Over the previous a number of years, institutional buyers had largely shied away from China’s e-cigarette makers, an business that was teeming with shoddy workshops and lacked regulatory oversight. But buyers’ perspective is altering as China units in movement its strictest ever regulation on digital cigarettes.
Myst Labs, a Chinese e-cigarette maker co-founded in 2019 by Chenyue Xing, a chemist who was a part of the group at Juul that invented nicotine salts, a key ingredient in vaping, lately raised “tens of thousands of dollars” from a Series B funding spherical. The financing was led by its current investor, IMO Ventures. Thomas Yao, CEO and one other co-founder of Myst, is a founding accomplice of IMO Ventures.
In March, one in all China’s prime tech coverage makers printed a set of draft guidelines that will carry e-cigarettes beneath the identical regulatory scope as conventional tobacco, which suggests vaping firms will want licenses for manufacturing, wholesale and retail operations on the earth’s largest producer and exporter of e-cigarettes.
These modifications will deal a blow to small producers with poor high quality management, leaving the business with a handful of established and compliant gamers, Fang Wang, head of promoting at Myst, instructed TechCrunch.
For one, standardizing manufacturing is expensive, Li mentioned. From ceramic coils, batteries, to perfume, each element and ingredient of a vape might want to meet stringent necessities. E-cigarette firms may even have to pay tobacco taxes, an vital supply of tax income for the Chinese authorities.
The different problem is how one can decrease nicotine content material. Many present merchandise available on the market have a comparatively excessive nicotine focus at 3-5%, so if China is in keeping with the European Union commonplace of 1.7%, many small manufacturers can be compelled out of enterprise as a result of they lack the know-how to supply low-nicotine vapes that also fulfill customers’ crave, advised Li.
“We’ve received a lot of investor interest in the past few months. Before that, professional, institutional investors often avoided e-cigarette companies, but they are showing more willingness now as regulations take shape,” Li added.
Myst declined to checklist its different buyers however mentioned they embrace high-profile people invovled within the e-bike sharing firm Lime, Facebook and the bitcoin business.
Most of Myst’s present gross sales are from China, the place it has opened 600 shops and plans to succeed in a footprint of 1,000 shops within the subsequent few quarters. Overseas, the startup has a retail footprint in Malaysia, Russia, Canada and the United Kingdom, the place it’s promoting in over 30 purchasing malls and some hospitals by means of its distribution accomplice, Ecigwizard.
The new funding will permit Myst to additional develop its gross sales community and strengthen its analysis and improvement. The firm prides itself on its product containing 1.7% nicotine, which it claims can ship the impact of a 3% counterpart. At her lab, Xing is at the moment engaged on e-liquids with “natural tobacco contents” and with out natural acids, components that permit nicotine salts to vaporize and be absorbed.
Myst continues to be a comparatively small participant in comparison with China’s market dominator Relx, which went public in New York earlier this yr and is making use of for a license to promote within the U.S. But Yao is optimistic about Myst’s future. Vaping, he mentioned, is without doubt one of the fastest-growing shopper classes in China. Myst’s latest gross sales are tripling each three months.
“In other consumer areas, you rarely see a top player commanding 60-70% of the market, so there is still a lot of room for the top 10 players to grow,” the CEO mentioned.
