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The Companies Venture Capital Isn’t Allowed to Invest In
Vice Ventures is investing in taboo industries that other funds won’t touch — even if they want to
By Juliyen Davis
What image comes to your mind when you think of the word “vice?”
Friends passing around a joint in a dimly lit living room? The Vegas Strip with its high rollers in fancy suits? Maybe the reality of browsing the internet for sex toys because stepping into a brick and mortar sex shop feels too awkward? Needless to say, vices can sometimes be complicated to interact with. Many turn their heads while stepping into sex shops and dispensaries to make sure no one they know is behind them. Why?
We don’t always acknowledge it, openly at least, but we’re all human: excitable, horny, susceptible to temptation. It’s because of this human nature that vice industries — including cannabis, gambling, and sex-tech — are among the most lucrative. The porn industry, for example, is valued at $97 billion, according to some estimates. But this figure, among similar figures for other vice industries, usually goes unspoken.
Vice industries are nothing new; these markets have existed for as long as humans have had desires. But, for just as long, a narrative has separated bad or unspoken vices from good or acceptable ones. This same narrative has separated cannabis from alcohol, gambling from gaming, Pornhub from Netflix. All of these things are similarly addictive, yet only some of them are regulated, punishable, and generally regarded as being “bad for us.” The others are simply seen as normal activities; and — from a VC’s perspective — spaces worth investing in.
Startups in the vice space have historically been underfunded and overlooked by Silicon Valley, largely because of vice clauses: agreements that bar institutional funds from investing in them. The investment, as a result, has generally come from sidecar funds, set up under the radar by fund managers, which are not subject to the disallowance of such clauses. However, as recent investment in the cannabis industry has shown (accounting for nearly $900 million of VC dollars last year), opportunities in vice industries are being reexamined by…
