Courtesy of Caliva
Inside Caliva's growing facility.
- Caliva CEO Dennis O'Malley told Business Insider that the California cannabis retailer won't be renewing its partnership with the cannabis delivery platform Eaze when the current contract expires in March.
- As part of the move, Caliva will let go of over 200 employees, the vast majority of whom are full- and part-time drivers associated with the partnership.
- In an exclusive interview with Business Insider, O'Malley said Caliva plans to expand its own direct-to-consumer platform, rather than partnering with a distributor.
- He also said the company is closing in on a Series B funding round that will exceed the $75 million Series A the company raised in January 2019.
- Visit Business Insider's homepage for more stories.
California cannabis retailer Caliva is taking dramatic steps to shore up its business amid a slump in the cannabis industry.
The company is cutting ties with cannabis delivery service Eaze and laying off around one-third of its workforce, CEO Dennis O'Malley told Business Insider. O'Malley said that Caliva plans to build up its own ability to sell cannabis products and deliver them to consumers, instead.
Caliva is not the only prominent cannabis company to shed employees in recent weeks. Leafly, a cannabis media and information site, cut 54 employees or 18% of its workforce last week, and MedMen - contending with a slumping stock price and layoffs of its own - announced the departure of its co-founder and CEO, Adam Bierman, in January.
The vast majority of the more than 200 employees cut at Caliva will be full- and part-time drivers who delivered cannabis orders placed via Eaze, Caliva CEO Dennis O'Malley told Business Insider in an interview. Caliva said it plans to hire some of them back into other roles at the firm. Caliva has around 700 employees, meaning that the cuts will affect around one-third of its workforce.
The employees were notified of the cuts early Tuesday morning. O'Malley did not say how many roles would be open for the affected workers to apply to.
Many Caliva drivers are full-time employees with 401k plans and healthcare benefits. O'Malley said he "fully expects" drivers re-hired by Caliva to retain the same benefits.
Tough times at Eaze and in California's cannabis industry
The two-year partnership between Caliva and San Francisco-based Eaze began in April 2018, as part of an effort to expand Caliva's reach in the Bay Area, according to Caliva. The current contract, which runs through the end of March, will not be renewed, O'Malley said.
Eaze didn't immediately respond to a message seeking comment sent early Tuesday.
With its break from Eaze, Caliva will turn to expand its direct-to-consumer platform through its website and network of dispensaries. The timing of all this, O'Malley told Business Insider, was right for Caliva, which recently expanded into the Los Angeles area.
"It was very important for us to continue to focus on a consumer experience that we can control end to end," O'Malley said.
Eaze makes money by charging dispensaries a technology fee and providing advertising space, data, and menu placement to brands, according to internal documents reviewed by Business Insider. All of the drivers that deliver orders through the Eaze app are paid by the dispensaries or brands that partner with Eaze, rather than by Eaze itself.
REUTERS/Luisa Gonzalez
The cannabis industry is facing tough times.
Eaze, which has been dubbed "the Uber of weed," works as a platform to deliver cannabis products in select cities in California and Oregon and has partnered with dispensaries as well as brands since its founding in 2014.
The company was seen as a bright spot for cannabis-curious VCs, many of whom aren't able to invest directly in the industry because the institutional investors that back most mainstream venture funds are barred from investing in startups that profit from a Schedule I drug.
But Eaze has faced many challenges in the past year.
In June, the startup was hit with a lawsuit alleging that the company had engaged in wire and bank fraud to process credit card payments for marijuana purchases. TechCrunch recently reported that the company was facing cash shortages, unable to pay its vendors or employees, and pivoting toward plant-touching operations by acquiring former retail partners.
That would make Eaze a direct competitor to Caliva, a vertically integrated company that grows its own cannabis and sells products through its own shops and other retailers. Eaze's other partners, many of whom are cultivators and brands in the Californian market, would also become de facto competitors.
Caliva is closing in on a Series B funding round
The company is also in the process of closing a Series B funding round, which O'Malley said would exceed its Series A, in which it raised $75 million, as reported by Business Insider. Investors in the Series A include three-time Super Bowl MVP Joe Montana and former Yahoo CEO Carol Bartz. Rapper and entertainment mogul Jay-Z serves as a brand strategist to Caliva.
O'Malley told Business Insider that Caliva has secured a lead institutional investor for the Series B, though he declined to get into specifics around participating investors and funding amount. He did say that the pre-money valuation would exceed the post-money Series A valuation, and expects to announce specifics in a "few months."
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