The cannabis delivery app Eaze will soon enter the recreational cannabis market in California, after raising $27 million in Series B financing. Though known for burning through cash—Eaze was recently estimated to be spending $1 million a month—the company can boast a 300 percent year-over-year increase in gross sales.
According to TechCrunch, the company already spent the $24.5 million they previously had from VC funding. With California, where Eaze is based, legalizing recreational marijuana, new CEO Jim Patterson has put forth an aggressive growth strategy to spend now and reap profit later.
We are a tech startup…we’re investing in growth,” Patterson told TechCrunch when discussing Eaze’s high burn rate. “We’re investing the money now in what’s clearly going to be a very big market.”
California is expected to reach $5 billion in marijuana sales by 2018 while estimates indicated the national cannabis market could breach $20 billion by 2020. With a large revenue stream about to open thanks to recreational cannabis in 2018, Patterson clearly believes now to be a vital opportunity for Eaze.
What will remain to be seen is how many individuals opt in to the delivery service Eaze provides. California recently announced plans to prohibit cannabis drone delivery, which had been a part of Eaze’s growth strategy. Now that will likely be a sunken cost for the company. In addition, as Patterson admitted to TechCrunch, the ever-looming proprietary threat of Amazon looms overhead of any delivery service company.
Patterson and Eaze do have the benefit that many national brands remain wary of entering the cannabis space. However, if cannabis does become legalized nationally, the competition will flood in.
“But I do think we have a couple of years and hopefully Eaze will be a lot bigger by then and by then maybe it will be less scary than it would be now with only 80 employees,” Patterson told TechCrunch.