Eaze was once a darling of cannabis and cannabis-curious investors.
With the promise of the rapid spread of cannabis legalization in new markets, venture capital firms and high net worth investors were trying to figure out how to bet on the potentially millions of new consumers getting access to a product that had been classified as a Schedule I drug for half a century.
In 2017, companies like Eaze, ostensibly a delivery service, used the promise of a cannabis boom to woo investors and grow their businesses.
Because cannabis is federally illegal in the US, many investors are barred from betting on companies that handle the plant itself. To them, Eaze was an attractive investment because, as a middleman, it handled cannabis transactions but didn’t derive any revenue from selling marijuana.
Like many startups that sought to aggressively expand in emerging markets with lots of legal gray area, the initial story that the startup trotted out to investors in 2017 — of widespread legalization and hundreds of millions in revenue in a few short years — was more attractive than the reality that materialized.
Business Insider obtained internal documents from Eaze, including its 2020 pitch deck published in full below, that reveal the startup’s pivot and scaled-back ambitions after a series of setbacks including layoffs, a lawsuit, and executive churn.
By January of this year, the company had pared back its sales projections and announced that it was shifting to running its own dispensaries and selling its own branded cannabis products on its platform.
Comparing Eaze in its early days to Eaze now “is a bit like apples to oranges,” an Eaze spokesperson told Business Insider.
“I think since the early exuberant days of 2015, 16, and 17, people have had to do a lot of reconciling between what they thought the market would look like and what the market actually supports,” the spokesperson said.
Once billed as the ‘Uber of weed,’ Eaze has scaled back its ambitions
Once billed as the “Uber of weed,” the startup promised an easy way to connect dispensaries and brands to consumers. Using Eaze’s app, consumers could easily order cannabis from a variety of dispensaries and have it delivered to their doorsteps.
In 2018, as California opened up its adult-use cannabis market, Eaze transitioned from delivering medical cannabis to recreational, which would reach a much larger customer base.
Eaze’s initial business made money by charging dispensaries a technology fee and providing advertising space, data, and menu placement to brands, per a 2017 pitch deck reviewed by Business Insider. The drivers that delivered orders through the Eaze app were paid by the dispensaries or brands that partner with Eaze, rather than by Eaze itself.
In the 2017 pitch deck, produced before adult-use legalization went into effect in California, the company predicted massive scale, touted expansion plans into eight new states by the first half of 2019, and said it would handle $1 billion worth of cannabis transactions across multiple states by the end of 2020 with what the company expected to be thriving commercial cannabis markets. In 2016, the company handled just $24 million in cannabis sales.
Eaze’s 2020 pitch deck reveals a very different company than what it predicted it would be in its earlier years.
In the 2020 deck, Eaze says it hopes to sell $190 million worth of cannabis by the end of this year, generating $125 million in revenue — a far cry from the $1 billion projection three years earlier.
Eaze has raised $201 million from investors
In the 2017 deck, Eaze claimed to be the “only service that supports credit card payments,” a claim formed the basis of a lawsuit filed in June 2019 on behalf of the Toronto-based Dionymed, a former partner and competitor of Eaze. Most cannabis companies, at the time, couldn’t take credit cards, since the substance is federally illegal. The lawsuit is complex, but at the heart of it, Dionymed claimed that Eaze was committing fraud by accepting credit and debit card payments.
An Eaze spokesperson said the company does not handle credit card purchases, and customers are able to pay with debit, cash, or direct deposit.
Dionymed went bankrupt — resolving the lawsuit — and Eaze ended up acquiring a portion of its business as the basis of Eaze’s pivot to running its own dispensaries.
By late 2018, Eaze had become one of the most well-known startups in the cannabis-tech ecosystem. The company closed a $65 million Series C funding round in December 2018, valuing the company at around $400 million, Business Insider reported at the time.
Just over a year later, Eaze closed a significantly smaller $35 million round after replacing its CEO, laying off dozens of employees, and churning through executives. Business Insider has not been able to confirm Eaze’s current valuation.
An Eaze spokesperson said the latest round was smaller because the startup raised with a “very specific purpose,” in funding the company’s pivot. In all, the company said it’s raised $201 million.
In February, Business Insider reported that Eaze lost a valuable partnership with Caliva, a California cannabis retailer. Caliva is building up its own delivery business.
The company that once billed itself the “Uber of weed” is now trying to become a vertically-integrated cannabis retailer, a move that Eaze CEO Rogelio Choy describes as the company’s “second act.”
It’s important to note that Eaze is far from the only cannabis company to struggle in recent months, as issues in accessing venture capital and retaining employees have been compounded by the economic downturn caused by the coronavirus pandemic.
The Eaze spokesperson said the company is “engineered to be responsive to what the market looks like today, versus what people hoped the markets would look like,” as evidence by the pitch deck published in full below.
The startup’s ups and downs over the past three years provide insight into the wild ride that cannabis startups, investors, and employees have been on since US states began legalizing the drug.