After raising a cool $46.7 million, PAX Labs Inc. is loading up for massive expansion of a nine-year-old, vape-turned-lifestyle brand.
Here, founders Adam Bowen and James Monsees talk year-on-year growth, the secrets to PAX’s spectacular rise, targeting dispensaries and non-traditional outlets for distribution—and what each thinks of the other.
On most damp, foggy middays in San Francisco’s Mission District, you could easily find yourself unwittingly sharing a hot sauce bottle at a down-home burrito joint with fresh dot-com billionaires, tech conjurers, and margarita-swilling young urban professionals who might work for your favorite app developer. It’s here that James Monsees and Adam Bowen, co-founders of the pioneering vape company PAX Labs, hang out. The Stanford graduates reinvented the nascent vape marketplace in 2007 when they launched PAX’s predecessor, Ploom, with dazzle, innovation, and splendor that created buzz. GQ gushed:
“The PAX 1 looked like something Marty McFly would have brought back from his travels. People marveled when I broke it out at parties (and concerts, and my parents’ backyard, and…). The best part of the Pax 2 is that it doesn’t screw with the formula. It’s a little sleeker, a little smarter. Pulling takes a little more work than other vapes, and you gotta perfect the art of packing the bowl to get the best hit (fine-but-not-dusty grind, overfill it a tad and tamp down). But those are small complaints for being able to vape from the future.”
The future is now for PAX Labs and the vape world. At their offices in the Mission (which they share with the Burning Man people), there is motion and action everywhere. The wide-open space has concrete floors that are more skateboarding and biking lanes than pedestrian-friendly walkways, the walls are adorned with custom PAX art and whiteboards, dogs scurry from one desk to another, and a beer and wine fridge is bulging. There’s also a chemistry lab somewhere, a pool table, and snacks here and there and everywhere it seems.
Bowen and Monsees preside over this 100-person, groovy tech circus troposphere with low-key demeanors—and as part of the gang. Vape world domination may be taking place, but it feels snugly scheduled in between the monthly birthday celebrations, wine-and-cheese happy hours, office field trips to Giants games, and ad hoc brewery meetings. However, it’s not all Saki shots and dog tricks: After securing nearly $50 million in funding for the conquest of the vape market, PAX Labs has its sights set on non-traditional distribution (fashion boutiques), dispensaries, and rec shops as a way to grow by leaps and bounds and get their vape out there. Inc. magazine observed: “Monsees and Bowen, who have somewhat accidentally become the godfathers of arguably the best portable, high-end and high-tech pot vaporizer on the market, know their products’ potential in the cannabis industry.”
In a rare interview, the two founders talked about their vape mission.
In 2015, PAX Labs raised nearly $50 million dollars, launched PAX2 and introduced JUUL. Not bad.
James Monsees: It was a good year. We refreshed our entire product portfolio: We launched PAX2 and JUUL. As a privately held company we don’t regularly speak to our specific financial performance, but I’ll provide a few highlights. Our PAX business saw a 28-percent growth in year-on-year ecommerce revenue. In 2015, we expanded the PAX business internationally to the U.K., Germany, France, Italy, and the Netherlands. Our JUUL launch has seen significant traction. Last year, JUUL’s total revenue grew over 102 percent while the e-cigarette category increased only 4.5 percent in the same period, [according to] Nielsen’s IRI. JUUL is now the fastest-growing Top-10 vapor brand in U.S. convenience and we continue to expand its domestic retail footprint, with the product now available in more than 10,000 leading retail stores.
What are your objectives for 2016?
We’re excited to continue to grow both PAX and JUUL into new retail outlets and distributors and get them into the hands of more adults seeking a premium vapor experience. PAX is now available in several countries outside the U.S., and we’re very much looking forward to continuing that trajectory. Of course, we’re excited to introduce some cool new products. Expect to hear more on some requested improvements as well as some other big surprises this year.
You have teamed up with The Weeknd for a limited-edition PAX2 collaboration. Are partnerships important to the brand?
Our partnership with The Weeknd came about organically. We are obviously fans of his, and Abel was already a fan of PAX. We’re always looking for new ways to present the PAX brand and connect with our consumers, and since music really resonates with our fans it became a natural fit for us.
How would you describe the PAX consumer?
PAX consumers tend to be educated and sophisticated, and they have a keen eye for design. Global connectivity has bred and enabled discerning consumers, and this is certainly the trend upon which we built the brand. Where there once were individual expectations, there is now a growing shared standard for products made from top-quality materials that provide top-quality experiences. We strive to move beyond simple marketing hooks and ensure our consumers love our products and help us continue to push boundaries. When that clicks, we see one more unique aspect to our consumers: engagement.
What’s your marketing strategy moving forward?
In 2015, we expanded internationally and also expanded distribution to non-traditional outlets such as top fashion and lifestyle stores including Odin in New York City, Notre in Chicago, American Rag in Los Angeles, Atrium in Miami, Opening Ceremony in New York City, Nomad in Toronto, and Tenet Southampton and SOTO Berlin. In 2016, our strategy is to keep up this momentum and continue to expand into new channels and geographies.
Do you see dispensaries and recreational shops as a major growth area for PAX?
Dispensaries are a completely new outlet for our products so naturally it’s a growth area, though one that is confined by the envelope of legalization. Dispensaries are a brave new world that we’ll be navigating with care and enthusiasm. We are already pleased with the success we have seen in this channel and are excited to see further growth.
What have been your biggest challenges in growing PAX to this point?
We have seen all varieties of challenges: historical stigmatization, manufacturing and demand planning, marketing in critically regulated environments, the natural ignorance of first-time business leaders (looking at myself), etc. There comes a point when a business has overcome so many hurdles that the organization is able to move past challenge paralysis and able to keep a dominant eye on an exciting future. When we get hundreds of notes a day about how beneficial your products have been to the lives of the people we aim to serve, we become emboldened to focus on that future.
As co-founder and chief product officer, what are your daily duties?
I work with teams across the organization to ensure our existing, emerging, and conceptual products are as strong as possible. I look to direct and indirect consumer feedback, data gathered across the organization, insights from investors and advisors, and a huge list of ideas we’ve all generated to help the company focus on the most important priorities for our growth and the happiness of our consumers. I dive deep into designs and new technology concepts with the product team. I’m also involved in the business development of the organization and work on new growth opportunities in addition to supporting the success of each group within the company.
Describe PAX in a few words.
PAX is a group of people dedicated to unlocking the power of vaporization technology to improve the lives and livelihood of all people through beautiful, elegant products.
HEROES, INSPIRERS AND TRANSFORMERS
“I am super impressed with Elon Musk’s driving vision and ability to push past risk to achieve something transformational. Peter Thiel has really impressed me with his ability to identify human behaviors that predict macro changes, and certainly he’s been bold with investments like Privateer. I also enjoy the frequent thought experiment of how Nikola Tesla or Leonardo Da Vinci might approach furthering vision for our products, or how Johannes Kepler or the great Galileo Galilei might approach technology discovery or R&D.”
“ADAM IS… the most intellectually curious person I’ve ever met. He’s the best kind of scientist: one that’s equally creative and investigative. He channels that curiosity into deep understanding of whatever is put in front of him, and he does so without expectation. That combination of talents enables him to arrive at creative solutions that haven’t been thought of before. That’s inspiring.”
As chief technical officer, what are your daily duties?
Adam Bowen: My primary role is to lead investigations into new technologies that will dramatically improve the vaping experience. I also oversee our intellectual property efforts.
PAX1 and PAX2 modernized the vape world. What are the secrets to your wild success?
Well, PAX1 was the first vaporizer to combine superior performance: a compact, beautiful, industrial design, and extreme ease of use in one device. With PAX2 we improved upon this recipe, making the product smaller while more powerful and also more intelligent. The craftsmanship is unparalleled in this category. We also stand behind our products with extended an warranty and our now-famous customer service.
How does JUUL differ from PAX1 and PAX2?
JUUL is unique in a few very important ways. It is the first nicotine vapor product that satisfies in a way similar to real cigarettes, thanks to our patented nicotine-salt formulation. For adult smokers transitioning to vapor, this is paramount. The iconic design, while compact, looks nothing like a cigarette. We have also made it as simple to use and as intuitive as possible. JUUL is selling extremely well across all channels nationwide and sales are only accelerating.
How is PAX Labs approaching the cannabis market?
First off, while PAX is designed for use with tobacco, consumers may use it with the material of their choice. While we did not design PAX for marijuana consumption, the reality is that the industry and the regulatory landscape are shifting and we would love for our vaporization technology to be applied as broadly as possible. We want our consumers to be able to find PAX where they already choose to shop. This encompasses many different types of retailers, including dispensaries and head shops.
Have you had to deal with cheap knockoffs?
As they say, imitation—in this case direct knock-offs—is the sincerest form of flattery. We’ve seen a lot of counterfeits and have been able to shut them down by enforcing our intellectual property rights and working with counsel and law enforcement, both in the U.S. and abroad.
Do you see PAX Labs as a hardware and technology company or a lifestyle brand?
All of the above: a technology-enabled, branded consumer product company. Our lifestyle brand matters to us just as much as the quality and innovation of our products.
How much of your time is spent dreaming up new products?
The Edison quote comes to mind: “One percent inspiration and 99 percent perspiration,” but I would change it slightly. Our development teams probably spend 1 percent of their time developing product concepts and 99 percent on detailed design, refinement, and production development. It seems disproportionate, but both pursuits are equally important.
Is the vape category still attracting lots of investor attention? Are vape start-ups still on the rise?
It seems to me there’s been a slowdown in vape start-ups. Part of this might be the decline of venture funding, but also I think people are realizing it’s not easy to make a really great vaporizer.
What new accessories and other products are on your agenda?
Currently, PAX accessories include colored, flat mouthpieces, an AC wall adaptor, a cleaning kit, and various replacement parts for PAX2. We’ll continue to develop new accessories that enhance and improve the PAX experience, and we will be exploring products with other formats and functionality.
What keeps you up at night?
How to grow our business fast enough while staying true to our values.
What inspires you?
Anyone who follows their passion despite obstacles and what others think.
How do you stay productive?
Exercise—and lots of lists.
Describe PAX Labs in a few words.
Simple, sophisticated, approachable, fun.
“JAMES HAS… an innate craftsmanship that I’ve seen in few, if any, others. Whatever the tools or medium—from woodworking to cooking to making a business presentation—there is quality in whatever he designs and produces. It’s a rare gift and, I think, not something that can be taught.
A DAY IN THE LIFE OF JAMES MONSEES
7am: Gets out of bed, grabs “my JUUL,” pets the dog, walks to the office in San Francisco.
8am: In the office; drinks first cup of coffee. “I actually wake up.”
9am: Catches up on critical business performance and drinks more coffee.
10am: Sets goals for the day.
11am: Brainstorms new ideas. Calls with investors, a board member, an advisor, or press.
12pm: Lunch (sandwich or burrito), scours reviews and forums, checks emails, compares quotes and supplier capabilities.
1pm: Meets with vice presidents of product, finance, and supply and general manager to generate solutions to the problems of the day. Reviews priorities.
2pm: “Quickly test the above solutions!”
3pm: Investigates how tests are going, sketches out more concepts, quickly renders concepts in CAD and reviews with a few people, sometimes realizes a major flaw in thinking, generates a whole new concept to test overnight.
4pm: Grabs a beer and chats with colleagues about marketing concepts, sales performance, and feedback from retailers.
5pm: Time for a meeting that couldn’t be fit into the day’s schedule. Reviews hot-off-the press graphics, packaging, or design work.
6pm: Heads to the pool hall.
7pm: Meets his lady for dinner with friends, where he “whines about how work pervades every conversation in San Francisco.”
9pm: Ubers home, plays with dog, sits on couch with the “most wonderful woman on earth,” responds to emails while watching Game of Thrones or Girls (“gotta be a good partner”).
11pm: Throws some slides together to prove a point, knowing that by morning he’ll “have dreamed of a better way to do so.”
12am: Sleeps; dreams of World PAX Day.
Investors who bet on PAX Labs
Sand Hill Angels
Tao Capital Partners
For Wholesale Orders: PaxVapor.com