“We're in a growth phase, especially with legalization right around the corner.”
On a recent episode of Too Embarrassed to Ask, Eaze CEO Keith McCarty told The Verge’s Lauren Goode and Recode’s Kara Swisher that on-demand marijuana delivery apps like Eaze’s will disrupt illicit drug cartels.
You can read some of the highlights from their discussion at that link, or listen to it in the audio player above. Below, we’ve posted a lightly edited complete transcript of their conversation.
If you like this, be sure to subscribe to Too Embarrassed to Ask on iTunes, Google Play Music, TuneIn or Stitcher.
Transcript by Celia Fogel.
Lauren Goode: So Kara …
Kara Swisher: Yes.
LG: I don't know about you but I really enjoyed last week's podcast.
KS: Yes, it was very good. About the Apple event.
LG: We had Walt Mossberg in. Special guest Walt Mossberg. We had Dan Frommer, Recode's editor in chief.
KS: And they both determined the event was aggressively fine. Which is not really great. [laughs]
LG: [laughs] Aggressively fine.
KS: Yeah, do you remember that? It was like, what? They didn't love the stuff.
LG: I just remember us chanting "dongle" at the same time. Which made me very happy.
KS: Dongle. Well the thing is, the reviews were meh, eh. A lot of their reviews were like, ehhhhh.
LG: Well, the early reviews are out now.
KS: Yeah, I know, that's what I mean.
LG: The reviews are ... oh I thought you meant last week after the event.
KS: No, well it was meh, eh after the event, and then it was meh, eh in the …
LG: It's largely seen as a transitional year for some of these products.
KS: Ehhhh, it's fine, whatever. Did you get one?
LG: Can you just do that once more? Yeah, I have it right here. Do you want to see it?
KS: Ehhhh. That's what I'm going to do when I'm old and I have, like, intestinal problems.
LG: Here you go.
KS: Thank you. Do you like it? Are you liking it? It looks exactly the same.
LG: Yeah, well I've been reviewing the watch.
KS: Ehhhh.
LG: Well, in either case, if you are interested in listening to last week's episode, you can find that on iTunes. It is all about the Apple event. And go to theverge.com for some reviews too.
KS: Yes. I am not getting the new iPhone, just so you know.
LG: And Kara Swisher has …
KS: Declared it.
LG: She's put her foot down. She's sticking with her giant phablet, with her LuMee case.
KS: With my LuMee case, which Kim Kardashian gave me, I just want to say, not to drop any names. And speaking of that, we're talking about drugs this week correct? [laughs]
LG: [laughs] Wait, what?
KS: No, Kim does not do drugs.
LG: I was going to say, what's the correlation there? Yes, we are talking about drugs.
KS: Yeah, but not just any drugs.
LG: No, we are talking about cannabis, and this is a very topical subject because this November, eight states will vote on the legalization of weed for recreational use, so not just medical purposes. But Kara wants to get high, and how do I get that stuff?
KS: I actually have one of those cards, but I don't use it.
LG: Oh, all right. I thought that was like you move to California and you get your license and then you get your card.
KS: No, you don't. But the thing is, it's really interesting because California will be the biggest state to pass this. It looks like it's on its way for approval. And so it's a big deal. And they have it in Colorado now and many other states. And it looks like at some point it will be a federal action on this issue. But it looks like it's headed the way of liquor at this point.
LG: Well, you know, there are some proponents of legalization, there are also some people who are averse to the idea because of ... well, a lot of reasons. One, that we're talking about a drug, but also things like taxation. So we've invited Keith McCarty — he's the CEO of Eaze, which delivers medical marijuana on demand to consumers across California — to join us today. Keith, thank you so much for joining Too Embarrassed to Ask.
Keith McCarty: Thanks for having me.
KS: So tell us about what Eaze does, and, you know, it's medical marijuana delivery, but your business will be changing relatively soon if the legislation passes, which it seems to be headed that way.
Yeah, Eaze is a technology service that allows qualified patients to get access to medicine by connecting them with a compliant dispensary. So they go to the website, it's eazeup.com, E-A-Z-E-U-P.com, and they go through a signup flow, they submit everything …
KS: eazeup.com?
Correct.
KS: Does everything have to sound like you're high? But go ahead, move along.
[laughs] So they submit everything that's needed to verify their eligibility — so, California state ID, their recommendation letter. If they don't have one, they can actually click a button and be connected with a physician to go through that evaluation.
KS: Not just one of those doctors in Venice Beach with the green outfits that just hand you one when you give them 20 bucks.
Qualified physician.
KS: [laughs] Okay, fine. Okay, whatever.
So once they're verified, they get taken to a menu. There's high-def images and rich descriptions. All the products are tested, so the test results are on there. They just simply select what they want or need, they click the shopping cart button, and with the click of a button, it automatically routes it to a driver, and the average delivery time is about 15 minutes. So it's truly the easiest, quickest and most professional way to receive cannabis.
KS: Instead of having to go to the dispensaries, right? But you use dispensaries.
LG: You're connecting people with dispensaries or with local growers? Or all of the above?
So Eaze is a technology service, and compliant dispensaries use the technology to facilitate.
KS: I see. Sort of like Munchery, so to speak. Which comes after the pot delivery.
LG: Although Munchery does make some of their stuff in house, don't they? They have chefs in house and industrial kitchens.
KS: Yes, but you can get it instantly.
LG: You guys aren't growing pot?
Correct.
KS: Today. So when was it founded? And how much funding did you get for this?
Yeah, so Eaze launched July 2014, and we announced our Series A about a year ago for $11 million. And I think the growth is ..
KS: Who were the funders?
So DCM led our Series A.
KS: Okay, Doll Capital Management. And how did you think of the idea? Were you sitting around ... you were at Yammer, which is not really adjacent.
Yeah, pretty different.
LG: Enterprise software, Kara? You don't think people looking in enterprise software might have a link to cannabis? [laughs]
KS: [laughs] Perhaps. But where did you come up the idea? Like where had you been that would cause you to move to this area.
Yeah, it's interesting. I don't have a "Pineapple Express" story to share. My background is actually in tech. I helped start a company called Yammer, as mentioned, and we got acquired by Microsoft in 2012. And that's a pivotal year for the cannabis industry. So when I was looking at the next wave of technology and what I was passionate about, on-demand really was ringing a bell. I'm very bullish on the whole on-demand consumer service category as a whole. But around that time, we also saw other products or services being made available via on-demand. Uber, Lyft did a great job of paving the way for ride-sharing, but people were utilizing this proliferation of mobile devices and geolocation to connect a consumer with a service provider, and with the click of a button, driving efficiency through the logistics. But not all of them were taking off like ride-sharing. And so I started to question why, because they're all multi-billion opportunities or industries. And I really created three pillars that I now consider kind of the success criteria of on-demand. So having a high frequency of use, being agile on the supply side, and being naturally social. I literally looked through every product and service that was out there, and cannabis kept popping up. I'm not a cannabis user myself …
KS: Explain why that popped up. They use it all the time …
Yeah, so high frequency of use. Being agile on the supply side, so it's not perishable. You know, drivers can have it in their car, and so managing the operational aspects of ...
KS: Is easier.
Exactly. Yeah, you can have ... there's kind of two models in on-demand. There's one where you have a curated menu or a limited menu. And you have fast deliveries. Or you have a much broader option, like a Postmates, for example, but it's like an hour delivery. And that's because food is perishable. And you know with cannabis, you have the best of both worlds. You can have a broad menu. It's also very small in size compared to the price. And so I think you get the best of both worlds, and that's really about the agility. And you don't have to be as exact, let's say, when you do these demand projections.
KS: So you were saying you weren't a cannabis user, you hadn't ordered it.
Well, I have, of course, tried it in high school …
KS: You don't have to tell me if you smoke. I don't care.
But I don't consume today.
But you like the product area.
Absolutely. I think that the next part, before I started the company, was just to do an immense amount of research. I didn't know much about it, and I came across stories like Charlotte Figi, a little girl that had grand mal seizures, and I'm sure any parent out there, I'm sure they can imagine that you’d do anything for your kids when they need that type of help and nothing was helping. And as a last resort, they tried cannabis, high CBD, low in THC, and it stopped her grand mal seizures almost immediately, and she hasn't had one since. That strain is now called Charlotte's Web. So coming across these stories, there was a lot of ethos behind starting this company as well, because I think there's a huge stigma that's attached to it, but when people educate themselves, their mindset changes. But it's really about educating everybody as to what the benefits are.
KS: Well, this is in the medical use area, correct?
Absolutely.
KS: Right now it's headed to recreational, which is a whole different ball of wax.
LG: When you first started looking at the company and doing this research in 2012, what was the legal landscape like at that point?
So, at that time, I looked at, well, one, the majority of Americans favored legalization in 2012. So I looked at the most recent comparison, which would be gay marriage, and when you have that pendulum shift, my hypothesis was that it would move in that direction of legalization and it would happen at an accelerated rate. So that's been true, right? More and more states since 2012 have come online to offer legal cannabis. Not only medical now but also recreational.
LG: How many total?
Nearly half. And just this year alone there's going to be five additional states for recreational, moving from medical.
LG: So I want to talk a little bit about the logistics of the business, and we should also talk a little bit more about this vote that's coming down in November. So you guys aren't growing the marijuana. You are working with local dispensaries, you dispatch drivers. What happens when the drivers are driving around and they've got all this marijuana in their vehicle? I'm assuming it's your company vehicle they are using? Or is it their own personal vehicle? How does that work and what happens if, let's say, they get pulled over?
That's where Eaze is different than the Uber comparison. So Uber contracts or employs the drivers directly, whereas in California especially, the requirement is that the delivery people have to work directly for the dispensary. Third-party delivery services are not allowed. So Eaze purely is a technology play, and we streamline the way in which drivers become eligible and work for the dispensary, but the dispensary employs or contracts that driver. So they're not Eaze drivers.
LG: Got it. Okay, that makes sense. And so are they making some type of Eaze app?
Correct.
LG: And so the dispensaries have the app, you guys have the app, but you're just telling them ... you're basically, you're directing traffic in a sense.
Correct, yeah. A patient goes to the Eaze website. When they sign up, they select what they want, they click "request delivery," Eaze manages all the logistics for the driver, but the driver has a mobile side application that shows them who's ordered it, what they've ordered and how best to get there. The safest and quickest route.
KS: And then what do you charge? What is your charge? How do you make money?
So Eaze is free to patients, and we charge a fee to the dispensaries for the logistics and the …
KS: Who are trying to get more business, correct? That's presumably their incentive to do this.
Absolutely.
KS: Right. And so what is the fee? What is the fee that you get?
It's different for every dispensary, depending on their volume. They would be using more data or there's more logistics. There's more of what we provide that they need. So it's really based on ... it's different for every dispensary.
KS: So does that make you profitable?
On a unit economic basis, yes. We are not profitable as a company, purposely, because we're in a growth phase, especially with legalization right around the corner.
KS: How many states are you in right now?
So California is the only state that we're in, but California is nearly half the cannabis market.
KS: Of course it is.
It's the sixth-largest GDP if it were a country, and it's the largest GDP in the U.S.
KS: Happy cows live in California.
Absolutely.
KS: So you're only in California, but I assume you're expanding out as this new legislation ... and explain the legislation for people. These are legislations across the country in eight states, is that right? Right now it's legal in Colorado and Washington state, correct?
It's legal in 23 states for medical, legal. And then for recreational, it's legal in Colorado, Washington, Oregon, Alaska, and D.C.
KS: Oh, I didn't realize there were so many. Okay. All right. And then ... and what is that? You will be operating there? What's the plan?
The plan is to operate everywhere where legal cannabis is allowed. We can't do it all overnight, but the good news is …
KS: But you started with California because everyone's ... it's the biggest market.
Correct. And it's on the brink of going recreational. It's going to be on the November ballot, Prop 64 — everybody get out there and vote. You know, I think from our perspective, it's not just that. California was the first state to go medical 20 years ago. And so it has a lot of the infrastructure that's built up, and I think it's nearly half the cannabis market today. Sot there's a lot of learnings that go into developing the technology and creating the right experience for the end consumer. And California is really the place to be right now, especially leading up to recreationalization. So we launched July 2014 in San Francisco, and then we expanded throughout the Bay Area, and we're in nearly 100 cities across California. So the Bay Area, LA County, Orange County and San Diego County.
LG: So if it is legalized for recreational purposes, you are absolutely planning on servicing that market as well?
Absolutely, yeah.
KS: God, the cartels better do something. Otherwise their whole business is screwed.
LG: Do you see that as being inherently more risky? What does that bring into your business? Aside from the obvious, which is money for you guys.
So, I mean, I think it's ... we're going to follow what the voters decide. And so for us, from a technology perspective, it doesn't change very much, except for you remove the requirement to capture the recommendation letter, and it's just the state ID that you need to capture. What does it mean? It means that we are able to start really disrupting the illicit activity that's happening …
KS: Yeah, that's what I'm thinking. Wow.
Putting tax dollars into books and education for kids as opposed to illicit cartels.
KS: So are you expecting any problems? Because, you know, the taxi unions didn't like Uber. This is a very different group of people that you all will be disrupting.
There doesn't appear to be many incumbents. In fact, Eaze is a leader in many ways, not just because of the rapid growth of the business, but also in sort of elevating what the business acumen and really the data that we're capturing. We're able to educate the regulators, the media, even patients that are interested in using cannabis. They don't know much about it. So this kind of frictionless, low barrier to entry, I think, is really powerful, and I think that what we're seeing is, and sort of our mission, is to help educate people as to what the benefits are of cannabis and educate them as to what and how to consume it and what they should feel in terms of effects. How they shouldn't feel maybe.
KS: Except when it turns to recreational, it turns into something else. I mean even if most people have medical things, they're maybe using it recreationally. How do you address that? Because obviously in every state that that's happened in, they've had issues around kids, they've had issues around people using too much, and things like ... just like liquor or like anything else.
I think it comes down to education, and I think that a lot of the most recent data that's coming out is that, you know, those problems don't really exist as much as people may think that they do.
LG: Wait, which problems specifically?
KS: Kids, or …
Well, the harm of cannabis. In fact, it's not only medicinally …
LG: Health harm or the …
KS: Abuse harm.
So in states where it's legal, they actually find that it actually goes down in terms of kids using cannabis. And I think it's because the legal market is disrupting the illicit market and that's ... when there's a proper framework in place to provide both accessibility and safety, if that's preventing people that aren't eligible to be able to buy it, meaning anybody under 18 or 21 depending on where you are, that's one way in which the legal market would allow that, because they're following the rules, whereas illicit activity is not.
LG: When you say that in areas where it has been legalized the abuse rates have gone down, I mean, what kind of data are you basing that off of?
Third-party. You know, there's analysts out there, there's research papers. You know, one of the problems right now is that cannabis is still Schedule One, so that means that they're saying that it's not medicinally beneficial, although it clearly is. And that also prevents things like research to happen. Like it could with any other industry that's not classified as a Schedule One drug. So there is a lot of research, but it's not as much as what we'd like. But I think this is an area where rescheduling would certainly help. But as the market matures, as the opportunity becomes bigger, people are just kind of taking that leap and really doing it on their own without ... with it still being Schedule One.
KS: And it is kind of an inevitable thing. So talk about the, just before we get to questions, talk about the selection. Like you're sort of like ... are you worried about Amazon? Or anybody else getting into this? Amazon likes to sell anything at all, don't they?
Amazon doesn't do 15 minute deliveries. I think that …
KS: [laughs] Today they don't.
LG: Wait until the drones take over.
KS: Exactly. That would be a good drone.
We'll use them too.
LG: Are you going to use drones to drop off cannabis?
I mean, I think that it's not a core focus right now but ...
KS: We're teasing you, ignore us completely. But what I'm wondering is more about, do you expect big incumbents to come into the market once it becomes a big market, because it is going to be one.
Right. So on the menu — and then I'll get to the other incumbents — so our approach is ... well, one of the hypotheses that I made was that this is going to follow the alcohol market to some degree, in the fact that pre-Prohibition with alcohol there was moonshine with these crazy names like White Lightning and Triple Axe. That's just not what you see today. It's really built around brands, and we see that movement already happening in the cannabis industry, where brands are being created, and Eaze's menu since day one has really been catered around being product-centric and not necessarily where the brands are coming from. It's really about … just like with Uber, when you request a town car, you know that you're going to get a 2006 or newer, you don't care if it's coming from Bobby's Limousine or Johnny's Limousine, you just want the 2006 or newer, with the driver that's been background-checked and has a certain efficiency score. Eaze is very much the same way, where only safe products of the highest quality at the most competitive pricing are even allowed on the menu.
KS: Is there a Jack Daniels of marijuana now? No, I guess is there a Budweiser of marijuana?
Celebrities are leading kind of the way in terms of brands, I'd say. Snoop Dogg has his brands.
LG: What's his called?
Leaves.
LG: That's poetic.
KS: That's a shocker. No, I'm teasing, it's not a shocker in any way.
LG: You mentioned pricing. I honestly don't know, how much is marijuana right now? If we were to order some ... what's a normal amount to order? How much would it cost us?
There's different product types, so there's different ways to consume it. Really, when we guide patients through the menu, we're really trying to get three questions answered: How do you want to consume it? Do you want to eat it, smoke it, vape it? The next one is, how do you want to feel? And post-recreational may look like, what are you doing? And then the last one is, how much do you want to pay or how much can you pay? And that's relative to quality. So we design the menu to address all those buckets. So there's product types like flowers or edibles or concentrates and pre-rolls. Those would be the ways in which you consume it. Then there's the effects, which today it's like indica, sativa and hybrid or CBD. We're really trying to …
KS: I have no idea what you just said. What is that?
[laughs] Exactly. So we're trying to create a menu that's kind of a nomenclature that people are familiar with. So a better way to say that would be active, balanced, or relaxed.
KS: I see, okay.
So that's the second question we're trying to get answered. And thirdly, it's about price and quality. So we have the top tier, the mid-shelf, and then the bargain. And I think that …
KS: I didn't know there was bargain marijuana.
LG: But I'm just curious, can you give us some type of range?
About $20-$60 of 1/8 of flower would be an example.
KS: And meaning what? That's what people normally spend? Here's why I'm asking. My friend was dying of cancer, and they asked me to buy them marijuana when it wasn't medically available because they were in a lot of pain, and I had never bought marijuana so I talked to a dealer and I said, "I'd like a pound," and they thought I was a drug agent [laughs]. It was very embarrassing to have a drug dealer laugh at you. It wasn't very nice, and I said, "What's wrong?" And then when he delivered it I was like, "This is very sticky, what is this?" And he laughed at me again. So I'm not very good at it. She's pointing out that we don't know anything.
So another way to say it is the average consumption …
KS: But will the prices drop? Presumably prices drop when there's going to be lots of these, right?
Right. I think so. And you know, the average consumption of a patient today is about a half a gram to a gram, and an eighth is three and a half grams. So if that puts it into any perspective.
LG: That helps. And so the incumbents. So that was the outstanding question. Around whether or not you think you're going to be battling some really giant competitors in the coming years or months if this legalization does pass.
Right. Well, I think there's a few differences. The first one is that you have to verify eligibility to be able to receive this type of product. There's age requirements even in a post-recreational environment. The next is that having a product-centric menu that's specifically for something has a lot of power. The data that we're capturing around what people are consuming, what they like, what they don't like, and building a graph around that, so build a recommendation engine …
KS: So you'll know what people buy and like.
Right. As we start to understand consumer behaviors and then draw parallels between your consumer behavior and everyone else's in our database, you can start to build this recommendation engine. So the kind of focused solution has a lot of weight and a lot of value in it, especially for something that potentially affects you psychoactively. It's not like you're ordering hamburgers and hotdogs. You know how you're going to feel after you eat a hamburger versus a salad, but it's a little bit different when we're talking about cannabis.
KS: At some point when it becomes not as much of a hot button issue, some of these companies are clearly going to get into that delivery. I mean you could see Uber doing it too, or any other …
Yeah, and I think that publically traded companies are going to be a little more resistant until it goes federally legal. And hopefully at that point it's too late.
KS: Yeah, or they'll buy you or something like that. And then the last question ... and then eventually you're talking about this sort of reputation systems for these different selections, but at some point it will be brands. Maybe you'll see the tobacco companies get into it, whatever, these people who are good at delivering these kind of products. Do you imagine that happening more and more?
Absolutely. Yeah, I think, like I said, our hypothesis was that it was going to move to a world of brands. Until then, I think it's important to carry the best products and to really listen to the patient's' voice. What do they like, what do they not like?
KS: What is the best product? Right now. Your'e highest-rated cannabis on the site.
It varies across the board, depending on what you're looking to use it for. Some popular strains are like Girl Scout Cookies, or …
KS: [laughs] Who names these things?
Yeah.
LG: They're cookies made with the marijuana or it's just a type of a marijuana but it happens to be named Girl Scout Cookies?
It's a strain of flowers that's named Girl Scout Cookies.
LG: Oh, okay.
KS: What else? Give me another name.
LG: That's pretty clever.
KS: It's horrible, but I have children.
There's a new brand called State that just recently launched.
KS: Who?
State.
KS: State, okay.
Yeah, that one's pretty popular. Bloom Farms — they produce oil cartridges or the oil for vaporization.
LG: Sounds like they would make organic yogurt or something.
KS: I know. Maybe do that and marijuana. Yeah, it's going to be interesting, all the brands that are going to …
LG: I'm sorry, we interrupted you. Continue.
Yeah, I was just going to say that the concentrates category is the fastest growing. When you look at the …
KS: Those vaping things?
Exactly. So when you look at the future consumer, let's say a post-recreational environment or crossing the chasm further along in the adoption curve, there's going to be a different type of consumer coming into this. It's not going to be geared towards millennial males, for example. It may be stay-at-home soccer moms. And lowering that barrier, not having to roll a joint or smoke out of a bong and really just having the oil cartridge that you just plug it into a little battery and vaporize it, I think that's really important. And we're already starting to see that trend where …
KS: It really is actually. I was just somewhere and I was surprised by it. It was interesting. And it was indeed a soccer mom. And we've got some questions from our listeners. Lauren do you want to read the first one?
LG: This week our listeners and readers were quite literally too embarrassed to ask questions.
KS: Incredible.
LG: We put out a call to our Recode social media, I asked around The Verge. We put it out on Facebook. We said, "What are your questions about marijuana on demand?" And a couple people did respond to me and they said, "I just don't want to use my name."
KS: We're not going to use their names. They're reporters, of course.
LG: Of course.
KS: [laughs] Of course. We're not embarrassed. No shame.
LG: No shame. The first question we have is from JT: "How do you run a successful business if you're operating in a gray area, meaning it's different at the state level versus the federal level?"
Good question. So, you know, we operate in compliance with the state. And I think that's ... the guidance that the federal government has given is that as long as you're operating within compliance at the state level, they don't really have an issue with that. Although it is still federally illegal and it's still a Schedule One drug, they've given guidance, like I said, that they don't have an issue with that. As long as you're operating in compliance at the state level.
LG: And obviously your expansion plans depend a lot on whether or not it's approved on a state-by-state or a federal level. And so you're somewhat limited in the market that you're in now. I mean maybe what he's asking is how do you maximize the current market that you're in?
You know it goes back to ... well, one, the cannabis industry is the fastest growing industry in the world. So it's already doing that on it's own. I think that the majority of Americans favor legalization, and when that pendulum shifts, naturally it starts to snowball as well.
KS: Yeah the states ... the federal’s given up essentially.
Yeah, they've cut the budget from DEA and I think it's ... the federal government isn't the fastest moving thing in the world, so I think these things, they take time. And in the same way that ... you know, California was the first to go medical 20 years ago and there's a lot of learnings over those 20 years, but before shaping the Prop 64, which is going to be on the ballot this November, California looked at all the other recreational states. So Colorado, Washington, Oregon, Alaska, D.C. And we learned from that. And we've used the 20 years of medical as well, as what worked well and what didn't …
KS: What have we learned? What have you learned?
Oh, I think that it's a balance between safety and accessibility. And there's a lot of things, you know, peeling back the onion a little bit, another layer is balancing supply and demand so that you're not reintroducing or leaving the door open for illicit activity. So, you know, I think the federal government is taking a similar approach. They're looking at these states, they're seeing what works and what doesn't, they're seeing the tax revenue that's generated, they're seeing how it's disrupting the illicit activity, and they're seeing that it's not being abused as a lot of people maybe thought based on the stigma that has been attached to it for quite some time now.
KS: All right, next question, Lauren?
LG: Next question was also anonymous. This person said, "Credit cards ..."
KG: Ech. That's Walt Mossberg.
LG: [laughs} Walt. It was Moss Waltberg. [KS laughs] No, this really is truly anonymous.
KG: I'm just going to start naming people.
LG: "Credit cards. How do they work? Are you leaving a digital footprint?" And then this person mentioned a company that charged a 5 percent fee for credit card transactions and was wondering why this would be the case. Is there any kind of discouragement around credit card payments in this particular field. How does the payment actually all work?
KS: Probably all credit cards, right?
Well, today it's cash only, actually.
KS: Oh, why?
Yeah, it's pretty wild that the service is growing this fast in a world where you mostly pay via credit card. So I think that's ... well, one, it's mainly cash business because of the scheduling of the drug and because it's not federally legal. But at the same time, it's not slowing down the growth of the industry, right? It's still the fastest growing industry in the world. So how do we deal with it? Well, we don't, because we're not collecting the initial transaction. The dispensary does. You know, I think that we're really pushing to create an environment where credit cards can be allowed and where banking isn't an issue. From a safety perspective, it would be a lot safer if people weren't driving around with these large sums of money.
KS: Yeah, I didn't realize it was cash.
You know, I think it's also, you know, it's about taxes. It's easier to hide money when it's a cash-only business.
KS: When is it going to be credit card?
Well, I think it's going to ... there's a few different ways to do it. Some dispensaries are potentially misclassifying today. Others are not misclassifying, but those are much harder to find the banks that would support that. And then also it’s payment processing. So you need to find a payment processor that's willing to accept the high-risk merchants.
KS: Why don't you do that? You could that.
Yeah, I mean for Eaze it's more about, and with any startup really, I think it's more about focus. What's your core competency? Do we want to be the bank or the payment processor? Do we want to focus on data and logistics and kind of more the piping? But we may have some announcements coming up soon, not to spoil anything. But it's definitely …
LG: You could spoil it here on the podcast.
[laughs] Yeah.
KS: You could pick up some dough doing that.
Credit card payment processing is in some ways critical.
KS: Yeah, I think so.
So, yeah. Not to spoil anything, but we'll probably have some announcements very soon.
LG: So right now, when someone comes from a dispensary to drop off a delivery, that person pays at the point of delivery in cash.
Correct.
LG: And so you're trusting essentially that customer who requested this is going to pay, they're going to have the funds on hand to pay, and that they are who they say they are.
Well, we know who they are.
LG: They have to have the card, right? Oh, okay, so you've screened that, that's true. But otherwise it's just …
So we know who they are. To prevent diversion, the driver has the photo that they signed up with and their state ID. And that's all been verified and cross-verified with all the other information. So the dispensary is trusting that they're actually going to pay, but …
KS: To hand it to the person that's supposed to get it.
But the success rate is extremely high.
KS: Oh, that's good.
There's not many cancellations.
KS: Don't deliver to anyone named Swisher but me.
LG: That was a very good anonymous question, thank you. Do you want to read the next one?
KS: Certainly. It's from Quentin Hardy, of course — hi Quentin — and a reporter for the New York Times. They seem to enjoy their cannabis over there. "Presumably it's a laid-back demand, something it would be cool if you could get to later today ..." What does that mean?
LG: I think he might be high.
KS: [laughs] Quentin, what are you talking about?
LG: No, I think what he's saying is can you maybe schedule it for later today?
KS: Schedule, like an Uber drive.
LG: As opposed to on demand. Because you're talking about this 15 minute window, which is actually incredibly fast. And maybe he's saying …
KS: "Oh, I get home at 4:30 ..."
LG: Let's say you are that parent who has the sick child and you need the marijuana for medical purposes — can you schedule it for later?
So I think …
KS: We think that's what Quentin means.
So for on-demand, scheduled deliveries make less sense when you deliver it fast already. So when, you know, that you can get an Uber in San Francisco in about three minutes, scheduled pick-ups make less sense.
KS: Although they just added that.
Probably for more suburban areas where you don't have three-minute pick-ups. With our operational model, the deliveries across all our cities are about 15 minutes, and I think that becomes less important. It's not to say we wouldn't do that in the future. I'm just saying that it becomes less important.
KS: Well, Quentin would like it every day at 4:20. Go ahead. Sorry, I had to.
LG: This one is from, once again didn't want his name being used, but VJ: "Are there loyalty cards?"
KS: That's Mark Bergen; he's really cheap. Go ahead.
So loyalty is, I think, important. One thing that Eaze does do is there's promotions from product manufacturers, and those are given to people that place a certain number of orders a month, or we have different classifications, like VIP. If you place a certain number of deliveries per month, then you're classified as a VIP and you get different privileges.
KS: Are you limited in the number of deliveries you can have?
You are not limited in terms of the number of deliveries that you can have, but you're limited in terms of the amount you can have per day. And then also on yourself at anytime.
KS: Loyalty cards are a great idea.
LG: So there are loyalty cards. It is a great idea.
KS: I always love a loyalty card. Who doesn't?
LG: Especially in their case. Especially in the case of medical.
LG: So this is my colleague at The Verge, Casey Newton, who did agree to submit a question, but he said we had to read his name as Casey Harambe Newton.
KS: I just bought him dinner the other night and now I know why he was so hungry. "Can you talk a little bit about whether there is a generational divide — i.e. is there data on generations embracing different drugs differently?" That's a good question, Casey Harambe.
So I don't know about drugs differently. I can speak on behalf of the cannabis market. The sentiment across the younger GenY, GenX is massive support for cannabis legalization. But we're also finding that the older generations are also changing their mindset. I think it comes through more education. I can tell you that I grew up in Orange County, Southern California, a fairly conservative Christian household, and drugs just weren't a part of how I was raised. And my mom, when I told her I was starting a cannabis technology company, she almost fell out of her chair and had some choice words. But I had her go through the same process that I went through around educating herself and really she came back a few days later with a 180 in terms of how she viewed cannabis. So I think that, just going back to the point, it's really about education, and I think that there's a lot more education coming out, especially most recently. And most people that take the time to educate themselves usually …
KS: The later, older generations did start the whole thing off. I think there was just shame associated with it.
LG: Kara, millennials did everything first.
KS: No, they did not. I'm certain it was the ‘70s people.
LG: Why do you think there is such an embrace of this among the younger generation?
You know, I'm not completely sure. I mean, I think that younger generations are much more open and accepting, maybe a little more liberal at a high level, I guess. You know, I think on the older generation, the other impact would be, for example, my mom, when her mother got sick, and I don't know if you guys have gone through any illnesses in your families, but when you have to make a decision as to what that treatment looks like, you always second-guess, "Wow, did I do the right thing?" And I think it's about choice — not only "did I do the right thing?" but "did i explore all the options?" And so the older generations are going through that much more so than the younger generations. So I think it's different. I think it's ... you know, the younger generation is much more open-minded maybe. That may be a stereotype, but that's what we see, at least.
KS: Gosh, I think young people are much more conservative. I do. There's a question here, follow-up, "Do you have a sense of responsibility around the long-term risk effects of marijuana?" Do you as a company?
I mean, from a legal perspective, I'd say no. But from a moral perspective, absolutely. And I think that's why we take this so seriously. This is a big responsibility for us, and we use the data, we follow data, we have a data-driven decision making process internally. That's how we develop technology, and we use the data to guide us. We wish we had more data like research that's out there, but absolutely we take a responsibility, and I think there is at least a moral responsibility that we have.
KS: All right, Keith, thank you so much for being on our show. This is a really interesting area and as the legislation passes and goes across country, it'll be an interesting question. And worldwide — do you expect to expand worldwide?
Yeah, I mean, like I said, we want to be everywhere that it's legal. So Canada, Australia, other European countries I think are certainly …
KS: And who is your biggest competitor? Besides the drug cartels.
Yeah, definitely the illicit market is our biggest competitor. In terms of ... Eaze being first to market is a huge advantage and especially with on-demand because the geographic network effects … just as you increase volume, the service becomes a lot better. Faster deliveries and what not. So we're pretty far ahead of the next biggest competitor but there's competitors like Meadow or others that are out there.
KS: We'll see more of them.
Yeah, I think competition is good sometimes.
KS: Yeah, well ... Keith, thanks so much for joining us. This has been another great episode of Too Embarrassed to Ask.