do it, because as a publicly traded company, the second you do that, you’re going to get sued by your shareholders for breaching your duty to them.”
A privately held business, such as a privately held bank on the other hand, can make that decision. They can say, ‘I’m going to weigh the risks of violating this federal law against the likelihood of actually facing any repercussion from doing so.’ And just like anybody who opens a dispensary or a cannabis grower or any other business in this space that is having to get comfortable that they’re violating federal law, so too are the banks that are handling this money. That’s where we come in, is helping them get the appropriate level of comfort to move that needle.”
Working through a Little Rock-based, state-chartered independent bank – Roda declines to name which – Abaca provides a means for growers and dispensaries to have bank accounts and their clients with a payment app, MediPays. It also helps its banking partner meet the U.S. Treasury guidelines to verify the legitimacy of funds coming in. Those two needs met, the company expanded to address the industry’s other financial stumbling blocks including its payment app and providing a lending platform.
Rapid deployment of such services – as well as an influx of venture capital, including $800,000 recently – demonstrates Abaca’s broad opportunities within the marketplace.
“Deposit banking, that was issue number one. That’s the most immediate, most pressing, most mission-critical concern for a business,” he said. “Banks now are charged with monitoring every dollar coming in to make sure they have a reasonable certainty that the bank is not distributing product to the black market, filtering in money from another criminal enterprise, that kind of thing.”
But then there are other problems that we’re also solving. Launching MediPays is solving the problem in processing payments in this space. Then it’s being able to get capital and loans. Using our technology, we’re looking to break down all of those barriers.”