The Green rush in the Bay area

It is Friday night and I am standing on the doorstep of my San Francisco apartment looking down in disbelief at the neatly packaged, vacuum-sealed bag of green-grey marijuana buds in my hands which has just been delivered by a friendly and courteous driver, 16 minutes after it was ordered online. An eighth of an ounce (3.5g) of Purple Platinum cost $25 after a $20 promotional discount. The payment was cash only. The label lists the strain along with the retail dispensary that supplied it. Everything is legal.

Let me explain. In California, medical marijuana is allowed, and my husband ordered the drug through the delivery service Eaze. It was, well, easy. Earlier that day, for a separate fee of $25, the site connected him to a marijuana doctor who, over a video chat, was happy to give him a good-for-a-year medical recommendation for his occasional migraines.

Though the doctor was not available immediately when it did happen the consultation took five minutes. After uploading the recommendation, it was a case of browsing Eaze’s site and selecting a strain from the 18 available (which include varieties such as Funk You Up, Green Crack and Headstash Cookies). Delivery time averages 15 minutes. There was no physical visit to either a doctor or a dispensary, which has been the process for Californians in the past.

Eaze started in San Francisco in July 2014, but has since spread to more than 80 cities in California, mostly in the Bay Area. The separate service that connects patients with marijuana doctors over video was added this summer. The idea is that of Keith McCarty, an early employee of business social network Yammer, sold to Microsoft in 2012 for $1.2bn.

Looking around for how to catch the next wave of technology, McCarty decided to focus on consumer delivery on demand. Since the success of ride services Uber and Lyft, startups have sprung up in San Francisco to deliver everything from fancy restaurant meals to clean clothes.

Eaze quickly raised $1.5m in funding and by June 2015, an additional $11m, the lion’s share of which came from top-tier Silicon Valley investment firm DCM Ventures but which also reportedly attracted the investment firm of rapper and marijuana aficionado Snoop Dogg.

Using tech in marijuana industry

“Eaze is like the Uber of marijuana,” says McCarty. Drivers employed by a local medical marijuana dispensary cruise the streets with a set inventory in the back. When a patient selects a product online, Eaze algorithms alert the closest driver and ask them to make the delivery.

The company and its investors are at the vanguard of a new trend in Silicon Valley: bringing software technology and business models to bear in the marijuana industry. “It is called the green rush. It is already a growing industry and we are just getting started,” says McCarty.

“Cannabis hasn’t really had a lot of technology, and now it is coming,” says Eddie Miller, co-founder of New York-based eCann Media, which is hosting a series of summits across the US and overseas, including London, for those interested in investing in cannabis technology companies.

Splashy investments have hitherto been rare in the marijuana industry. There is also a stigma attached to the industry which is seen as rife with people who overindulge, adds McCarty. But as more and more states open up to medical or recreational marijuana or both (24 so far, including Washington DC) and the move to legalise it for recreational use in California gathers steam, the business opportunities are obvious.

The market is likely to reach $3.1bn (£2bn) this year in wholesale and retail cannabis legal sales, estimates the industry publication the Marijuana Business Factbook. Aiding things too is the so-called Cole Memo, which makes clear that the US federal government will take a hands-off approach to enforcement as long as state laws are complied with.

California’s voters are poised to consider legalising cannabis for recreational use in 2016, funded by the likes of tech billionaire and former Facebook president Sean Parker. If the state embraces it, it will not have been the first to do so. Incentivised by tax revenues, Colorado, Washington, Oregon, Alaska and DC have already legalised it for recreational use.

Earlier this year, Founders Fund — the investment fund of Peter Thiel, the powerful Silicon Valley venture capitalist  — put multi-millions into Seattle-based Privateer Holdings, a private equity firm that owns several cannabis-related companies. In the city of Oakland, on the other side of San Francisco Bay, cannabis investor network Arcview, formed in 2010, connects mostly individual investors with marijuana startups — tech or otherwise — in need of angel funding. This year it launched Canopy, an accelerator programme for ancillary cannabis businesses, in Boulder, Colorado.

Hurdles aplenty

Despite the enthusiasm, cannabis-tech companies face more hurdles than the average app startup. Banking can be a headache because growers and retail dispensaries can struggle to get accounts, making them harder to work with. Differences in marijuana laws between states and cities within a state are also a problem.

In California, some cities allow delivery but others don’t and some exist in a grey zone. Many states which have allowed recreational or medicinal marijuana either prohibit delivery or in effect ban it, making expansion for the delivery companies challenging. 

However, new challenges are likely to emerge. Keith Humphreys, a professor of psychiatry and behavioural sciences at Stanford University, expects to see some “push back” against the companies as use grows with greater legalisation. Cannabis is a drug that affects learning, memory and sometimes anxiety levels and has the potential for addiction, he points out.

“People know somebody who is couch-locked, not finishing school, not getting a job and it is like, ‘Wait a minute, this is not harmless’,” he says. Some of Eaze’s marketing even suggests use before or after a weekend workout to enhance “runner’s high” — hardly a medical application.

Newcomers to the cannabis industry may also face resistance from established players, believes Erick Eschker, co-director of the Humboldt Institute for Interdisciplinary Marijuana Research at Humboldt State University, in the so-called emerald triangle region in northern California where most of the state’s cannabis is grown. For all the rising interest, investment is still only at the beginning, even when it comes to ancillary companies, note Miller and Dayton, blaming the massive reluctance on the legal issues that do not exist in most other industries.

They add, the reluctance also makes the advantage of investing today bigger: those who get in first stand to make the most if and when the barriers vanish. So one day will it be Eaze as well as Uber pinging UK phones to say a driver is outside? Miller believes that, though it may take up to 20 years, cannabis will eventually be legal across the world.

 The medicinal benefits will drive the movement forward, with recreational consumption following. “Just like how the repeal of Prohibition [on alcohol] happened,” he says.

As to what my husband is going to do with his medicine, he wants to look first at evidence that marijuana can help migraine sufferers. One recent scientific review concluded that there was some evidence suggesting it could have a role, but the gold standard of proof necessary for confirmation and further evaluation – randomised clinical trials – were lacking. But it is also a long weekend and, well, the doctor thinks it is worth a shot.