Last month, cannabis delivery service Eaze announced the closing of a Series D funding round of $20 million in cash, with the opportunity to raise another $20 million over time.
The closing of this round comes after the California-based company’s completion of a recent $15-million bridge round. This puts Eaze’s newly raised capital at $35 million, all of which comes in the form of equity.
Eaze’s New Business Model: A Brand Of Its Own
Up until this point, the “Uber of Weed” based its success in connecting consumers with retail brands through its delivery service. With the announcement of the Series D round, the company also unveiled what it plans to do with the money.
Eaze is going vertical. This means that, aside from the products it already sells and distributes, Eaze will add its own brands to the catalog, working with local licensees to market a selection of cannabis products.
After the announcement, a wave of online criticism arose from members of the cannabis community who wondered whether Eaze’s move could hurt its partners.
By working with its own platform, Eaze could be inclined to incentivize sales of its own products, taking a chunk out of its partners’ sales. Critics also noted that Eaze might take advantage of years of consumer-generated data extracted from millions of operations in order to create products that outrun any possible competition.
The biggest concern with these views is that they involve a shift in the perception of the company for licensed retailers: from their biggest ally in driving sales to a not-so-friendly strategic partner and competitor.
“All is fair in love and war — and business,” says Roderick Stephan, partner at Altitude Investment Management, a firm that holds a vast portfolio of cannabis companies.
“Distribution and getting product to consumers is the biggest challenge branded product companies have. With this part of the equation solved, why would a company not produce its own products and retain a higher all-in margin than a branded product manufacturer who has to pay for delivery?”
Published: March 12, 2020