Venture capital firms are giving money to “Uber for weed” apps, but you can only deliver pot legally in a few cities in California. It’s illegal everywhere else.
In this photo taken June 5, 2014, Michael “Billy the Kid” Kenworthy, right, a marijuana delivery driver, selects a package of pot for a customer who identified herself as “Tracy,” while conducting a transaction in Kenworthy's car outside Tracy's home in Seattle.
Ted S. Warren / AP
No one wants to furtively shove cash into a stranger's hands on a park bench. If a city has no commercial space for buying weed, getting it delivered at home seems like the next safest choice. Too bad weed delivery is still illegal — even in most places where marijuana is commercially available.
That hasn't stopped investors from pouring their money into “Uber for weed” delivery apps. About five years ago, when marijuana legalization first started to feel like a real possibility, investors began to make conservative bets on pot, sticking to startups that stayed on the safe side of the law by not touching the drug but that generated buzz and money from their association with weed. In 2014, investing in things like grow lamp manufacturers and online dating for stoners was all the rage among ambitious young white guys, finance industry veterans, and stock market risk takers.
This year represents a new, second phase in cannabis investment: businesses dependent on something mostly illegal but that investors hope will become more legal soon. In the past six months, we've seen PayPal co-founder Peter Thiel invest in a Bob Marley–branded strain of cannabis that has not yet been smoked by consumers, and celebrities from Willie Nelson to Bethenny Frankel say they plan to soon offer strains of their own.
But delivery apps are among the hottest investments in this new phase. In February, the startup incubator Y Combinator announced its investment in the delivery app Meadow. And on April 14, the San Francisco–based app Eaze announced that it had raised $10 million in Series A funding, with some of that money coming from Snoop Dogg's cannabis-oriented Casa Verde Capital fund.
However, marijuana delivery remains illegal in all four of the states that have passed laws legalizing recreational weed — Colorado, Oregon, Washington, and Alaska — as well as in Los Angeles, the nation's largest cannabis market.
So how is it possible that these apps still exist, and why would anyone want to fund them?
The truth is marijuana delivery services in the U.S. are thriving — just not the ones that have slick interfaces and venture capital. Most apps, including Eaze, Nestdrop, Meadow, Nugg, and Canary, try to avoid liability by subcontracting the acquisition of marijuana and the actual delivering out to dispensaries or unlicensed services, whose names and information they typically keep private. The consumer gets pot on demand, the app facilitates but does not consider itself responsible for a potentially illegal transaction, and the guy taking weed out of his car to sell it to you in your kitchen remains under the radar. Sounds foolproof, right?
Maybe not. Several lawyers have pointed out that apps connecting dealers with consumers in areas where delivery is illegal may be aiding and abetting a crime. And on Dec. 2, L.A. City Attorney Mike Feuer announced the city was seeking an injunction against an L.A.-based delivery app called Nestdrop for so flagrantly facilitating delivery of marijuana.
Still, these apps soldier on, and the investors supporting them feel confident that the law will eventually be on their side.
“I think that over time regulations will change,” said Kyle Lui, a principal at DCM Ventures, which led the funding of Eaze. “It makes sense to have deliveries because people don't want dispensaries in their neighborhoods.”
Marijuana is still federally illegal, and therefore all marijuana delivery is technically illegal. Even when following local laws, legal marijuana delivery only exists in scattered places across California. But it's unclear whether delivery will still be allowed in the Golden State once the drug is legalized for recreational use, which many believe will happen in 2016. The Drug Policy Alliance, which has the best chance at gathering the consensus and funding necessary to pass a ballot initiative next year, has yet to decide how delivery will fit into their proposed law.
“We understand the importance of delivery for many patients,” said the DPA's California state director, Lynne Lyman. “This is one of many regulatory issues that the DPA is still considering.”
For now, pot delivery is most popular in densely populated areas where the drug is still illegal, like Manhattan, or in cities that are attempting to crack down on medical dispensaries, like Los Angeles and San Jose.
Just three years ago, Los Angeles had nearly 1,000 brick-and-mortar marijuana collectives, only a handful of which delivered. Then, in May 2013, voters passed Proposition D, banning delivery and deeming only 135 of those dispensaries legal.