Raising Cash Is Tough Business for Sex Toy Pros, Forbes Reports

Aug 13, 2013 7:45 AM PST

NEW YORK — The sex toy business may sound seductive, but trying to raise capital for new and often established novelty companies can be anything but satisfying.

Interviews with pleasure products executives including Jimmyjane’s Ethan Imboden, Good Vibrations’ Jackie Strano, Crave’s Michael Topolovac, Revel Body’s Robin Elenga and others, shed light on the financing challenges that face adult toy entrepreneurs in a new Forbes article.

Although armed with sound business models and in many cases technically advanced products, investors are often gun-shy about being associated with new companies that in any way smack of sex.

Imboden revealed that one potential investor — a gun manufacturer —backed out of a deal for “moral reasons” once he heard Jimmyjane produced women’s’ vibrators.

“So, this is a company that had absolutely no issues, from a morality standpoint, manufacturing handguns but absolutely refused to work with a company involved in sexual health and well-being,” Imboden told Forbes.

What makes matters worse for novelty creators is that sex and porn are automatically linked in the minds of most mainstream business. Imboden told of problems with having his magazine ads yanked and credit card companies confusing his vibrator products with sex services.

Strano added that the loose association with porn also creates branding problems that hamper budding entrepreneurs.

In an effort to shake the stigma, novelty professionals prefer to categorize their products as consumer goods. Forbes reported that the adult market listing on venture capital database Angel List, lists 38 companies and zero investors. “None of the startups listed in this category is located in Silicon Valley. Instead up-and-coming startups, such as Crave and Minnalife, and established companies, such as JimmyJane, are listed under Consumer Goods category.”

Religion and cultural beliefs also come into play with potential investors. Topolovac, no stranger to raising venture capital, having raised $33 million for a previous start up, said most of the roadblocks Crave has faced were due to religious reasons, noting that investors who had to answer to partners from Catholic institutions rejected a recent pitch. Crave’s co-founder Ti Chang, had a job listing yanked by open job board because it was for an adult toy startup. “Religion always gets in the way of culture,” she told Forbes.

The Small Business Administration (SBA) also stymies adult businesses with its morality clauses, and even crowd-funding website Kickstarter kicked Crave to the curb. “They basically said, “we don’t allow vibrators on Kickstarter” or “we don’t like vibrators,” Topolovac said.

And getting a line of credit can also be a nightmare, as most other adult businesses already know. Imboden said a major credit card company mistakenly assumed Jimmyjane had a high number of charge backs for his service because of the nature of his business, but in fact revealed no charge backs or transaction reversals at all.

The lack of acceptance by banks have some novelty companies embracing third-party processors just like their porn counterparts. “It goes against our corporate values but we have no choice,” Revel’s Elenga said.

Despite the pitfalls, the sex toy industry could be on the cusp of creating a well of opportunity for investors if the perception switches to “sexual health and wellness” rather than automatically being associated with porn.

Dema Tio from San Francisco-based sex toy start up Vibease told Forbes that investors are adopting a “wait and see” attitude towards the yet-unproven industry.

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