Eaze and the cannabis ‘unicorns’ that never were 🦄

EAZE
Eaze and the cannabis ‘unicorns’ that never were

Driving the news: Eaze, once billed as the ‘Uber for weed,’ is winding down operations as of December 31, according to a LinkedIn post from CEO Cory Azzalino. 

The company’s assets were foreclosed in August, and it’s in the process of laying off more than 500 employees. Though the company and the brand may exist in some form next year — Azzalino told MJBizDaily that would depend on the results of Florida’s legalization vote — the startup’s once-lofty aspirations won’t come to fruition.

Eaze didn’t immediately respond to a request for comment. 

Zoom in: Eaze isn’t alone. 

It’s one of a crop of early-to-mid 2010s California cannabis companies that raised millions in venture capital or through initial public offerings, got flashy press coverage and comparisons to some of the world’s best-known brands (from myself included, mea culpa), and ultimately failed to deliver on its promises.

• MedMen, called the ‘Apple Store’ of weed, peaked at a valuation of over $3 billion after it went public. It was parodied on South Park, before the founders were ousted in a series of lawsuits, and the stock eventually went to zero. Founder Adam Bierman is writing a book about the escapade, which has already been optioned for a documentary. 

• Flow Kana, once likened by founder Mikey Steinmetz as the ‘Whole Foods’ of weed for its model of connecting craft growers with the mass market, managed to raise $125 million in a single round and is now barely operational.

• That brings us to Eaze, which dubbed itself the ‘Uber for weed,’ before it eventually pivoted to cultivating and selling cannabis itself in a push for elusive profits. 

Back up: Eaze, founded in 2014, was once valued at $700 million as venture investors, including billionaire Jim Clark, looked to back the next big trend — consumer cannabis.

The company provided an attractive landing spot for investors, as it didn’t sell cannabis itself and wasn’t violating any federal laws. But as venture dollars poured in — and the company’s logo even got a cameo in the intro of HBO’s ‘Silicon Valley’ series — many began to raise alarm bells about the company’s too-rosy financial projections, and the narrow market it was operating in. 

Delivery for just one product, illegal by federal law, in California’s highly regulated market may have been a flawed plan from the start. But that’s much easier to see in hindsight. 

In 2020, after reporting on a series of successes at Eaze, I was leaked a pitch deck that revealed the company had vastly scaled back its ambitions. You can read that here.

Why it matters: The story of Eaze’s failure isn’t something that can be blamed on any one person, though it’s fair to point the finger at early management teams that let the prospect of becoming a ‘unicorn,’ or a billion-dollar startup, get in the way of diligent management.

Investors, executives, and employees took huge bets with their money and time on the company, and that bet never paid off. Bye, bye, $700 million. 

On the other side, the company should be credited for going for it and for surviving for so long in California’s tumultuous cannabis market. It certainly wasn’t an easy path to stay afloat for so long. 

Our take: Eaze’s story is a cautionary tale of the cannabis industry. 

Entrepreneurs by their nature are full of hubris. In the late 2010s, after California and Canada had just legalized, the cannabis industry was full of it. People believed they were creating the next Silicon Valley before our eyes, and if you weren’t in, you were missing out. For many reasons, that prediction never panned out. 

For every Steve Jobs, there’s an Elizabeth Holmes. (That’s not to say we’re comparing Eaze to Theranos, but there are some key lessons from both). 

But it’s also no one’s fault that legalization in the US hasn’t materialized as quickly as many thought it would six years ago. And California’s business climate certainly hasn’t helped the struggling industry, as legal operators still contend with illicit sellers, high taxes, burdensome regulations, falling wholesale prices, and can’t transport their products across state lines to seek new markets. 

In a sense, Eaze and MedMen shutting down can be thought of as the end of the ‘Cannabis 1.0’ era. Let’s hope that in the 2.0 era, we’ll see a bit less hubris, and a bit more diligence. 

- JB

INTRODUCING DUTCHIE 2.0*
Dutchie 2.0: Personalized Cannabis Recommendations

Dutchie's AI-powered platform provides tailored recommendations, from online browsing to in-store purchases.

Omnichannel personalization
Customer preferences and purchase history flow between online and in-store platforms, enabling highly personalized product recommendation

Customer behavior insights
Deeply understand your customers' preferences to optimize product offerings and discount strategies.

Superpower your budtenders
At-a-glance customer insights give budtenders the power to personalize every interaction.

Learn more about how Dutchie 2.0 supports your business today!

*SPONSORED

“This view was groundbreaking, say, 15 years ago. But in 2024, candidates don’t get a gold star just for recognizing the obvious,” Parabola Center founder Shaleen Title writes in an op-ed for Marijuana Moment regarding Vice President Kamala Harris’ recent statement that no one should be imprisoned for smoking cannabis on a podcast.

The Parabola Center for Law and Policy is a drug policy think tank that advocates for consumers and small businesses. 

Read the full op-ed.

New York updates hemp regulations 🌿

New York’s Office of Cannabis Management released updated regulations for hemp-derived cannabinoids, as multiple states look to crack down on intoxicating hemp products. The regulations stipulate that “orally consumed” cannabinoid hemp products should have less than 0.3% THC, have a ratio of 15:1 CBD to THC, and be limited to 1 milligram of THC per serving. View the full regulations. 

Maryland rakes in cannabis tax revenue 💰

Maryland pulled in more than $22 million worth of cannabis taxes in the second quarter of 2024 — a 52% increase compared to the first quarter, the state’s comptroller said in a report. 

Minnesota warns against ‘creative workarounds’ ahead of legalization  👀

Minnesota’s Office of Cannabis Management is warning businesses against ‘creative workarounds,’ like selling cannabis alongside a T-shirt, ahead of the state kicking off recreational sales next year. The move is an effort to clamp down on illicit sales, and help legal operators find success. 

Another Florida Amendment 3 lawsuit 🛑

Florida State Sen. Jason Pizzo, a potential gubernatorial candidate, is seeking an injunction against Florida Department of Transportation for running an ad claiming that cannabis legalization has increased car crashes in other states, though the research on the question is very much mixed. This comes less than a week after Trulieve, the pro-Amendment 3 campaign’s largest backer, sued the state’s Republican Party. 

Cannabis lender AFC Gamma closed a $41 million senior secured credit facility with Story Cannabis, a Maryland brand. The company says it has originated over $100 million of loans this year — it’s a good time to be a cannabis lender!

Cannabis firm Gold Flora says a ‘limited receiver’ was appointed in a case resulting from the company’s $1.65 million of outstanding debt. 

Tilray will release its line of Charlotte’s Web CBD gummies in Canada. 

Study finds that cannabis has ‘promising potential’ for cancer treatment ⚕️

A new meta-analysis published in the journal Discover Oncology found that cannabis compounds like Delta 9-THC and CBD have “significant” anti-cancer properties. Check out the study here.

Adolescent cannabis use leads to worse outcomes in school 🎒

A new study published in the journal JAMA Pediatrics finds that cannabis use during adolescence is associated with lower grades and less school completion. Read more.

New York cannabis retailers sold over $229 million in the third quarter of this year, the state said in a recent report.

You may have noticed this image above. Keen Silicon Valley (the show, not the place) will recognize it from the opening sequence from Season 6.

Like Pied Piper, Eaze is winding down.

Growing cannabis and opium poppies may be key to US supply chains | The New York TImes

Vote yes on 3, the marijuana amendment | The South Florida Sun-Sentinel

Newsom wants to protect kids from intoxicating hemp. Industry says crackdown goes way too far | The San Francisco Chronicle

Slow going on cannabis licensing in Minnesota | MinnPost