It’s a harsh time for cannabis startups. I’m hearing some are raising at 1/5th of their 2019 assessment amidst widespread competitors, high taxes, and sluggish legalization. The battles for cannabis’s best-known startup, shipment service Eaze, continue as today it’s losing among its top partners.
$75 million-funded weed brand name empire Caliva has dropped Eaze in favor of introducing its own delivery system. By partnering with Hypur banking to fix the marijuana payments legality concern, Caliva will be able to accept contactless mobile payments unlike Eaze that usually requires customers pay in money. Caliva buyers won’t have to fret about journeys to the ATM, specifically now throughout COVID-19 shelter-in-place orders, which the start-up anticipates will enhance their average order volume. Combined with verticalizing shipment in-house plus its wholesale and retail operations, Caliva hopes it can grow its margins and endure this long winter season for weed start-ups.
“Our objective at Caliva has constantly been to offer safe and easy access to plant-based solutions for health, recovery and happiness,”stated Caliva CEO Dennis O’Malley.” Together with Hypur, we are happy to provide our customers safe, certified and practical cashless payment options to improve and improve their buying experience.” It hasn’t been so easy for Eaze, though.
Back in January, we reported that Eaze was in difficulty, having actually suffered unannounced layoffs and executive departures. It burned money on billboards, and never introduced the services of a startup it obtained. There were concerns about information security, and weed brand names dropped Eaze due to postponed payments. It was almost out of money and in danger of vaporizing. It fortunately managed to protect a$15 million bridge round to keep it alive plus a $20 million Series D in February prior to the COVID struck the fan, though I fear to think of the terms of that financing.
The prepare for Eaze was to verticalize, purchasing and developing brand names that it could offer through its existing shipment service to up its margins. Now it’s 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 brand names like Dosist and Kiva. Its menu breadth to bring in customers and in-house brand names to drive earnings could be a winning combo. After minimal pilots in SoCal, Caliva delivery is launching in LA and the Bay Location.
Unfortunately, traditional payment processors typically refuse to work with cannabis business for fear of legal effects. That’s why most shipment services can’t accept credit or debit cards, or do so through questionable legal workarounds that have led payment suppliers to be sued. Others like CanPay just provide ACH transfers, while Square just deals with CBD sellers. “We hung around investigating and evaluating all platforms that accept marijuana payments in the U.S., and discovered that Hypur has the very best compliance, customer and security experience” O’Malley informs me.
400-person Caliva is now attempting to raise a Series B, but may experience tough headwinds with shelter-in-place orders in impact in states where cannabis is legal. Stiff taxes on marijuana have on the other hand helped the black market continue to flourish, as California’s $3.1 billion in legal 2019 sales were eclipsed by an approximated $8.7 billion in illegal sales. Faster shipment and simpler payments could assist. Enthusiasm for the market has diminished following the initial flood of entrants sought to exploit the end of restriction. Is the Green Rush over?
Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.