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

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.’”