Keith McCarty had already given his parents plenty of reason to be proud of their only son.
In 2012, a technology company he helped build was bought by Microsoft for $1.2 billion. At 26, the Orange, Calif. native was sitting pretty.
McCarty said his company would be called Eaze, and it would be an on-demand health care service that connects medical marijuana patients with deliveries from local dispensaries.
With a couple of taps on a smartphone, he explained, patients could order buds or edibles for discreet delivery in 20 minutes or less – much like calling for a ride from Uber.
His mom, concerned over what her son was getting into, had a question:
“What am I going to tell Grandpa?”
In the 20 months since Eaze launched, McCarty has built a company that’s won over family members and traditional business minds alike.
Technically, it’s a technology platform, he explains, not a pot company. McCarty doesn’t use cannabis and his company never touches it.
Keith McCarty, the CEO of the growing marijuana delivery service Eaze, shows deliveries in San Francisco that are enabled by his app. (Courtesy of Eaze)
The concept helped Eaze land one of the largest rounds of Silicon Valley investment dollars in the cannabis industry, according to Troy Dayton, CEO of the ArcView Group, an investment company that specializes in cannabis-oriented startups.
McCarty, Dayton explained, is part of a new generation of entrepreneurs launching cannabis-industry companies after making their first fortunes in technology. Now, he said, they’re pioneers in the great green rush.
And of McCarty’s idea specifically, Dayton added: “Eaze really broke down some barriers.”
But in McCarty’s native Orange County, where Eaze launched in July, the 30-year-old is still working to break down those barriers.
Much like Uber has fought regulators even as the ride service became ubiquitous, Eaze is trying to grow while toeing the line of an ever-shifting legal and political climate.
It doesn’t help that new state regulations have prompted a flood of cities across California to ban marijuana delivery services.
But McCarty says his team is going to local cities, one by one, to win over city councilmembers, saying his business model doesn’t violate any law. The potential, he adds, is promising.
“Orange County is taking off at an even faster rate than San Francisco did when we initially launched there,” he said. “One patient at a time, we’re helping to remove that stigma.”
A BORN ENTREPRENEUR
McCarty grew up in Orange, in the house where his parents still live.
“It was a typical Orange County household, with strong Christian values,” McCarty said.
His dad worked for Yamaha, so McCarty was active in motor sports while he was growing up, always tinkering.
McCarty also showed an early knack for business, according to his mom, Vicky.
When he was 10, and his friends started catching and raising lizards, McCarty went in a different direction: He caught crickets and sold them to his buddies to feed their new pets.
McCarty graduated from Villa Park High School in 2003, then earned his bachelor’s degree in finance and marketing from Chapman University.
In 2008, he was the fourth employee hired at Yammer, a social networking service for businesses to communicate internally. After Microsoft bought Yammer in 2012, McCarty started dreaming of his next move.
McCarty watched on-demand technology turn Uber and Lyft into international brand names, and knew he wanted to use the concept for a new purpose.
It happened that 2012 also was the first year national polling showed a majority of Americans favored legalizing marijuana, and he was drawn to the industry’s growth potential.
As he researched medical uses for cannabis, he read about patients such as Charlotte Figi, a 9-year-old who is having fewer epileptic seizures thanks to a particular strain of marijuana, her parents say.
“It just became very inspiring to me to become a voice for the industry,” McCarty said. “I knew I wanted to be part of that movement.”
HOW EAZE WORKS
Eaze launched in San Francisco in 2014, with the beta version built in McCarty’s apartment and capital coming from McCarty and his former colleagues.
As the service caught on in the Bay Area, the team raised $1.5 million to see if it could replicate that success in other California markets. Then came another $10 million from venture capitalists, including a firm co-founded by rapper Snoop Dogg.
Now, residents in portions of Orange and San Diego counties, as well as Los Angeles and San Francisco, can access Eaze.
Users must register at the EazeUp.com website, then upload photos of their state ID and a doctor’s recommendation for medical marijuana. If they don’t have a medical referral, they can video conference with a doctor using the EazeMD app or website for $30.
After a patient submits an order, Eaze detects the location and dispatches the closest driver – an employee of the dispensary. Much like Uber, customers also get an estimated delivery time and text alerts about the status of their order. They pay the driver in cash.
McCarty, the marketing expert, learned much from his company’s early tests. For example, 28 minutes is something of a magic time; if customers have to wait longer than that, they tend to cancel their order. So Eaze aims to deliver in under 20 minutes, with an average 15-minute wait.
He also learned to run a cash-only operation (federal law blocks bank access for most marijuana businesses) and other operational rules of the still-new industry.
“We’re at a point within the industry when you don’t want to make any mistakes,” McCarty said. “There are a lot of eyes on what’s happening.”
Customers aren’t told where the marijuana is coming from, trusting Eaze to send high-quality product, much as they trust Uber to provide clean, safe rides. McCarty says Eaze works only with vetted dispensaries that test products for safety and label the amounts of THC and cannabidiol, chemicals that give marijuana its psychoactive and medicinal effects, respectively.
For dispensaries that can handle the demand, the relationship pays off. McCarty said one top dispensary that works with Eaze boosted its revenue by 45 percent in nine months.
There are competitors. The delivery service Meadow is giving Eaze a run for its money, and smaller players, including GreenRush and Flow Kana, fight for a piece of the pot delivery pie.
But Eaze was first out of the gate, and McCarty believes that’s a key advantage.
“If I had a crystal ball, I don’t think I could have timed it any better,” McCarty said.
POISED TO EXPAND
As Eaze spreads to more cities, it’s offering a rare glimpse into the demographics of California medical marijuana’s users.
Three-quarters of medical marijuana patients are men, according to company data, and chronic pain is the leading reason for medical referrals.
McCarty also is gearing up, with Eaze posied to expand now that voters have legalized the recreational use of pot in California. By the end of the year, he said, he hopes to grow beyond the state line, with Nevada a potential growth market.
It’s not all green pastures ahead, though.
Apple won’t allow Eaze, or any other cannabis company, to build an app that permits ordering for delivery; the EazeMD app allows customers to acquire the paperwork from a physician, but orders must be placed through the company’s website – either desktop or mobile. Eaze also is still working on a platform that will allow for payment by credit card.
And it’s still fighting to grow on McCarty’s home turf.
If patients try to visit EazeUp.com from Santa Ana, for example, they get a pop-up that says: “Due to restrictions imposed by the city, medical marijuana delivery is not available in Santa Ana.”
That kind of pushback is why investors still view businesses like Eaze as risky bets. Dayton said investor money for cannabis companies remains tiny compared with other segments of the tech industry.
McCarty is optimistic about getting back into banned cities, though. He even got backing from his earliest convert: his mom.
After reviewing case studies and seeing how cannabis helped family friends battle illnesses, Vicky McCarty said she and her husband have come to understand why their son is so passionate.
“I’m an Orange County mom with Midwestern values,” she said. “The fact that I’m here now, supporting medical marijuana, tells me that anyone who does their research will … change their minds.”
This article was first published at OCRegister.com.
