Electronic Cigarette Investment and Financing Report: Over 2 billion yuan in 44 financing cases in the first three quarters of 2019, the war of cash burning is imminent

Electronic cigarettes date back to 1963, when Herbert A. Gilbert developed a smokeless non-cigarette device, a device that produces vapor gas by heating nicotine solutions. In 2003, Hon Lik, a Chinese pharmacist, invented the first nicotine based electronic cigarette product, Ruyan. In 2013, Ruyan was purchased by Imperial Tobacco, the world’s fourth largest tobacco company, for USD $75 million. In 2015, Juul Labs launched the first nicotine salt electronic cigarette product and achieved great success in the U.S. market. In 2018, JUUL occupied 76% of the U.S. e-cigarette market and was acquired by Altria Group, Marlboro’s parent company, at a valuation of $38 billion. Juul’s myth of wealth makes entrepreneurs and capital excited.

Since 2018, the domestic electronic cigarette industry has been sought after by capital. Source-code capital, IDG, Financing capital, Zhen Fund, SIG Asia, Handing assets, Xiaoyao capital, Longitude China, One-third capital, Hongta venture capital, Jiayu capital, Ledong Capital, Guangfa Sinde, Tianfeng Tianrui, venture capital and so on, have entered the field of electronic cigarettes one after another.

According to the monitoring data of electronic cigarette industry chain, 64 financing incidents occurred in the electronic tobacco industry between 2015 and 2019. However, in 2019 alone (as of September 30, 2019), there were 44 financing incidents in the electronic cigarette industry, and the total amount of enterprise financing is expected to exceed 2 billion yuan. Thus, the amount of equity financing in the field of electronic cigarettes increases rapidly with the increase of industry heat.

Launched in January this year, LINX completed the fifth round of financing in September, with Tianfeng Tianrui as the investor. Tianfeng Tianrui is a subsidiary company of private equity fund of Tianfeng Securities Co., Ltd. specializing in equity investment and private equity fund management.

MOTI completed two rounds of financing in 2019, received $10 million investment from Zhen Fund in January and $50 million financing in September, with SIG Asia as the leading investor today. This is also the largest amount of financing that industry enterprises have received since this year.

The financing amount of 12 electronic cigarette enterprises exceeds 50 million yuan

Enterprises with more than 50 million yuan financing mainly include: MOTI two rounds financing 60 million US dollars, SNOWPLUS two rounds financing 40 million US dollars, SSSO angel rounds financing 25 million US dollars, Bink strategic investment 20 million US dollars, idols strategic investment 101.7 million US dollars, ALD strategic financing 100 million US dollars, Fanwei electronic cigarettes get angel rounds 100 million US dollars investment, FLOW received 10.89 million yuan in Pre-A round, TAKI 55 million yuan in A round, NUT 50 million yuan in Angel round, BTM 50 million yuan in the first round and Gippro 50 million yuan in strategic financing.

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From the analysis of current financing stage, angel and A rounds have the largest number of financing events and A rounds have the largest amount of financing. It can be seen that the electronic cigarette industry is still in the early stage of development.

With the ban on e-cigarettes in the United States, India and other parts of the world, and the uncertainty of domestic policies, the prospect of e-cigarettes has been overshadowed. We expect capital to slow down in the fourth quarter as we wait for policy clarity.

In addition, the supervision of sales network channels is becoming more and more stringent, e-cigarette brands are using the power of capital to speed up the competition for offline channels, channel admission fees once soared, a war of money is imminent. At present, the main channels are convenience stores, night venues, bars, chess and card rooms, KTV, gas stations, restaurants, hotels and other places. E-cigarette brands are gradually building a “new non-cigarette system sales network”.