With cannabis start-up’s founder out, these Main Line, Hollywood, and pro sports investors are seeking a future for Kind Financial

David Dinenberg was persistent. He’d tried real estate development, film production, and the food business, but didn’t get rich. In 2013, the Montgomery County native started again: He moved his family to California, started Kind Financial to market tech-based services to the emerging legal cannabis economy, and over time raised at least $8 million from Hollywood and pro sports celebrities, Main Line business owners, and others.

Encouraged by Dinenberg and fellow Philadelphia-area natives including venture capitalist Wayne Kimmel, investor Lindy Snider (whose late father Ed owned the Flyers), onetime Inquirer executive Greg Liss, and film producer Mike Jackson, Kind raised money from singer John Legend; former tennis star Andy Roddick and his actress-model wife, Brooklyn Decker; former Sixers manager Billy King; former Eagles star Brian Westbrook; and dozens more, according to investor lists.

Legend invested after meeting Dinenberg through a mutual friend and fellow Main Line native, film producer Mike Jackson. A spokesperson for Jackson said he didn’t recommend Legend invest in Kind. Dinenberg later gave Jackson 0.25% of the company, as a gift, the spokesperson added.

Kind’s services would include “seed-to-sale” tracking services for state marijuana regulators and smartphone apps to help customers buy the drug from legal dispensaries without cash.

In 2016 Dinenberg announced that Kind was part of a deal with Microsoft to seek government clients in states where marijuana sales were legal. Dinenberg and the company basked in a wave of positive media coverage, including New York Times and Los Angeles Times profiles.

It was a hopeful moment. A Texas bank, an Oklahoma investment fund, and a handful of cannabis businesses also offered Kind cash or partnerships, in hopes of sharing its success.

But as with so many hopeful start-ups, Kind stalled.

Kind’s efforts to move ahead have required extra steps because of the company’s governance structure. Though Kimmel, Snider, TV personality Montel Williams, and others were identified as advisers on the company website, there has been no formal board of directors, according to SEC filings, Dinenberg, and Snider.

Slick early progress reports gave way to terse typed statements with unaudited numbers; an accountant left and wasn’t replaced; shareholders complained it became difficult to obtain financial statements so they could track their investments and update tax records, according to investors and others connected to the company, who declined to be named because they were not authorized to speak on Kind’s behalf.

Now Dinenberg is out, investors are attempting a relaunch, and they have questions about where their money went, given the lack of detailed financial records.

“They burned through a lot of investor cash. The Microsoft announcement was a good news release, but it was way premature,” said Scott Berman, a Philadelphia-area venture capitalist who specializes in cannabis start-ups. “The payment space is advancing rapidly. The volume [of digital cannabis transactions] is going up. But it’s tricky, and a lot of companies have come and gone.”

Dinenberg, a Penn State grad, stepped down May 4 and agreed to give back his company-issued shares after meeting with Snider, a major shareholder.

“Lindy decided it was time for a change,” he told The Inquirer.

“We tried very hard,” he added. “I had what I thought was a great idea about payments in the cannabis space. We had a great investor base.” But Kind’s early efforts to sell legal-pot tracking services to state governments turned out to be “expensive and time consuming,” Dinenberg said.

Several investors told The Inquirer they were talked into backing Kind by associates of Dinenberg, some of whom were listed on Kind’s website as employees. Dinenberg said Kind hadn’t paid the initial boosters who urged investors to buy into the company, and none are listed in its SEC filings: “It was word of mouth. There was no promotion.”

Investors interviewed by The Inquirer said they did not recall receiving a private placement memorandum documenting the company’s initial business plan, which start-ups typically share when they claim exemption from the SEC securities registration and disclosures required of larger ventures. Snider said that there had been a memo and that investors and their reps likely met with Dinenberg and other officials, but added that company documents are private.

Some investors said they had not realized Dinenberg was the subject of court judgments, totaling over $700,000, demanding payments to financial creditors — the kind of potentially embarrassing information that start-up founders often acknowledge when they ask investors to trust them.

“A bunch of stuff happened when the real estate crash happened” in the late 2000s, Dinenberg told The Inquirer. Did he tell prospective investors about the financial claims against him, or the judgments? “No. I was never asked. If I was asked, I would have told people,” he said.

Dinenberg said he had made a more general admission to Snider and other early investors: “I made it clear I lost everything in the real estate crash,” including his Main Line home. “It was a bad time in my life.”

Several investors say they have asked Snider and Liss for an investigation of spending during Dinenberg’s last years at the company, in addition to basic company balance sheets.

Investors who lose money often search for signs of potential wrongdoing “to try to get pressure to get their money back,” said Marc Durant, a past deputy chief of the criminal division of the U.S. Attorney’s Office in Philadelphia, who has over the past 40 years handled securities cases and white-collar defense in private practice.

Speaking in general and not about Kind, he added, “A lot of rich people invest their money without drilling down. Investing involves risks.”

The Securities and Exchange Commission, which pursues civil violations of U.S. investment laws, has said in court proceedings that investment sellers have “a positive duty” to tell potential investors about court judgments and other material challenges that they face.

“I think it’s really dangerous not to do so,” Durant said. “Not every investment is going to work,” and not disclosing a founder’s earlier issues may look bad.

It’s important for companies to keep careful accounts, Durant said. “If they use investor funds for anything other than the investment, that is criminal. You can’t use someone else’s money for your own purposes.”

Asked if she and other leaders were seeking an investigation, Snider said her focus is on moving the business forward.

With the founder gone, a group including Snider, Liss, and other insiders are now rallying other shareholders around Kind’s business potential. They told them they plan to produce improved financial statements, raise more from investors or business partners, fund and hire a new CEO, and speed a “product relaunch.”

The relaunch would include a mobile app to purchase marijuana and other items, with added features such as tipping and incentives. They hope to roll out services this fall, three years after Kind debuted a credit-card-compatible app, Kind Pay, backed by Herring Bank, in hopes that card companies would encourage such apps. They didn’t.

The new app, if all goes well, would be available to cannabis buyers nationally, according to Snider. Locally, Pennsylvania has dispensaries for medical marijuana patients only, though general use has been decriminalized in Philadelphia. New Jersey allows recreational use and licenses sellers.

Snider said the company’s progress had been “a much slower process than our investors expected.” She would not comment on Kind’s current staffing or revenues.

Across the U.S., she said, “a large class of investors thought cannabis was just a get-rich-quick scheme. But it’s not. It takes time and patience.”

As to Dinenberg’s future, “I’m trying to figure out what’s next,” he said. He continues to share marijuana industry news on social media, months after departing from Kind.

“I still believe in the [cannabis services] space, and in the industry,” Dinenberg said. “I still want to see it become normalized.”

This story has been updated with new details clarifying the role of film producer Mike Jackson.