Eaze to become America’s largest cannabis delivery service after buying Green Dragon
Eaze this week announced significant plans to expand into one the U.S.'s largest cannabis delivery services. One of the original on-demand cannabis delivery services, the Bay Area-based company is set to acquire cannabis retailer and cultivator Green Dragon, which operates in the hot markets of Colorado and Florida. Combined with existing operations in California and Michigan, the deal would find Eaze operating in America's four largest cannabis markets.
Less than two years ago, it was unclear if Eaze would have enough cash to continue operating. According to TechCrunch's reporting, it was experiencing significant trouble raising funds and went through unannounced layoffs. The company was switching from providing delivery services to operating as a delivery dispensary. Eaze was effectively the Uber of Weed, attempting to become the Amazon of Weed.
Founded in 2014 by Keith McCarty, Eaze has raised over $255 million to date. The company cycled through leadership and has seen three CEOs, with Rogelio Choy leading it since 2019. Former CEO Jim Patterson recently pleaded guilty in a $100 million scheme to deceive banks into processing credit and debit payments in cannabis purchases. The case is similar to one brought against Eaze in 2019, though the company denied involvement and is not a defendant in the case against Patterson. The future was unclear, but now two years later, it's raising more funds and is on track to become the nation's largest multi-state cannabis delivery service.
The company switched gears in 2019 and closed a previously-announced Series D financing round of $90 million in August 2020. This year, Eaze is trying to close a $75 million Series E with 80% of the funds already committed. The company expects this round to close in November. Eaze tells TechCrunch that this round will value Eaze at more than $700 million - double its fundraising valuation in 2019. The anticipated funding will be used to drive additional retail expansion.
Eaze Chief Strategy Officer Cory Azzalino justifies the higher valuation as such, The company is fundamentally different. Even our California operations are significantly larger than they were back in 2019 from a revenue standpoint. But also just in terms of future growth opportunities. There's a substantial increase in our addressable market. Florida, Michigan and Colorado create some $6 billion worth of incremental market size."
Eaze is quickly becoming a major national cannabis operator. Earlier in 2021, it announced that its delivery service will be moving into Michigan, the hottest cannabis market in the midwest. If the Green Dragon purchase closes, the company also gains delivery operations in Colorado (now approving cannabis delivery companies) and Florida (a state with a massive medical marijuana market). According to a press release, Green Dragon saw more than one million transactions in 2020, and its Colorado stores grew 39% in 2020. In July, the company turned to Florida, announcing the opening of its first two dispensaries in the state and its intention to secure 20 more locations by the end of 2021.
The timing couldn't be better for Eaze. In June 2021 Apple changed an App Story policy, allowing licensed cannabis dispensaries to list and sell cannabis products (flower, edibles, and vapes) directly from an iOS app. Eaze jumped, becoming the first retailer to sell weed from an iPhone app. However, purchases are only possible in Eaze's two markets: California and (soon) Michigan.
Eaze has achieved exponential growth over the last two years by successfully shifting to vertical operations and continuing to grow our loyal customer base," said Eaze CEO Rogelio Choy said in a released statement. Green Dragon's airtight operations in Colorado and expansion into Florida's booming market adds key operational capabilities to our national footprint and cements our leadership as California's largest MSO. Together, we are well-positioned to leverage the market's explosive growth now and into the future."