Invest in a Cool Cannabis Tech Startup
A few weeks we wrote probably the most useful article we’ve ever written titled “How to Buy Marijuana Stocks for Dummies“. We know it is our most useful article because at least a few times a day, we send a link to that article in response to the question “how can I buy marijuana stocks“. Interest is reaching a frenzy pitch, and now we’re even starting to get pitches from eager entrepreneurs who want us to help them grow their cannabis related businesses. Take as an example this email we received from Luke in Jamaica on his exciting startup called Frazzle:
So Luke is building an Instagram/Youtube for cannabis called Frizzle and he’s looking for capital. He suggested we promote his company in an article titled “Invest in a Cool Cannabis Tech Startup“. Done! If anyone’s interested, drop us a line and we’ll put you in touch. Luke, you’re welcome.
In addition to the exciting prospect of Frazzle, we’ve been coming across other very interesting cannabis related startups that show the industry is looking to apply technology in the same way any other industry does. For those of you who don’t spend much time hanging around VCs, these days it seems that everyone has come up with an ‘Uber for XYZ’ business model that tries to somehow apply the success of Uber to whatever industry they’re working in. Well, the cannabis market is no exception.
Remember when you had that dealer whose house you always had to go to for a bag of skunk? He’d tell you very specifically when to come over so the “neighbors wouldn’t notice anything”. Then there was that awkward moment when you’d stay for a bowl a bit too long and run into the next customer in the driveway where you’d exchange fleeting glances in hopes that one of you isn’t an undercover cop.
Then there’s that other dealer. He’s always on the go, always off to the next delivery. His bags are consistent, he’s at your doorstep on time, and you’re just a bit more likely to go through him rather than be asked to put down your game controller and drive all the way across town to someone’s house where you’re forced to exchange pleasantries and probably interrupt someone’s dinner. The guy that delivers is going to be your preferred dealer, even if his bags are $55 instead of $50.
That’s exactly what’s going on here when we talk about an “Uber for Weed”. We’re going to talk about one specific company that’s trying to be the Uber for Weed, but you can be damn sure that everyone and his brother has decided to get into weed delivery because there are so few barriers to entry for this business. This particular company is different though because they’ve raised more funding than any other cannabis startup out there.
Founded in 2014, San Francisco startup Eaze has taken in a total of $24.5 million in funding with just over half of that coming in late last year as a Series B round of $13 million. The co-founder and CEO of Eaze, Keith McCarty, was a co-founder of Yammer which Microsoft acquired in 2012 for over $1 billion. Investors in Eaze include a whole slew of firms including the Snoop D O Double G himself (Casa Verde Ventures). It’s worth noting that the Series A lead investor was DCM Ventures, a venture capital firm with over $3 billion under management and investments in over 300 technology companies.
The co-founder of DCM Ventures, David Chao, isn’t afraid to tell you that he puffs the magic dragon himself. That’s actually how he was introduced to Eaze – as a customer. This means that he is familiar with the space and understands the nuances of the business. When you get funding, it’s not just so you can pay yourself a fat salary and tell everyone “you’re funded”. One of the primary reasons for funding is that you bring in experienced venture capitalists who can advise you on how to grow your business. That’s what makes Eaze stand out here.
The experience is just what you’re thinking of when you visualize an “Uber for Weed”. Plug in your zip code, and before you can say bubonic chronic you’ll be surfing through all kinds of delicious looking treats like the “flowers” seen below:
San Diego, San Francisco, and Oakland are just some of the over 100 cities in California that Eaze delivers to now with 200,000 “patients” being able to get their medicine without even having to put down their game controller. The Eaze value proposition focuses on the speed at which they can deliver and the fact that their delivery guys/gals have background checks. Speaking of drivers, they’re paying $16 an hour so you better go make hay while the sun shines before the human drivers are replaced with delivery robots.
What’s that you say? You can’t order your “medicine” because you don’t have a medical marijuana card? Eaze can hook you up with a “video consultation” for $30 where you tell the actual doctor on the other end that you feel the only way you can handle reading the news anymore is to get baked out of your gourd. Actually it seems like you can tell the doctor just about anything since nobody seems to be asking Google what they should say:
Eaze software features GPS tracking so you can see how close your buds are and has built-in safeguards including verification of patient identification and medical recommendations. Delivery is made from Proposition 215 compliant dispensaries and takes less than 30 minutes from any connected device.
Now here’s where technology comes into play. Eaze helps premier dispensaries automate three aspects of operations, which have historically been challenging without on-demand technology: delivery logistics, real-time inventory, and business intelligence insights. In September of last year they unveiled their “Brand Insights Program (BIP)” which is all about providing insights for all that “big data” they’re collecting with every delivery.
While $24.5 million in funding is incredibly small for the most “well-funded” cannabis startup out there, the truth is that a taboo is still attached to this market. The fact that cannabis is still an illegal drug at the federal level is a risk factor that can’t be ignored. Nonetheless, let’s hope we see more VCs like David Chao get involved so that the industry can grow responsibility and investors can be rewarded appropriately for the risks they are taking.
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