The ‘Costco of cannabis’ raises $2.8 million for a membership weed delivery service

Weed may be legal in California, but the black market is still the top spot for buyers looking for bud on a budget.

Flower Co. graduated from Y Combinator’s latest class on the promise that they could cut customers better deals by focusing on partnering with growers directly to create their own house brands while pushing users to order ahead of time. The company calls itself the “Costco of cannabis.”

The company just announced the close of a $2.8 million seed round from investors including Slome Capital, Prehype, Rob Stavis, Adam Draper, Josh Abramson, and Camille Hyde.

Even in California where weed has been legalized, the black market is still king due to the high prices buoyed by high taxes, Flower Co.’s CEO Ted Lichtenberger says the regulated market is just 1/4 the size of the unregulated market. Flower Co.’s ultimate goal is less focused on getting people to ditch their existing dispensary as much as they are focused on getting black market regulars to go legit thanks to the better deals and conveniences of their platform.

Part of building allegiance to the Flower Co. brand is the company’s membership plan. Anybody can make a purchase on the site, but members save up to 40% on purchases, a number that makes a big sticker difference when you’re buying weed by the ounce. An ounce of “Forbidden Fruit” goes for $192 without a membership and $142 with one, for example. With a membership, the company’s “House Sativa” goes for $63 an ounce.

An annual membership to Flower Co. is $119, and in addition to the discounts, users get faster delivery and beta access to the company’s “private events and concert series.” The company just recently launched a two-day delivery service for customers in Sacramento.

The company is just flexing its muscles in a few city markets in California, but is hoping that by scaling slowly they can be ready to attack new opportunities as the regulatory environment shifts.

“We understand that we’re in the first inning of what’s probably a pretty long game, because this industry, as it goes federally legalized is going to have another massive transition moment just like it’s having right now as it’s getting legalized and regulated in California,” Lichtenberger says. “So if we have a great understanding of our customers and stay focused on keeping them delighted, and then be nimble in the face of that change, then we can come out as the dominant player in the delivery market.”