Business

“We’re in a very tight spot,” Eaze exec tells team

By Alex Halperin
Apr 27, 2022
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Photo credit: Getty Images

Delivery app Eaze’s survival was in question before it acquired Colorado-based retailer Green Dragon, executives told staff in a Zoom meeting this month, a recording of which was shared with WeedWeek.

The sometimes contentious meeting between the company’s leadership and engineering team offers a rare look inside a major cannabis company navigating consolidation, slowing growth in some states and the many challenges inherent in the federally illegal industry.

As with any merger, the combined company has had to align the companies’ cultures and operations. Green Dragon, which started about a decade ago, had been a profitable family business. Eaze, by contrast, looked more like a tech start-up and was “burning an obscene amount of money,” CFO Trey Handley, formerly of Green Dragon, said.

Employees at Eaze, which handles about one third of legal deliveries in California, took pride in the company’s social equity component and being, what one current employee called a positive force in the industry. While current and past employees, speaking on background for fear of retribution, acknowledged that Eaze needed to stabilize financially, they worried that the management team coming from Green Dragon, who they see as controlling the combined company, was overly focused on profitability.

  • Though it doesn’t come up in the recording, in interviews they expressed concerns about what they view as anti-union activity at Green Dragon. Eaze had previously had relatively good relationships with organized labor.
  • Earlier this month, the combined company “vehemently” denied being anti-union and said it “has not and will not retaliate against employees for union activities.”

To protect sources, WeedWeek is only publishing the meeting’s audio. Participants occasionally referred to a simultaneous comment thread which WeedWeek did not obtain. 

“At every turn it’s been oversimplified that Green Dragon [is] evil, Eaze [is] perfect and good,” executive Alex Levine, who came from Green Dragon, said on the Zoom. “The truth isn’t so simple. It’s a very, very very, difficult situation this company is in.”

“For the record, Eaze acquired Green Dragon, not the other way around,” Levine said. The deal “improved the balance sheet, improves the entire situation. I don’t know where this company would be if this did not happen.”

Through a spokesperson, the company declined to comment on any aspect of the recording. The company’s interim general counsel sent an email threatening legal action if WeedWeek published the recording.

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The “Uber of weed”

Eaze launched in 2014 and has raised more than $250M from high profile investors including Silicon Valley technologist Jim Clark. Often described as the “Uber of weed,” the company initially operated a tech platform that enabled customers to buy cannabis online and facilitated delivery without touching the plant.

In January 2020, and reportedly low on cash, Eaze was pivoting to a plant-touching model, with the company developing its own products and handling delivery itself. As Eaze pursued its transition, two former consultants to the company were convicted of one count each of conspiracy to commit bank fraud for a scheme to trick banks into handling credit card transactions on its non-plant touching platform. Before the trial, former Eaze CEO James Patterson pleaded guilty to one count of bank fraud conspiracy, also in federal court. Eaze, under CEO Ro Choy, cooperated with the feds and was never accused of wrongdoing.

Last August, when Eaze announced it was acquiring Colorado-based retailer Green Dragon for undisclosed terms it looked like a comeback story. The new company would have a presence in the country’s four largest markets — California, Colorado, Michigan and Florida — and deep expertise in the competitive and fast growing delivery arena.

“Eaze is the engineering team”

The immediate reason for the April 12 meeting, which dozens of people attended, was for management to meet with Eaze’s engineering team, which had built its delivery platform. The engineering team had seen colleagues laid off in other departments and some team members were frustrated, according to multiple sources, that Green Dragon’s leadership had not yet met with the engineering team as a group.

The former Green Dragon executives began on a conciliatory note. “Eaze is the engineering team,” Andy Levine, an executive and Alex Levine’s father, said, calling them the smartest people at the company.

  • Later in the meeting, CEO Choy said, “We completely understand that we live or die by this team,” adding that no one in engineering had been laid off.

Alex Levine said the combination of Green Dragon’s expertise in cultivation and retail, and Eaze’s tech made it the “most complete” cannabis company. “We believe in the delivery story, we believe that’s where everything will be decided in cannabis, as it is in retail, food, restaurants.”

  • Green Dragon, he said, had been approached by “pretty much every major player in cannabis” and he hadn’t been impressed.
  • “Hey, Here’s a bunch of assets in different states with different names and we don’t really run a good operation. That’s their pitch essentially,” he said.

But to make the merger work, CFO Handley said he had to put aggressive cost cutting measures in place. “Nobody was going to hand us another $50 to $100M that we needed to get through the year,” he said. “We had to find a way to survive.”

The call grew more heated about 40 minutes in. As the head of HR responded to a question, CEO Choy interjected, in apparent response to something typed in the comment thread. “It’s extremely upsetting to me,…when we’re trying to be as upfront and frank as possible, to get that sort of shit on a public transom.”

“We’re in a cannabis industry that’s not growing,” Choy said. “In light of that, we’ve had to continually make adjustments.” 

“I also don’t appreciate being called out for the options or the equity being worthless because that’s not true. The reason to work at a cannabis company isn’t because you’re getting paid what you get paid at Facebook or Apple…”

“No it’s not,” an engineer named C.J. Silverio interrupted. “I’m going to tell you one important thing: I do not work here for money…I work here for the values of this company. It is the intangibles that have kept me here working very hard to help this company survive.”

“The money is never going to keep people here,” Silverio continued. “It’s not the money, it’s everything else and you’re cutting away at everything else. My boss quit rather than work with these people. Why is that?”

Silverio expressed respect for Choy’s leadership. “If I thought you were still running this company I would be whole heartedly behind you,” she said. “I don’t know that I feel that way about the leadership right now.”

“I believe they have their heart in the right place and really trying to understand what’s going on,” Choy defended the executives who came from Green Dragon. It’s “scary,” he said for a lean, profitable, family-run business to align with an unprofitable tech company.

Choy also said that despite its tight finances, Eaze continued with Momentum, its accelerator for cannabis entrepreneurs from underrepresented communities.

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“It’s really been smooth sailing”

Towards the end of the call, Alex Levine fielded a submitted question: “Why does GD have so many reports of troubling behaviors?”

  • Green Dragon employees have complained about poor conditions at a Green Dragon grow house in Colorado. In a statement earlier this month the company said the allegations are without merit.

Without specifying any behaviors, Levine said “The reality is we’ve operated a very successful company, a very profitable company, a very healthy company culturally. We’ve never had any issues. It’s really been smooth sailing. So these allegations of troubling this and troubling that it’s like disgruntled employee here or there sure. But in 10 plus years of operation, thousands of employees cycling through the company. I don’t know even know how to respond to that question.”

  • Longtime employees were “very offended” by this narrative he added.

“Eaze has and continues to do more work in social equity than every other cannabis company combined,” he said. “There’s no intention of trying to get rid of that…Believe me, we don’t win by just being slash and burn, slash and burn”

Former Green Dragon executive Lisa Leder, Alex Levine’s stepmother, followed up: “Florida is about to launch on a big big scale. We have three stores open….By the end of this year I hope to have 30 stores open.”

  • “Instead of focusing on negative things, let’s focus on the positive things,” she said.

COO Cory Azzalino ended the meeting with the focus on Florida. The state’s mandatory vertical integration requires “a mind blowing amount of money” to turn on operations. “We have to invest tens and tens of millions of dollars in Florida to stand it up and it starts operating,” he said. “That time frame is now to November.”

“Everything is about the next six months,” he said.

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