12 Leading Investors Explain Why They're Funding Sextech

Originally posted in Forbes.

March 25, 2019

For some, it’s personal. For others, it’s political. But the one motivation that drives nearly every sextech VC is the exploding market in sexual wellness.

Much of the coverage of sextech has focused on the founders and their products. But given the funding issues faced by sextech companies, a more important issue might be the motivation of the investors themselves. Because whether its vibrator design or contraceptive delivery or educational platforms, no sextech company can change the world without funding.

Some sextech pioneers, like MakeLoveNotPorn’s Cindy Gallop, are lucky enough to have a single investor who believes in — and helps fund — her company. For sextech companies raising outside funding, it’s still a big deal to be backed by major VC funds. (Recently, app-based audio erotica platform Dipsea raised $5.5M in a competitive funding round, a hopeful harbinger of what we’ll start to see in this space.)  

So I asked nearly a dozen prominent investors in sextech — some of whom have invested in O.school,* and others who have invested in companies like Maude, Unbound, Elvie, and Juicebox — the central question: Why are you investing in sextech?

‘Overlooked’ and ‘Ignored’

Many cited the promise of a surprisingly untapped market — women.

“You can tell that this market is growing by the unicorn status of companies like Rent the Runway and Glossier,” venture capital investor Monique Woodard told me. “But so far women’s health, women’s sexuality, and women’s products have been ignored. Given the demographic shifts that are underway right now, a women’s health company that also has a lens into women of color will be even more important.”

“There is a huge business opportunity in sextech,” says Christie Pitts, partner at Backstage Capital, a VC fund dedicated to funding people of color, women, and other “underestimated” founders. “Women control nearly all of the purchasing decisions and the majority of the wealth in the US, yet have been overlooked when it comes to products and solutions dedicated to their pleasure.”

Lina Wenner, principal at firstminute Capital, a $100M UK-based seed fund backed by 30 unicorn founders, sees that trend only growing.

“We’re particularly excited by the younger, more sexually liberated Gen Z gaining share of wallet and opening up the conversation around [sextech],” she says. “Over the next few years, we’ll continue to see an increasing democratization and growing social acceptance of — particularly female — sexual pleasure. If we can speed this up by investing into the right teams, that would be a great outcome for us.”

‘A Huge Part of Our Lives’

“The current cultural climate has created a window to shake up this moth-eaten market with new, innovative thinking and design,” says XFactor Ventures partner Aubrie Pagano, pointing me to a Medium post she wrote upon backing the sexual wellness company, Maude, in 2018. The real excitement for her? 10% YOY growth in a market that’s barely explored anyone but young cis males.

Pagano isn’t the only one drawn in by the potential to remake a long-stagnant industry. Changes in technology have made it easier for products to get to prototype, and crowdfunding is allowing founders with a little money and a strong idea to get to market.

“Sex toys in general are really interesting,” says Cyan Banister, an angel investor and partner in Founders Fund. “There are lots of people innovating on form and function of these products, especially women entrepreneurs. Previous to companies like JimmyJane, there weren't a lot of products that were geared towards innovation of materials. … And, it’s becoming less of an issue. The fact that you can get a Trojan finger vibrator at Walgreens or Walmart means that it’s becoming a little less stigmatized, which makes me very hopeful for the future.”

'A Moral Imperative'

Elomida Visviki and husband Lars Rasmussen, co-founder of the company that became Google Maps, find the reticence to discuss sex in the US — and by extension Silicon Valley — unnerving, and a bit silly. (During their first pitch meeting with me, Visviki breastfed their child.)

“It’s been an undervalued, ‘shady’ category,” says Visviki, who grew up in Greece, “but it’s such a huge, important part of our life. We should embrace it, and it has to be fun.”

“When I was in college I volunteered at the local kindergarten, and [sex ed] was the kids’ favorite subject,” says Rasmussen, who was raised in Denmark. “Now I live in a country that if you suggested that kids learn about sex and pleasure in kindergarten, it would not be OK. I want to be part of changing that. … Despite the hangups about sex, everyone loves it and everyone is interested. It’s just a matter of time before someone breaks through.”

Gerda Larsson, co-founder and managing director at The Case for Her, a European fund which invests in women’s health, says she sees huge opportunities in markets like sex education and fertility. But to truly realize that potential, investors simultaneously tackle stigma.

“Why can I see Viagra ads everywhere,” she asks, “but you're not allowed to advertise sexual products for women? Why is my sexuality shamed and framed as unnatural?”

Larsson says she invests in sextech as a strategy to close the gender gap — The Case for Her launched its Pleasure Portfolio in 2018:

“We started investing in sextech after identifying it as one of the solutions that could tackle the global taboo surrounding sex and female sexual pleasure. Tech gives people the opportunity to explore, nurture and innovate around pleasure and what that means to you.”

“Sexuality is part of wellness,” says angel investor Laura Behrens Wu. “My investment in sextech shouldn’t be viewed any differently than investments in other types of healthcare ,  like Headspace or Calm  — and that’s a huge, established market. Investors who insist on segmenting out one aspect of our bodies, just because it makes some people uncomfortable, may regret it in five years.”

Courtney Broadus, a member of Broadway Angels, an all-female investment group world-class angel investors, sees investment in sextech as a moral imperative. “Youth, teens and beyond [need to] have access to scientific information about consent and healthy, safe and enjoyable sex.”

“Sexual health and wellness are still taboo in so much of our culture,” says Alison Hartman, Ph.D, an angel investor in New Orleans. “I love that Juicebox democratizes access to experts on sex and relationships.”

For Jake Gibson, an angel investor and co-founder of NerdWallet, the educational aspect of sextech can offer an antidote the bullying, misinformation and shame that now seems to saturate online life.

“When the internet started, it was a place for all freaks and geeks,” he told me. “As the internet grew and evolved, it has gotten toxic, exactly like the places you had to run away from before. That’s why I invested in O.school — because safe places are important.”

Pioneering investors have begun the process, but the market is imbalanced. Once institutional investors come in, we may finally unlock the sector’s true potential.

‘Entrepreneurs Are Standing Ready’

“It’s a growing industry and the entrepreneurs are standing ready to go,” says Larsson. “Now we need more investors and pioneers from the finance sector to take on the subject and start realizing the potential both from the rights perspective and as an investment case.”

“Sextech is underserved because a lot of people that do not see the exit opportunities, and they don’t understand the space — or they have vice clauses in their LP agreements that keep them from investing in the space,” says Banister. “I try to identify companies that I believe that aren’t so “risky” they can’t fit, but can be mainstream — but also moving the needle to what people think can be a VC-type investment. It’s the mission and the outsize return opportunity. ”

“I think it's time we provide something relevant to the market,” says Sophia Bendz, an angel investor and partner at Atomico, one of the most respected institutional VC funds in Europe, with a $765M fourth fund. “I like the idea of a sextech company being founded by women and targeting the needs of women in a more ambitious way and not having someone else dictating the rules … I believe it has a huge potential.”

*Disclosure: Banister, Behrens Wu, Bendz, Broadus, Gibson, Pitts, Rasmussen, Visviki, Wenner and Woodard have all been invested in O.school, either personally or through their funds.

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