Gamucci, an electronic cigarette company created by two brothers in 2006, is set to appoint Canaccord Genuity to help it raise more than £20m for expansion.
The company, whose products are sold in WH Smith and Waitrose, is one of a number of firms that have sprung up in Britain to take advantage of the surprise popularity of electronic cigarettes.
Sales of “e-cigarettes” are expected to reach $3bn (£2bn) this year and analysts have suggested the technology will prove to be the “most significant development in the history of the organised tobacco industry”, which is around 200 years old.
Around 1.3 million people use the devices in the UK, according to the Medicines and Healthcare Products Regulatory Agency (MHRA).
Gamucci was founded by Taz and Umer Sheikh, two entrepreneurs from Surrey who previously ran several IT businesses. They saw an early opportunity to improve on electronic cigarette technology, which has been evolving since 2003, when a Chinese pharmacist, Hon Lik, set about trying to find away of inhaling nicotine without burning tobacco.
Gamucci has a manufacturing plant in Shenzhen, China, where it employs around 400, and expects sales in the UK to exceed £10 million this financial year.
The company owns a UK patent for its technology and it intends to use some of the funds raised to go after a number of other players in the market, who it believes, have potentially infringed its patent.
The fledgeling industry is currently something of a melting pot, made up everything from small one-man-band outfits to tobacco majors such as British American Tobacco. However, there is expected to be a major shake-up in 2016, when electronic cigarettes will be licensed in the same way as medicines in the UK.
The Sheikh brothers said the £20m - some of which will be put towards gaining a licence - is only likely to be a “first tranche” and they intend to raise a further £70m-£100m in a second round of fundraising, potentially in the next 12 months. The funds will also be put towards marketing and further research and development.
“We have had a lot of interest in the business from investment banks, private equity businesses and high net worth individuals,” the brothers said.
Gamucci recently recruited a number of senior directors from the tobacco industry to lead its expansion, including chief executive Tony Scanlan, who spent 17 years at Rothmans International.