Impact Investor and Advisor Christian Tooley raised a brief question to an audience at SXSW London last week. What if investors put aside social prudence for profit?
Tooley was primarily referring to subclauses. This is a limitation in which partners place investments on Guardrail in venture companies.
These no-sectors often include products that deal with substances such as gender, psychedelics, gambling, and tobacco, and such restrictions are usually imposed by large institutional investors who don't want to invest in products that are controversial at best and at worst are potentially harmful.
Tooley feels that investors are missing out on innovation by keeping these so-called vices away from them, especially when sex or substances are involved. “Returns can be financial, cultural and systematic,” Tooley told the crowd. “Sex is massive, it's for consumers and has lower capital needs. Materials have medium to long ROIs, but they're in higher rewards.”
He really insisted that such clauses succumb to social stigmas about these topics.
For example, he said the sex technology market is expected to reach nearly $200 billion by 2032. Over the years, the industry has received small but stable venture capital funds, at most hundreds of millions of dollars. Specialist investors and companies, particularly sub-venture companies, have tried to support more companies, but no redemption from those mainstream investors, particularly from mainstream investors.
Despite earning billions of revenue, even only fans struggled to find investors because of their relationship with porn content. “The whole industry is underfunded, not because it lacks benefits, but because it challenges comfort,” Tooley later told TechCrunch.
As an investor, Tooley supports products such as Polari Labs, a tool that promises to improve Anal Sex, and Linq, a company that promotes to provide a safer way to send nude.
It's not surprising that large institutional investors are leaving such categories. Many of them are donations and pension funds that are trying to avoid legal uncertainty and harm to reputation. Some investors who handed over the only fans were worried that there might be minors on the platform.
In terms of substances, cannabis is legal for each state, so here is a good example. In most cases there is legal, regulatory, and tax uncertainty that comes with endorsing what is a criminalized product.
Tooley says that due to less competition from facility funding, secondary investments could be a particularly good opportunity for small LPS, family offices, and progressive funding. “If you focus solely on perceived controversy, you miss innovation and often miss returns,” he added.
Tooley said it is important to address stigmas around investing in areas that are beneficial but may be avoided at present. For example, Tooley pointed out that speaking openly about issues like menstruation is considered controversial.
Today we have venture support companies such as unicorn age trackers Flo, Femble and Womanlog.
Tooley imagines a world where more investors will connect taboo companies to better sexual health tools. Psychedelic therapies with more cultural nuances, and biohacking related to queer and trans bodies. “We don't just need funders who are happy with the risk,” he said. “The current situation requires something very uncomfortable.”