Pax Labs, a San Francisco-based vaporizer company, announced a whopping $46.7 million Series C round on Wednesday led by investors including Fidelity Management & Research Company and Sivia Capital.

Fidelity declined to comment about its investment, but Pax's success as wooing such an established institutional investor is a clear sign that vaping has become a serious growth business. According to a new Reuters/Ipsos poll, about 10 percent of U.S adults now use electronic cigarettes and or other vaporizing devices, four times the estimated number in 2013. Wells Fargo Securities analyst Bonnie Herzog estimates the U.S. vaporizer market will grow to $3.5 billion by the end of the year, up from $2.5 billion in 2014.

Pax Labs used to be named Ploom, but sold the Ploom name and its ModelTwo vaporizer to Japanese Tobacco International earlier this year after a three-year partnership. Founded in 2007 by Stanford graduate design students James Monsees (now the CEO) and Adam Bowen (now CTO), Pax has seen sales grow 200 percent over the past two years and has sold more than 500,000 units of its eponymous flagship product: a portable loose leaf vaporizer that looks more like a mobile electronic device than a vapor delivery system. Monsees and Bowen says Pax will use the new funding to expand beyond the U.S. and Canada.

Racing to replace the cigarette

On June 1, Pax Labs released its newest product, the Juul, a sleek electronic cigarette the company sells along with its liquid nicotine cartridges. Inside the SD card-sized cartridges--which are available at 10,000 retail locations around the U.S., as well as by monthly subscription on Pax's website--is a proprietary blend of nicotine liquid that Pax Labs chemists reverse-engineered from the tobacco plant. Compared to competitors' nicotine liquids, Bowen says, Pax's has a bigger punch that is more satisfying to people who are switching over from cigarettes.

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"It's 10 times as much nicotine as other e-cigarettes on the market, which sounds crazy high but it's actually what you get per puff from a cigarette," Bowen says. "[Other] e-cigarettes can't go that high."

Monsees and Bowen say that the e-cigarette industry's biggest problem is that most smokers aren't satiated by e-cigs and go back to conventional cigarettes. Additionally, as the Reuters/Ipsos poll found, about 75 percent of people who vape nicotine continue to smoke cigarettes. The founders hope that because the Juul's liquid delivers similar nicotine satisfaction to that of a cigarette, the product will get people to give up smoking. (Most researchers believe e-cigs will prove to be less harmful than cigarettes, and various studies have found no evidence that vaporizing liquid nicotine causes cancer or heart disease. Still, the long-term health effects of vaping remain unclear.)

A future in cannabis?

Pax Labs has never marketed its products to marijuana users. But thanks to their portability and how well they vaporize THC from cannabis flowers, the Pax loose leaf vaporizer and the recently released Pax2 have been heartily adopted by legions of marijuana users. The cult following the Pax has created has blossomed into a community of technology-minded cannabis users who congregate on a subsection of Reddit.

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The rising popularity of THC concentrates could be a huge opportunity for Pax Labs. While the Juul is a closed system, the Pax2 can be filled with whatever material the consumer wants to pack in it. 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.

"Pax is currently a tobacco product. But the industry and the regulatory landscape is shifting. We're very much aware of that and we would love for this technology to applied as broadly as possible," Monsees says. "That was the concept from day one. We did not want to build a tobacco company; it was to build the greatest vaporization company possible."

But when asked if they have a THC oil cartridge waiting to be deployed in Colorado or other markets where recreational marijuana is legal, the vape kings say not yet.

"We are experimenting with the technologies for other markets, potentially for the cannabis market. But we will only ever do that in places where we can get full legal compliance for federal, state, and local level," Monsees says. "We do not have a product announcement at this point, but certainly the future is bright to bring technologies that open up the landscape."