Speaking at SXSW London, impact investor and advisor Christian Tooley recently sparked discussion by challenging investors to consider funding ventures that society often deems taboo. He specifically referred to the “vice clauses” frequently set by limited partners, which restrict venture capital investments into sectors involving sexuality, substances such as psychedelics, gambling, or tobacco.
Tooley contends that this cautious approach deprives investors and society alike of meaningful innovation. He argued that startups in these areas often promise significant returns—financially, culturally, and systematically—highlighting that sexual wellness ventures typically boast high consumer demand with moderate upfront capital and that substance ventures, particularly ones involving psychedelics, provide moderate-to-long-term returns with potentially substantial payoffs.
According to Tooley, institutional investors apply these clauses primarily to navigate societal stigmas, rather than genuine risks or lacking opportunities. The consequence is underfunding beneficial innovations. He pointed out the sex tech industry, projected to exceed $200 billion in market size by 2032, as an industry historically underfunded despite its clear potential for growth. Although specialized firms like Vice Ventures have made targeted investments, substantial mainstream funds have largely held back. Even financially successful companies like OnlyFans have faced investor skepticism and challenges due to their association with adult content, despite generating billions in revenue.
He underscored similar hesitations surrounding substances, notably cannabis, which remains caught up in complex legal frameworks with state-by-state varying legalization and regulatory ambiguity. Institutional investors frequently avoid these markets to safeguard their reputations and minimize legal risks, as many represent large endowments or pension plans obligated to steer clear of perceived legal or moral uncertainties.
However, Tooley believes this hesitance creates an attractive opportunity precisely for smaller LPs, progressive funds, and family offices capable of navigating riskier waters without the same reputational constraints. Tooley, whose investments include startups like Polari Labs—a sexual wellness company improving anal sex—and Linq, a startup promoting safer ways to share nude images, argues that avoiding discomfort might cause investors to miss out on both high-impact ventures and substantial returns.
Drawing parallels from once-taboo sectors now commonplace—such as period-tracking apps, with startup unicorns like Flo—Tooley emphasized the importance of confronting stigma directly. He envisions investments that enhance sexual health services, innovative therapeutic uses of psychedelics, and biohacking products tailored to LGBTQ+ communities.
Ultimately, Tooley concluded, venture funding requires individuals and institutions willing not only to accept entrepreneurial risk, but to proactively challenge prevailing societal discomfort. “We don’t merely need investors comfortable with risk, we need ones deeply uncomfortable with the status quo,” he asserted.
