An investor makes a case for funding sex, drugs and other socially taboo products

Summary

Impact investor and advisor Christian Tooley posed a simple question to the audience at SXSW London last week: What if investors put aside societal prudence for profit? Tooley was mainly referring to vice clauses, the restrictions that limited partners place on venture firms to guardrail their investments. Some of these no-no sectors often include products dealing with sex, substances like psychedelics, gambling, and tobacco, and such limitations are usually imposed by large institutional investors, who don’t want to invest in products that are at best controversial and at worst potentially harmful. Tooley feels investors are missing out on innovation by keeping away from these so-called vices, especially where sex and substances are concerned. “Returns can be financial, cultural, and systemic,” Tooley told the crowd. “Sex is high volume, consumer-facing, with lower upfront capital needs. Substances have moderate-to-long ROI but higher payoffs.” He argued that such clauses are really more about bowing to the social stigma around these topics, even though some startups could be bringing about positive health and social benefits, in addition to being lucrative. The sex tech market, for example, is expected to hit nearly $200 billion by 2032, he said. Over the years, the industry has received small but steady amounts of venture capital funding, a few hundred million at best. Specialized investors and firms, notably Vice Ventures, have sought to back more companies but there hasn’t been an onrush, especially from mainstream investors, to follow its lead. Even OnlyFans, despite earning billions in revenue, struggled to find investors because of its association with pornographic content. “Entire industries are underfunded not because they lack merit, but because they challenge comfort,” Tooley later told TechCrunch As an investor, Tooley has backed products such as Polari Labs, a tool that promises to improve anal sex, and linq, a company touting to provide a safer way to...