ASA in the News

Justin Hampton, The Daily Beast

Five months in, thousands of orders fulfilled, six days before Cyber Monday. With all this, Michael Pycher shouldn’t have to reflect much on any nagging existential debates surrounding his business.

But considering the nature of his enterprise, Nestdrop, which delivers medical marijuana and alcohol throughout metro Los Angeles, Pycher can’t help but frame such a debate in grandiose terms when asked about its legality. “It’s very rare where you can make everyone happy. And I feel like that’s what we’re doing,” he says. “We’re making sure everything happens within the scope of the law and at the same time, give patients what they want.”

Clearly, Pycher wasn’t thinking about LA City Attorney Michael Feuer when referring to the universal love surrounding his company. For not just a week after Pycher made those statements, Feuer’s office, making good on their “pending investigations”, filed a 16-page complaint in LA Superior Court. The complaint seeks permanent injunction against Nestdrop, as well as legal fees that could total up to $5K/day in civil penalities for every day Nestdrop facilitates medical deliveries—rendered illegal by the city since the passage of Prop D in 2013—on their app as of November 12th. Since Nestdrop continues to do so as of this writing, they wager a tense gamble that the odds will be in their favor. After all, just like those ever-so-hungry Games, there are many—from San Francisco mobile web upstarts Meadow and Eaze,to the beta-invite Canary in Washington state—willing to take its place should it stumble and fall.

Pycher, like his competitors, is quick to stress that Nestdrop is strictly a technology platform, and that they do not “touch the plant,” in the parlance of medical/legal cannabis startups. Rather, they see their role as bringing efficiency and reliability to dispensaries, who fulfill the order with the patient once she or he has uploaded a California Patient ID or recommendation letter to a central server and the patient status is verified. In exchange for the increase in sales, the dispensaries pay the service, not the consumer.

In addition, a company like Eaze offers a host of incentives, such as data analysis of peak consumption hours, placement services for drivers with high-volume dispensaries, and route optimization strategies for licensed dispensaries looking to grow their businesses. “If data is key in optimizing your service, the one who has the most data is the winner,” figures Eaze founder and CEO Keith McCarty in describing his company’s strategy. Since San Francisco’s Department of Public Health determined that Eaze, as a tech platform, need not be regulated, they can pursue this goal without much worry.

Prior to the DA’s suit, Nestdrop focused mainly on expanding its reach, announcing medical delivery services in San Francisco, Oakland, and San Jose a week before. Those services will remain untouched by the current suit, according to City Attorney spokesman Frank Manteljan. Nestdrop shares this growth mandate with their competitors. While Eaze continues to refine its business in San Francisco, McCarty does crow about the $1.5 million the company raised in a recent seed round from several investor sources, and says, “Our ultimate goal is to be everywhere we can be, as the laws permit.”

Yet the push to become the “Uber of weed,” according to longtime medical marijuana criminal justice attorney Meital Manzuri could in fact work against them if they grow too quickly. “Once these companies start expanding, that’s when they become more interesting to the bigger authorities… [for] what kind of safeguards have they created to prevent the diversion of marijuana to non-medical marijuana patients and other states or to minors?”

Then there’s the issue of branding. Nestdrop’s own corporate messages have discordantly mixed facile memes targeting frats and sororities, and bottle service contest promos with sotto-voiced evocations of “suffering patients” who are “restricted in their movements” from visiting physical dispensaries. Pycher explains it thusly: “Our message has never been, ‘Go party and get wasted.’ Our message has been in a funny way, trying to say: ‘Stay safer. Don’t drive. We’ll bring it to you.’” And where “it” comes from with Nestdrop is an open question. Pycher insists his company works with “pre-ICO” dispensaries grandfathered into Prop D. However, he declined to name them, citing confidentiality agreements. Feuer’s complaint insists that deliveries, even from pre-ICO dispensaries, are not permitted under any circumstances, and that only a primary caregiver consistently handling the vital needs of a patient can fulfill such a delivery.

Since the lawsuit, Nestdrop has issued a defiant reply, which reads in part: “We are saddened by the City Attorney’s recent attempt to restrict patient’s access to their legal medicine and intend to fight this.” They have found general support from the medical marijuana advocacy organization Americans for Safe Access, whose Kris Hermes said of the space, “There’s no reason why a storefront dispensary has to be the only business model for patients accessing medical marijuana. [Entrepreneurs] can and should develop alternative models such as delivery services.”

However right or wrong, a tech disruptor that has chosen to fight City Hall is clearly in an unenviable position, according to Manzuri. “The civil suit is a stronger strategy than pressing criminal charges, because they can go after the corporate officers,” she says, echoing Feuer’s complaint. “They’re going to spend their resources on making an example [of them], and sending a message to other delivery services, ‘This could be you next.’”