Pax Labs is aiming to go public in 2020, Bharat Vasan, the marijuana-vape startup's CEO, told Business Insider in a Thursday interview.

Vasan said he's been talking to bankers and found the appetite for an initial public offering has been "overwhelmingly positive."

The buzzy vape startup has landed equity investments from blue-chip firms including Tiger Global Management and Tao Capital Partners.

The CEO of one of the world's most popular marijuana-vape startups says the company is looking to go public next year.

"We've been talking to bankers, we've talked to the exchanges," Pax Labs CEO Bharat Vasan told Business Insider in a Thursday interview. "The appetite has been overwhelmingly positive."

Pax is raising another round of funding this year to lay the groundwork for a potential IPO next year, Jeff Brown, a VP at Pax confirmed to Business Insider. The size of the round was not yet clear.

The buzzy Silicon Valley vape startup already raised $20 million in funding last year, and its investors include blue-chip firms Tiger Global Management and Tao Capital Partners.

Read more: Marijuana could be the biggest growth opportunity for struggling beverage-makers as millennials ditch beer for pot

While Vasan did not give a specific date for an initial public offering, he said he'd like to take the company public on a US-based exchange like the NASDAQ rather than on the Canadian Securities Exchange, a path that many marijuana-industry startups have taken in the last few months to skirt federal prohibition of marijuana.

"We feel like US companies should be public on US exchanges as opposed to going abroad," Vasan said.

That's possible because Pax, despite its devices being used for consuming marijuana, is like any other software-and-hardware company. They don't "touch the plant," Vasan said, and therefore don't traffic in any federally controlled substances.

Pax was spun out of Juul, the tobacco-vape company that recently landed a $12.8 billion infusion from Altria, in 2017.

Pax CEO Bharat Vasan. Courtesy of Pax Labs

The 'platform' model and why a Pax is like a Keurig

Vasan drew a comparison between Pax's vapes and a Keurig coffee machine. Think of it like this: the Pax vaporizer, like the Keurig, is a "platform." Other brands produce the actual coffee — or, in Pax's case, the marijuana flower and oil pods — that the user plugs into the machine.

That means Pax isn't reliant on any one partner.

"We're kind of what I'd call a bellwether stock for cannabis," Vasan said. "We index so broadly against all other companies in the space."

Pax has an "inbuilt" subscription model on top of that with their Pax Era oil vaporizer. The company sells empty pods that fit into the device to partners who fill the pods with cannabis oil.

It's the "razor blade" model, Vasan said. "We feel fundamentally that's a better business model than if you're selling a product and you have to wait three years before someone buys it again."

Apart from that, Vasan said regulation is an " absolute boon" for Pax because it will eventually weed out some competition.

"We do expect a shakeout to happen," said Vasan. "There are a lot of companies that are maybe playing it a little too fast and loose."

Because marijuana isn't legal in all 50 states, being in the business of growing it comes with a ton of risks. Like any other agricultural commodity, it's subject to rapid price compression and declining margins as the cost of growing quality marijuana gets cheaper.

In theory, price compression could work to Pax's advantage because it drives consumer adoption, Vasan said. If it's cheaper to buy marijuana then more people may choose to buy it.

Pax, therefore, could be a way for investors to ride the upside of the marijuana wave without as many risks. And in a market downturn, marijuana could be one of the few sectors that actually benefit.

"Nothing is ever recession-proof," Vasan said, but marijuana, like alcohol before it, tends to fare better than more "discretionary" purchases like, say, a new smart TV.

Marijuana is the 'single largest thing that CPG has seen in the last 100 years'

Vasan took the CEO job at Pax last year after nearly a decade of building and selling hardware startups. He most recently served as president and chief operating officer of August, a San Francisco startup that makes smart-home equipment, and before that, sold Basis, a wearables company, to Intel.

"Look, I think smart home is big, but smart home is basically 5 or 10 million people in the US," Vasan said. "I think cannabis is tens if not hundreds of millions of consumers coming online not only in the US but internationally and developing a habit like coffee."

To Vasan, cannabis is a "100-year trend."

"You've got brand-new sector with new content coming on the market," he said. It's the single largest thing that CPG [consumer packaged goods] has seen in the last 100 years."

This story has been changed to reflect that the company's IPO timing is 2020, not 2019. CEO Bharat Vasan had originally told Business Insider that Pax was looking to go public in 2019 but later followed up that it was 2020.

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