Business

“You Have to Give Something Up:” Eaze Tries to Get Equity Right

By Dan Mitchell Sep 3, 2020
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Dan Mitchell is a veteran journalist based in Oakland, Calif. He has written for The New York Times, Fortune, Wired, National Public Radio, the San Francisco Chronicle, the Chicago Tribun...
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Dan Mitchell is a veteran journalist based in Oakland, Calif. He has written for The New York Times, Fortune, Wired, National Public Radio, the San Francisco Chronicle, the Chicago Tribune, Leafly, and many other publications.
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Carolina Vasquez-Mitchell was overcome on the day last November when she got a $50,000 check from Eaze, the San Francisco-based cannabis retail platform, for her cannabis company, Dreamt. “I couldn’t believe it,” she said. “I almost cried. All my dreams came true that day.” 

She quit her job as the chief scientist of Innova Labs, a cannabis-testing company in Los Angeles, and she and her husband and a couple of other partners dove into running Dreamt, which they had been building mostly on weekends. Now, she is creating cannabis products the company claims help people with sleep issues, with a spate of new products  both on shelves and in the pipeline.

All this might have happened without Eaze, which this week announced that Dreamt, along with several other Los Angeles companies, is part of an expansion of its Social Equity Partners program,  which it has been running in partnership with minority-owned businesses in the Bay Area since last year. But Vasquez-Mitchell said that, thanks to Eaze, it’s happening much faster. (Check out Dreamt on the WeedWeek podcast.)

Dreamt introduced its first product — a vape pen containing a mixture of THC, CBD, and cannabis terpenes, as well as other ingredients such as melatonin and valerian root — at the end of last year. Now it’s introducing several new products, including tinctures, gummies, and, soon, a cannabis-infused beverage. Besides the $50,000 grants , which the program’s participants each get, Eaze provides heavily discounted sales analytics, free business and legal advice, networking, and prime real estate on its Web site.

“Equity” is a somewhat amorphous concept that was introduced well before states started legalizing recreational cannabis in 2012. It aims to recognize the absurdity and unfairness inherent in the creation of a brand-new legal industry dominated by monied white people, selling and using a product that for decades was used to marginalize and punish black and brown people for doing the same thing. Many of those people are still in jail for pot offenses.

Efforts by state and city governments to support equity businesses have largely run aground on red tape, court cases and a raft of other complications. Eaze’s effort suggests corporate equity programs could be more effective.

Featuring equity products on the Eaze platform “makes it easy for consumers to support a diverse industry, and to address the War on Drugs’ disproportionate effects on the BIPOC [black, indigenous, and people of color] community, by putting their dollars toward these brands,” Eaze said in a statement. The company says its equity partners have made more than $1M worth of sales through Eaze.

Vasquez-Mitchell had all the credentials needed to start up her company: a bachelor’s degree in chemistry from the University of Guadalajara in Mexico and a master’s from the University of Southern California, where she also worked as a researcher and lab instructor for seven years. After that came stints as head of research for Power Brands, a Los Angeles food company, and chief scientist for two big cannabis companies: KushyPunch and Innova.

But she’s also a Latina and a woman. It can be hard for any cannabis entrepreneur to get financing or make business partnerships. It’s that much harder for people, well-credentialed or not, who belong to demographics that continue to face discrimination in the marketplace.

Help Wanted

“You need a crapload of money to make it in California cannabis,” said Darius Kemp, head of equity and community change at Eaze. Cannabis companies have a hard time getting credit thanks to the continued federal illegality of marijuana, which keeps most banks out of the business.

It’s that much harder for people who come from communities where getting bank loans is generally difficult. Eaze hooks these companies up with willing lenders. “There’s a lot more to it than just putting black and brown people on the Eaze menu,” Kemp said.

The expansion involves making products from Eaze’s existing, Bay Area-focused equity program  available to customers in the L.A. area. Those partners include Cloud 9, KGB Reserve, and SF Roots. New partners include the Bay Area companies James Henry SF and Oakland Extracts, as well as the L.A.-based dreamt and Blaqstar Farms.

Cities and states have created social equity programs. Often, these include providing incentives for cannabis companies to take minority-owned businesses under their wing and provide them with space and other resources. Success has been spotty at best. For example, the city of Los Angeles has still not issued a single social-equity license, despite repeated promises to do so. (Another equity-adjacent lawsuit was filed against the city this week.)

“Lip Service?”

Among weed companies, the commitment to equity varies widely. Many brands tout their programs, and post inclusive messaging on social media, whether or not they amount to anything substantive. 

“My experience is that a lot of this is just lip service,” said Madison Shockley, a co-founder of the Social Equity Owners & Workers Association, which works for justice and fairness in the cannabis industry. “It’s nothing more than a press release.”

Shockley is not familiar with Eaze’s program, which at the very least can be quantified to a degree — those $50,000 checks — making it more obviously substantive than some others. Time will tell, he said, but he’s skeptical. At this point, he said, “there’s been no real effort by any company that I’ve seen.”

The main problem historically has been the partnership agreements, said SEOWA’s other co-founder, Kika Keith. Often, the agreements contain so many restrictions that the equity businesses essentially lose their independence. “They’re not looking for entrepreneurs, they’re looking for employees.”

Eaze’s Kemp said the company is different in that it has a true commitment to the cause. Unlike many companies, he said, Eaze doesn’t take equity stakes in the companies it incubates, which means it has much less leverage over them.  He agrees that too many companies have used social equity as a mere marketing tool, without committing a lot of resources to it. “You have to have a come-to-Jesus moment and realize that you have to give something up,” he said. “You have to accept that you might not make as much profit, but that what you get in return is worth it.”

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Dan Mitchell
Business columnist