Taat Lifestyle & Wellness (CSE:TAAT/Frankfurt: 2TP2) has received C$6.75m in the form of a private placement from a group of investors, including Debbie Chang, co-founder of Horizons Ventures. Chang is making the investment in a personal capacity, but investors have already taken note of Chang’s involvement with Horizon Ventures.
The money raised in the placement will help Taat to expand its launch initiative in the US state of Ohio as well as fund further research and development into its Beyond Tobacco base material. The company is also looking at further markets within the US, beyond its initial launch in Ohio.
Chang’s involvement with Horizons Ventures is notable: based in Hong Kong, it manages the private investments of Asian billionaire Sir Li Ka-shing in the technology, media and telecommunications sectors. It has made a number of landmark investments in the past in disruptive technologies, among them DeepMind (later bought by Google), Siri, Facebook, Spotify, Impossible Foods and Zoom Communications.
Horizons Ventures got into Skype in 2005, one year before eBay paid $2.5bn for the company. Chang was one of the team that pitched Facebook to Li in 2007. Their early stake would be worth $1.5bn today.
Investing in disruptive technology concepts
Chang founded Horizons Ventures alongside Solina Chau in 2002 to seek out high tech venture opportunities. Horizons Ventures is known to act as an investment vehicle for Li’s foundation into disruptive investments in areas like artificial intelligence and mobile technology. Its support of Impossible Foods is notable in this context: last year Horizons Ventures and Singapore’s SWF Temasek both contributed to Impossible Foods’ $300m funding round.
Taat’s appeal to strategic investors is its potential as a disruptive force in the global tobacco market. Because it is a zero tobacco, zero nicotine, non-vaping solution, it stands to see rapid uptake from smokers looking to wean themselves off nicotine. CEO Setti Coscarella has been involved in tobacco alternative projects within Philip Morris, but sees Taat as an alternative to tobacco which could really go places.
Unlike Impossible Foods, Taat is already trading publicly in Germany and Canada.
Taat is focusing on the US as its first market
Coscarella is looking to use traditional tobacco distribution channels for Beyond Tobacco, so that the product can be seen by smokers. Because it does not contain nicotine or tobacco, it can also compete at a lower price point as it is not subject to tobacco duties. Taat is focusing on the US for the time being, mainly because of the sheer size of the market there. Individual US states like Ohio contain more smokers than many European countries.
In Asia the issue of tobacco control is also creeping up the agenda. As we look ahead to other possible markets for Taat, China could be a key candidate. According to data from the World Health Organisation, the total economic cost from smoking in China rose by 1000% between 2000 and 2014, with one death every 30 seconds.
“Our objective is to provide a choice for current smokers of legal age to leave nicotine behind,” said Coscarella. “In so doing, we seek to create meaningful social, economic, and humanitarian impact by helping to alleviate the effects of tobacco use and production.”
Horizons Ventures’ interest obviously stems from the potential growth prospects for ‘alternative’ stocks like Taat, especially in the tobacco space. Investors will be aware of how JUUL built its vaping business into a $40bn business in three years. There are obvious ESG attractions here for investors too as the company aims at the large market of smokers who are currently addicted to nicotine, but would prefer not to be.
Ohio represents a massive initial market
Ohio is seen as a strategically important move for Taat, as it contains 2m smokers and 10,000 convenience stores selling cigarettes. Each store in Ohio services around 200 smokers. If only one out of 200 smokers tries Taat as an alternative, that already has the potential to turn Taat into a $10m a year business.
Chang and her colleagues are very canny investors who have backed some of the largest and most disruptive technology plays on the planet. It is hard to argue with success stories like Facebook or Zoom. Taat is still very much under the radar for many investors, and still at an early stage when it is about to deliver its first significant batch of its proprietary product into the US market, but things are already moving fast.