NY Times: VC Investing in Sex-Related Businesses

I love it...always did...I remember back in 1998 when a brilliant friend came up with the idea for a website that was called WallStreetGals.com --It was a Bloomberg Meets Playboy..with double entendre market coverage with live audio streaming, real time prices, mid-day updates from sexy starletts.....The site was profiled in a bunch of newspapers, and it got a fair amount of traffic when it first launched, but it was ahead of its time and soon folded...

But...today's NY Times article...excerpted herein--suggests that VC's are warming up to the idea that sex-related businesses might be a good investment. Duh. Rick's Cabaret (NASDAQ :RICK) shareholders could have told you that.. And what about the literally tens of millions of dollars being generated by professional companies operating online video chatting platforms--little overhead (and still littler underwear)..

Several former Wall Street investors are now specializing in marrying mainstream money with companies that offer such content or products. Separately, a handful of venture capitalists have already financed start-ups that receive a big chunk of revenue from making or distributing sexual content or products, and others are considering such investments.

Jimmyjane, a San Francisco company that sells sex-related consumer products including high-end vibrators (a gold-plated one sells for $250), has six venture capitalists among its investors. The company’s chief executive said he was close to completing a $3 million to $5 million round of financing with one or more funds — not merely individual venture capitalists but marquee funds.

“It will be a watershed,” said Jimmyjane’s chief executive, Ethan Imboden, formerly a design consultant to Nike, Motorola and other mainstream brands. He said the deal could be among the first major venture fund investments in an overtly sexually themed business.

The involvement of mainstream investors in such companies is still very much in its infancy, and even those with a vested interest in developing it say it may not evolve further. There are considerable hurdles, chiefly and simply the discomfort of many in being affiliated with products and services they consider immoral or that they think could tarnish their reputations.

In addition, investors are dubious that these companies can turn a sufficient profit to justify the risk. Pointedly, investors may find it tough to take sex-related companies public, or find big companies to acquire them, limiting their profit-making exit strategies. And the universities and endowments that invest in private equity funds and venture capitalists are not likely to approve deals they see as pornographic, investment bankers said.

But there are also som