INSUBCONTINENT EXCLUSIVE:
It a brutal time for marijuana startups
I&m hearing some are raising at 1/5th of their 2019 valuation amidst rampant competition, tall taxes, and slow legalization
The struggles for marijuana best-known startup, delivery service Eaze, continue as today it losing one of its top partners
$75 million-funded weed brand empire Caliva has dropped Eaze in favor of launching its own delivery system.
By partnering with Hypur banking
to solve the marijuana payments legality issue, Caliva will be able to accept contactless mobile payments unlike Eaze that it claims usually
requires customers pay in cash
[Update: Eaze claims the majority of payments come via debit cards]
Caliva buyers won''t have to worry about trips to the ATM, especially now during COVID-19 shelter-in-place orders, which the startup
expects will boost their average order volume
Combined with verticalizing delivery in-house plus its retail and wholesale operations, Caliva hopes it can grow its margins and survive
this long winter for weed startups.
Our mission at Caliva has always been to provide safe and easy access to plant-based solutions for
health, happiness and healing,& said Caliva CEO Dennis O&Malley
&Together with Hypur, we are proud to offer our customers safe, compliant and convenient cashless payment options to improve and modernize
their purchasing experience.& It hasn''t been so easy for Eaze, though.
Back in January, we reported that Eaze was in trouble, having
suffered unannounced layoffs and executive departures
It burned cash on billboards, and never launched the services of a startup it acquired
There were questions about data security, and weed brands dropped Eaze due to delayed payments
It was almost out of money and in danger of vaporizing
It luckily managed to secure a $15 million bridge round to keep it alive plus a $20 million Series D in February just before the COVID hit
the fan, though I dread to think of the terms of that funding.
Troubled Eaze finally closes $35M funding to sell its own cannabis
The plan
for Eaze was to verticalize, buying and developing brands that it could sell through its existing delivery service to up its margins
Now it seeing former partner Caliva do the reverse, launching a delivery service to sell its own Fun Uncle, Deli, and Caliva brands as well
as distribute other vape, edible, and flower brands like Dosist and Kiva
Its menu breadth to attract customers and in-house brands to drive profits could be a winning combo
After limited pilots in SoCal, Caliva delivery is launching in LA and the Bay Area.
Unfortunately, traditional payment processors usually
refuse to work with marijuana companies for fear of legal repercussions
That why most delivery services can''t accept credit or debit cards, or do so through sketchy legal workarounds that have led payment
Others like CanPay only offer ACH transfers, while Square only works with CBD sellers
&We spent time researching and evaluating all platforms that accept cannabis payments in the United States , and found that Hypur has the
best security, compliance and consumer experience& O&Malley tells me.
400-person Caliva is now trying to raise a Series B, but may
experience tough headwinds with shelter-in-place orders in effect in states where marijuana is legal
Stiff taxes on marijuana have meanwhile helped the black market continue to thrive, as California $3.1 billion in legal 2019 sales were
overshadowed by an estimated $8.7 billion in illegal sales
Faster delivery and simpler payments could help
But enthusiasm for the industry has dwindled following the initial flood of entrants sought to exploit the end of prohibition
