Startup Obituary : Eaze

How the "Uber of Weed" Burned $350 Million and Went Bankrupt

Author

Ram Gangisetty
November 14, 2025

🚀 What Was Eaze?

Founded in 2014 by Keith McCarty in his San Francisco apartment, Eaze promised to be the "Uber of weed" — delivering medical marijuana to your door in 15 minutes. The app connected patients with licensed dispensaries without touching the product itself, operating as a pure tech platform.

Peak Stats:

  • 600,000 registered users

  • 5 million deliveries completed

  • Operations in 100+ California cities

  • 120,000 monthly deliveries by 2017

  • $700 million valuation (2021)

💰 The Funding Journey

Eaze became a venture capital darling, raising $201 million from big names:

Year

Amount

Key Investors

2015

$10M Series A

Snoop Dogg's Casa Verde Capital

2016

$13M Series B

DCM Ventures, Fresh VC

2017

$27M

Multiple VCs

2019

$65M Series C

Undisclosed

2020

$35M Bridge

For "verticalization" pivot

2021

$75M target

Never fully closed

🚨 Red Flags Started Early

Technical Disaster: The platform was built by Eastern European contractors and never properly rebuilt. Products didn't match inventory, wait times were wrong, and engineers begged to fix the broken codebase — but growth targets always won.

CEO Musical Chairs:

  • 2014-2016: Keith McCarty (founder) → mysteriously steps down

  • 2016-2019: Jim Patterson → removed during layoffs

  • 2019-2022: Rogelio Choy → replaced

  • 2022-2024: Cory Azzalino → oversaw final collapse

The User Base:

  • 66% male

  • 57% aged 22-34

  • 49% earning $75,000+ annually

🚔 The Bank Fraud Scandal

In 2021, former CEO Jim Patterson pleaded guilty to conspiracy to commit bank fraud. The scheme? Tricking banks into processing $100 million in cannabis credit card payments by disguising them as:

  • Dog toys

  • Dive gear

  • Face creams

  • Carbonated drinks

"Eaze conspires to disguise the cannabis transactions as transactions for dog toys, dive gear, carbonated drinks, drone components and face creams."

Federal indictment (2020)

Patterson's associates got federal prison time. Eaze claimed it cooperated with authorities and was never charged.

💸 The Money Pit

Burn Rate: $10+ million per month by 2019

Failed Projections:

  • 2017 promise: $1 billion in sales by 2020

  • 2020 reality: $190 million

The Desperate Pivot: In 2020, Eaze abandoned its marketplace model to become "vertically integrated" — buying assets from bankrupt DionyMed and acquiring Green Dragon for $75 million in 2021. The pivot failed to fix fundamental economics.

⚰️ The Death Spiral

August 2022: Netscape founder Jim Clark issued a $36.9 million loan with a poison pill — miss revenue targets, lose the company

May 2024: Eaze defaults on the loan

August 2024: Clark forecloses, buys all assets for $54 million at auction

October 7, 2024: CEO announces "winding down" operations

  • 500 union workers laid off

  • Employees went weeks without pay

  • Some turned to GoFundMe campaigns

December 31, 2024: Eaze Technologies shuts down

January 1, 2025: "Eaze Inc." launches — same name, new entity, Clark's backing, $10 million funding, zero old debts

March 2025: Original Eaze files Chapter 7 bankruptcy

  • Assets: $0

  • Liabilities: $3.6 million

  • Investor returns: $0

📊 Why Eaze Failed

Internal Problems:

  • Never fixed broken technology platform

  • Negative margins on every delivery

  • Leadership chaos with 4 CEOs in 8 years

  • Bank fraud scandal damaged credibility

  • Burned cash pursuing growth over profitability

External Challenges:

  • California's 15-19% cannabis excise tax

  • 57% of CA cities ban dispensaries

  • Federal banking restrictions

  • Competition from tax-free illicit market

  • Apple and Google banned cannabis apps

Scorecard: Eaze

Dimension

Score

Reasoning

Product-Market Fit

3/5

High demand but unit economics were broken

USP

2/5

Nothing unique vs Weedmaps and others

Timing

4/5

Perfect timing for CA legalization, poor execution

Founder Fit

2/5

Tech background, zero cannabis experience, didn't use product

Team (Execution)

1/5

CEO chaos, fraud, technical debt, burned $350M

🎯 Lessons for Founders

1. Regulatory Workarounds = Prison Time
The credit card scheme landed executives in federal prison. In regulated industries, compliance isn't optional.

2. Fix Your Tech Debt
A buggy platform handling logistics will eventually collapse. Eaze never invested in rebuilding their broken foundation.

3. Unit Economics > Growth
Losing money on every order while burning $10M/month isn't a business model. It's a countdown to bankruptcy.

4. Founder-Market Fit Matters
McCarty didn't use cannabis and left after 2 years. Successful founders understand their customers deeply.

5. Watch Your Cap Table
Predatory loans with control provisions can wipe out all equity holders — as Eaze investors learned painfully.

🌍 The Bigger Picture

Eaze's collapse reflects systemic challenges in California's cannabis market:

"This closure and the fact that almost 500 union jobs are going to be lost should be a wake up call to state legislators that more action needs to be taken."

Jim Araby, UFCW Vice President

The company's "zombie rebirth" — shedding debts through bankruptcy while continuing operations — raises ethical questions about startup accountability. Original investors lost everything while the business lives on under new ownership.

💀 The Final Tally

  • Money Raised: $350 million

  • Money Burned: $350 million

  • Jobs Lost: 500+

  • Investors Wiped Out: All of them

  • Founders Remaining: Zero

  • Prison Sentences: Multiple

Eaze proves that even in a booming market with strong demand, poor execution, regulatory challenges, and unsustainable economics will kill any startup — no matter how much money you raise.

Cheers,

Ram

👉 My simple ask: It took hours to put together this post for you. I hope you forward this email to at least one founder friend or share on your social channels 🙏.

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