Liquidity Venture

JUUL Lands $12.8B From Big Tobacco As Vaping Grows Up, Sells Out

E-cigarette company JUUL Labs Inc. is on the verge of making history.

It appears that reports that Marlboro maker Altria Group Inc. is going to take a 35 percent stake in the San Francisco company are true, according to JUUL Labs CEO Kevin Burns. JUUL’s founders Adam Bowen and James Monsees are thus set to become the first e-cigarette billionaires, according to Bloomberg.

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On JUUL’s website, Burns wrote:

“Today, we have been joined by an unlikely – and seemingly counterintuitive – investor in our journey. Altria today announced a minority investment of $12.8 billion into JUUL for a 35% ownership in the company along with services to accelerate our mission. We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the US. We were skeptical as well. But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers. We understand the doubt. We doubted as well. We made it very clear that any investment would need to meet demanding and specific criteria to ensure that they are committed to our mission.”

JUUL was just founded in 2015, according to Fast Company, and has since raised a total of $761.5 million in venture funding. Its most recent raise was a massive $1.2 billion round from Tiger Global Management in July 2018 that included participation that gave the company a $15 billion pre-money valuation, according to its Crunchbase profile.

Altria’s plans to put about $12.8 billion in JUUL will take its valuation to about $38 billion, sources supposedly privy to negotiation discussions said yesterday, according to Bloomberg. The deal makes San Francisco-based JUUL more valuable than Elon Musk’s SpaceX and Airbnb Inc., Bloomberg noted.

The genesis of the company actually goes back to 2004 when Bowen and Monsees, as Stanford grad students, begin developing an e-cigarette prototype out of foam. They ultimately formed an e-cigarette company called Ploom. Ploom’s ModelTwo product was acquired by Japan Tobacco International in 2015. The duo bought back JTI’s stake in their company and renamed it Pax Labs, of which JUUL was ultimately spun out.

In July, we reported that JUUL turned in $245 million in calendar 2017, “up from around $60 million in 2016,” according to Axios’s Dan Primack. The company also projected revenue of $940 million in 2018, had gross margins of 70 percent, and its “2018 EBITDA projection (was) approximately $250 million,” Primack added.

As our EIC Alex said at the time, it’s kind of shocking that JUUL just might be a better unicorn than most software shops.

Illustration: Li-Anne Dias

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