Could I get a large pizza with marijuana on the side?

Coming soon to Amazon Prime

Weed will be legal throughout the United States- it is just a matter of when. As of currently, 30 states allow medical marijuana while 9 legalized recreational use. In states where weed is legal, startups are quickly seizing the initiative to get a head start in the booming market.

U.S States with legalized recreational and/or medical marijuana. Image from ProCon.org

Hailed as the “Uber of Marijuana”, the California based startup- Eaze, has been getting headlines with its innovative business model.

The company leverages technology to streamline access to the drug. Instead of having to drive to a dispensary (place to buy marijuana), you can just download an app that allows you to shop at local dispensaries and then have the drug delivered to the door.

However, instead of actually running the delivery business, Eaze merely connects buyer and sellers. The dispensaries themselves are in charge of delivery but Eaze collects a service fee for each transaction.

As Eaze CEO, Jim Patterson puts in “Eaze is the backbone and the technology that makes delivery possible, but it doesn’t own the physical inventory or employ the drivers. All of that comes from local dispensaries that we work with.”

Eaze has more than $50 million in venture capital funding with a long list of individual investors- including Snoop Dogg.

Eaze plays a similar role to the White Widow in the latest Mission Impossible Movie. Image from Google.

My Perspective:

Recreational marijuana is a very interesting market. One on hand, it a booming $9.3 billion industry with a predicted CAGR of over 30%. Additionally, many huge potential markets (NYC for example) are on the horizon for recreational weed legalization.

However, because of the ongoing (and probably overhyped) craze surrounding marijuana- there is actually an oversupply of the plant in legalized areas.

This leads to a situation where location plays a key factor in where customers will by from. This is where Eaze will come into play.

Instead of directly competing with local suppliers, Eaze simply provides a service that connects buyers to customers. Suppliers that partner up with Eaze will have access to a much bigger market — notably users of the Eaze app.

Eaze is thus in a great position as long as suppliers and local retailers see the increased revenue offsetting the service cost. In the current supply surplus market- the odds are looking pretty good.

Competitors:

In addition to similar startups like GreenRush, Eaze also is looking at possible competition with the second largest company in the world, Amazon.

The bigger players however, have more substantial regulation hurdles to sort out. For Eaze (and other similar) startups, this mean extremely valuable time to develop footholds on this emerging market before the big players come in.

Another competition source is the black market. While steadily decreasing, the underground market for weed is not going away fast enough. In California for example, the illicit market is still bigger than the legal market.

Eaze’s goal is should to priority compliance to capture the “law-abiding” portion of the market that want the experience to be as clean as possible.

There is an excess supply of MJ right now. Image from Google.com

The bottom line:

Eaze’s success with heavily depends on whether it can define itself as the most safe, clean and reliable way to obtain marijuana. It will also have to create that image fast enough to stand a chance against big name competitors when they hit the market.