AsÂ DavidÂ HuaÂ built Meadow, a cannabis technology company launched in 2014, he and his co-founders kept asking one question: Do we want to be kings or kingmakers?
Social and political tides were shifting. For the first time, a majority of Americans favored legalizing marijuana. There were whispers and murmurs, then chatter and finally shouts about California being poised for a âgreen rush,â a rapid and sweeping expansion of the marijuana industry.
For cannabis advocates, the green rush represented a social victory. It meant easier and safer access to medical cannabis and, as of last week, recreational pot, too. But the green many others see is cash. And the earning potential is colossal: San Jose is on track to bring in $9 million in medical marijuana tax revenue just this year. Hua and his partners created Meadow in this climate, and the answer to their questionâkings or kingmakersâcame organically.
âWeâre better as a team to be kingmakers,â Hua says.
This philosophy shaped Meadowâs focus: creating a software for pot shops that helps manage inventory, sales and deliveries. âWe believe thereâs plenty of room at the table; we donât need to be at the head of it,â Hua says. âWhy not build the tools and features that can help empower many people to have a better service?â
Questions about motives continue to dog companies entering the cannabis industry. San Jose recently passed two marijuana ordinances, both at least partially aimed at protecting the industry from predation and profiteering. The most recent, an urgency ordinance rushed through by the council on Nov. 1, bans growing, manufacturing, distributing, testing or selling recreational marijuana. The city designed the rule to give it time to study what legalizing recreational pot means for San Jose in the wake of votersâ approval of Proposition 64.
Another rule approved at the Nov. 1 meeting allows medical marijuana delivery within the city. Once it goes into effect Dec. 2, San Joseâs 16 licensed collectives will be able to deliver medical marijuana to patients 21 and over, between 8am and midnight.
Under the ordinance, third-party companies like Meadow, which works with 60 cannabis collectives across the state, can facilitate deliveries, but the products must come from the 16 approved dispensaries. Drivers must also be employed by the dispensaries and, like all cannabis workers in San Jose, theyâre subjected to a background check and given an official badge.
These protections are put in place in part to ensure that outside companies donât swoop in and profit off of the cityâs broadening marijuana regulations. But they also stemmed from a desire to stamp out the numerous cannabis collectives and delivery services that operate illegally in San Jose.
âMy clients were getting very frustrated with illegal operators,â says Sean Kali-Rai, a lobbyist for the local cannabis industry. âWe came up with the whole concept with the San Jose Police Department of fighting fire with fire.â
Cannabis advocates and SJPD tout delivery as a safer way to help increase patient access.
âAt a high level, [delivery] couples accessibility with safety,â says Keith McCarty, CEO of Eaze, another on-demand cannabis delivery company looking to break into the South Bay market. âWhen you donât give patients accessibility, they donât get what they needâ¦ or worse yet, they resort to getting it from illicit drug dealers.â
Safety comes down to three things: the purity of the products, the security of patients and drivers, and respect for the law. Both Meadow and Eaze offer real-time tracking of drivers, like a DoorDash or Uber, so both the collectives and the patients know where the delivery is at all times. Legalizing delivery also addresses the biggest problem for San Jose medical marijuana patients: location. Currently, San Jose only allows medical cannabis collectives in industrial zones, far from public transit and the cityâs center.
âThe city, with its aggressive zoning regulations, pushed us, pushed the legal collectives, into very difficult-to-reach areas for most patients,â says Neil Ruditsky, director of business for Elemental Wellness. âWeâre just excited to relieve the burden for some of our most seriously ill patients.â
Any of San Joseâs 16 collectives interested in on-demand delivery service will have to submit a plan to SJPD for approval, according to Michelle McGurk, assistant to the city manager. Collectives will have to choose between managing deliveries on their own or using a third-party, like Meadow or Eaze.
Eaze launched in 2014, the same year as Meadow, and McCarty says cannabis delivery helps overcome any stigmas by operating in a more discreet, professional manner. Meadow and Eaze provide similar services with subtle differences, but both charge collectives for their services, rather than patients. Eaze charges a dispensaries software-licensing fee. The company does not publicly share information on those fees, but Sheena Shiravi, a spokesperson for the company, says Eaze treats âeach business uniquely.â
Meadow, meanwhile, charges cannabis retailers on a sliding scale based on how many âactive usersâ they have. Thatâs defined as someone who signed up with the collective or placed an order through Meadow.
âPart of our ethos is that we arenât successful unless our partners are successful,â Hua says. âWe really donât make money until our partners make money.â
This is a reflection of a philosophical difference between the two companies. Meadow focuses on serving patients by making the collectives more successful businesses. Eaze, on the other hand, âreally [focuses] on the patient experience,â according to McCarty.
âWe do that by collecting data around consumption behaviors or interactions with the technology, and constantly improving that through the technology,â McCarty says.
Both Eaze and Meadow support San Joseâs regulatory approach, while also being careful not to step on the toes of collectives, which are naturally protective of their clientele and profits. Kali-Rai says the collectives he works with are excited about, if not a bit daunted by, the prospect of delivery. Many will likely welcome the chance to expand their customer base for a nominal fee. But, Kali-Rai notes, his clients are wary of companies delivering products from outside the cityâa practice not allowed in San Jose.
While collectives arenât eager for outside competition, San Jose officials are open to allowing the delivery to other municipalities. âIf a neighboring jurisdiction were to allow delivery, we would allow our folks to deliver there,â McGurk says, adding that Campbell is considering a proposal to ban dispensaries but allow delivery from San Joseâs. By contrast, Los Gatos has banned collectives and delivery.
The rush to profit off of pot delivery is still in its infancy, but since last week the city was flooded with enough questions that it established a website with information about what Prop. 64 allows now and once state licensing begins.