'Uber for marijuana:' Snoop Dogg's newest business investment

Eaze, a mobile app-based marijuana delivery service, recently raised $10 million from investors, including Snoop Dogg's Casa Verde Capital. What does this say about the emerging marijuana market?

Brennan Linsley/AP/File
A marijuana plant matures at a growing facility, in Denver. Colorado lawmakers started work April 9, 2015 on a proposal to allow people on probation or parole to use medical marijuana.

The San Francisco-based startup company Eaze, which provides a marijuana delivery service, recently raised $10 million from various investors including DCM Ventures, 500 Startups, Fresh VC, and Snoop Dogg's Casa Verde Capital.

As one of the first companies of its kind to garner that much investor support, Eaze’s success raises questions about the marijuana industry's emergence at a time when the legal status remains hazy. Under federal law, to grow, sell, or consume marijuana remains illegal. The US Justice Department has chosen not to enforce the law in states where the drug has been legalized. For businesses, that raises questions about marijuana sold across state lines. 

But Eaze is plunging ahead. Based on the instant delivery, community powered premise the Uber car-service made trendy in the startup community, Eaze connects medical marijuana users in California to local dispensaries through a mobile app. Like Uber, it utilizes delivery drivers.

Business opportunities are emerging as restrictions on marijuana are lifted, with many states moving toward allowing medical use and Alaska, Colorado, Oregon, Washington D.C., and Washington State legalizing recreational use. However, investors remain wary about putting their money behind it and Eaze is one of the first weed-centered startups to get significant backing. 

“At the time we invested in the seed, we had a thesis the medical marijuana market would continue to grow, and from a regulatory perspective, it would move toward deregulation,” Kyle Lui, a principal at DCM, told Quartz. “Things accelerated much faster than we had anticipated.”

The market is flooding with so called “ganjapreneurs”  seeking funding from investors. Dixie One is looking to market THC infused candies and drinks, while Privateer Holdings recently secured a 30-year license to sell Jamaican cannabis strains under Bob Marley’s name.

Other companies are looking to cash in less directly. Among the periphery businesses cropping up are consulting companies to advise dispensaries, tourist destinations catering to stoners, manufacturers producing child-resistant plastic baggies, and a whole host of mobile apps, in addition to Eaze.

Emily Paxhia, founding partner at Poseidon Asset Management, says that not only is there ultimately more money to be made in ancillary markets, but the companies will have an easier time finding investors.

“We do a tremendous amount of due diligence, but when it comes to companies that touch the plant, it’s almost eight times that,” Paxhia told Quartz.

Therefore, Eaze has an advantage as it is primarily a technology company and does not grow or sell marijuana. DMC sees investing in marijuana as a forward thinking move, despite the legal ambiguity.

“In a lot of jurisdictions, Uber was breaking the law, Airbnb was breaking the law,” Lui said. “I think being forward-thinking, you have to see where the world is going rather than where you currently are.”

Following its large capital investment, Eaze is going on a hiring spree while looking to expand the business outside of California so as to stay ahead of the competition.

“The plan is to be in every market as quickly as possible that allows for medical marijuana and even recreational use of marijuana,” Keith McCarty, founder of Eaze, told Quartz, singling out Nevada, Arizona, Washington, Colorado, and Oregon.

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