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Vaping Startup Pax Labs Raises $420 Million in Funding: Term Sheet for Monday, April 22

A UNICORN THAT VAPES

We’ve got another vaping unicorn.

Pax Labs, a San Francisco-based cannabis vape maker, confirmed that it raised $420 million (on April 20th) in funding at a $1.7 billion post-money valuation. What’s interesting here is that the startup initially set out to raise $150 million in capital, but it ended up raising much more due to “strong demand from investors who wanted to contribute more.” Those investors include Tiger Global Management, Tao Capital Partners, Prescott General Partners, and Redmile Group.

You may wonder — is e-cigarette vaping startup Juul somehow involved in this? Not really, but it does have connections. Juul used to be under the Pax Labs corporate umbrella until it spun out in 2017 to become an independent company and raise its own funding.

Pax has focused heavily in the cannabis space making vaporizers such as PAX Era for concentrates and PAX 3 for flower. Of course, the company saw an opportunity for an app, too — it allows customers to control the temperature and draw strength of the vaporizer. As a result, Pax projects $113 million in revenue for 2019 and forecasting that it could jump to $1.2 billion by 2023, according to The Information.

Investment in the cannabis category as a whole has been growing. Cannabis-related companies raised nearly $13.8 billion in 2018, compared to just $3.5 billion in 2017. The spike in capital flowing into marijuana businesses has largely been driven by legislative changes both at the national level in Canada and at the state level in U.S. states like Michigan, Oklahoma and Utah.

It’s obvious Pax is attempting to differentiate itself from its embattled vaping counterpart Juul by using language like, “the gold standard for safety,” “a product that enhances many people’s lives” and “establishing cannabis as a force of good.” Ironically enough, Pax has somehow managed to circumvent the negative attention that Juul has attracted following its underage customer problem and its FDA investigation. Juul was conceived at Pax Labs, after all.

Is the divergence in public opinion due to the fact that one is focused on e-cigarettes/nicotine and the other on cannabis? I don’t know enough to make that call (and clearly investors are throwing money at it), but I welcome Term Sheet readers’ thoughts on what’s next. Is Pax destined for the same fate as Juul or will it maintain its image as “the gold standard for safety?”

CATERING TO GRANDMA: Tencent made an interesting investment that might be indicative of a larger trend. The China-based tech behemoth invested in a Beijing-based startup called Tangdou, an app that teaches elderly women to dance. The funding amount was not disclosed, but Tencent’s investment brings Tangdou’s total capital raised to date to $100 million.

An app for teaching grandmothers to dance? Yep. Tencent has previously reported that WeChat’s fastest growing cohort of monthly users are those over the age of 55. The category is big enough to attract other investors such as GGV Capital, Shunwei Capital, and IDG Capital.

Although Tangdou started by featuring dance video tutorials, it’s become a one-stop shop for news, networking and other needs for senior users. The company claims it now has 200 million (!) people on its platform.

“As [China’s] mobile internet enters the ‘second half’ of its development phase, the markets for maternal and child care, middle-age and elderly users have become the new red-hot verticals,” GGV managing partner Jenny Lee told TechCrunch.

NEW BOOK: Melinda Gates is releasing a new book, The Moment of Lift: How Empowering Women Changes the World, which takes readers on a journey through many of the regions where the eponymous foundation she leads with her husband Bill Gates attempts to affect change. My colleague Michal Lev-Ram did an excellent Q&A with Melinda that I encourage you all to read here.

Here’s a great excerpt:

In one telling (and hilarious) anecdote, Gates writes about how, when her daughter Jenn was in kindergarten, she had to drive back and forth to her school twice a day, a forty-minute commute each way. She told her husband about her frustration with spending so much time in the car every day, and he offered to take on some of the drop-offs. About three weeks in, she started noticing more dads than usual dropping their kids off in her daughter’s class. Gates went up to another mom and asked what was going on. The other mom replied: “When we saw Bill driving, we went home and said to our husbands, ‘Bill Gates is driving his child to school; you can too.’”

VENTURE DEALS

Kangaroo, a New York-based provider of smart home security, raised $10.26 million in Series A funding. Greycroft led the round, and was joined by investors including Lerer Hippeau.

Embark Veterinary Inc, a Boston-based dog genetics company, raised $10 million in Series A funding. F-Prime Capital led the round, and was joined by investors including Slow Ventures, Section 32, Third Kind Venture Capital, Freestyle Capital, FJ Labs, and Anne Wojcicki.

HEALTH AND LIFE SCIENCES DEALS

Poseida Therapeutics Inc., a San Diego-based biopharmaceutical company, raised $142 million in Series C funding. Novartis Pharma AG led the round, and was joined by investors including Aisling Capital Management, Pentwater Capital Management, Perceptive Advisors, Malin Corporation plc., Longitude Capital, Vivo Capital and Boxer Capital.

Nocion Therapeutics, a Cambridge, Mass.-based biopharmaceutical startup, raised $27 million in Series A funding. F-Prime Capital Partners and Canaan co-led the round, and were joined by investors including Partners Innovation Fund and BioInnovation Capital.

PRIVATE EQUITY DEALS

Surge Private Equity acquired Access, a Texas-based network of dentistry practices, for more than $30 million.

Sumeru Equity Partners made an investment in 3Gtms, a Shelton, Conn.-based provider of transportation management software solutions. Financial terms weren’t disclosed.

THMED, a portfolio company of New Capital Partners, acquired CV Staff Solutions, a specialty inpatient locums and perfusion staffing company. Financial terms weren’t disclosed.

Sverica Capital Management LP made an investment in Stream Companies, a Malvern, Penn.-based marketing solutions provider primarily serving the automotive industry. Financial terms weren’t disclosed.

OTHER DEALS

Neiman Marcus Group LTD LLC agreed to acquire a minority stake in Fashionphile, a Carlsbad, Calif.-based pre-owned e-commerce company focused on ultra-luxury handbags and accessories. Financial terms weren’t disclosed.

IPOs

Fastly, a content delivery network, has filed for an IPO. It has raised approximately $219 million in venture funding from investors including Sapphire Ventures, Sorenson Capital, and Iconiq Capital. Read more.

Beyond Meat, a plant-based meat maker, has set terms for its initial public offering, with the plant-based meat maker expected to raise up to $183.8 million and be valued at $1.21 billion. It is offering 8.75 million shares in the IPO, which is expected to price between $19 to $21 a share. Read more.

EXITS

CloudBees acquired Electric Cloud, a San Jose, Calif.-based provider of continuous delivery and application release automation solutions. Financial terms weren’t disclosed. Electric Cloud had raised approximately $64.6 million in venture funding from investors including Bridge Bank, Wellington Financial, Next47, USVP, Rembrandt Venture Partners, and RRE Ventures.

FIRMS + FUNDS

North Castle Partners, a Greenwich, Conn.-based private equity firm, raised $400 million for its fund, North Castle Partners VII, L.P.

Armory Square Ventures, a New York-based venture capital firm, raised $31 million for its second fund.

Serena Williams has formed a venture firm called Serena Ventures, which invests in early-stage companies that “embrace diverse leadership, individual empowerment, creativity and opportunity.”

PEOPLE

Norwest Equity Partners named Tony Armand a partner.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.