As Sex Toy Sales Surge, Investors Remain Frigid

A patron rings a bell in a sex toy shop in Paris, August 2, 2013. Bertrand Guay/AFP/Getty

Sleek, high-concept sex toys are having a moment, both onscreen - the not-quite dystopian 2013 film Her is a love story starring an evolved operating system - and on shelves. The sex toy industry grosses over $15 billion in annual sales, and major retailers - Wal-Mart, Rite Aid and Brookstone now stock discreetly advertised vibrators - have paved the way for innovation. So why do sophisticated sex toy start-ups still have a hard time getting funded?

"Everyone thinks the sex industry is a place to get rich quick, but it can actually be very difficult to make money," said Lux Alptraum, the owner of sex-centric website Fleshbot. "The market is exploding, and sex toys are definitely mainstream, but investors and banks are still too scared to join in."

Sex toy entrepreneurs more interested in interactivity and sleek design than bachelorette-staple dildos told Newsweek that there's a frustrating divide between how investors really feel and what they're worried others will think. "We're in this weird in-between stage," said Brian Krieger, co-founder of Minna Life, a sex toy start-up based in San Francisco that used crowdfunding site IndieGogo to raise money for its new "squeeze technology" toy Limon, due in part to frustration with traditional routes. "Most people don't personally think vibrators are taboo, but they think everyone else does. I want to tell investors, 'You're not the only one! Nobody cares!' "

Cindy Gallop, founder of MakeLoveNotPorn, a social media platform that allows users to upload and share their own "real world" sex, has long been outspoken about the financial difficulties she has faced; she received $700,000 from one anonymous angel investor during a round of seed funding but hasn't had much luck since. Next month, she hopes to change that during Social Media Week, when she will, according to a panel description, match "VCs and angel investors open-minded and farsighted enough to see the opportunity in this area" with "pioneering brands."

Some high-tech X-rated start-ups say struggling companies just may not have a good enough product. Michael Topolovac, chief executive officer of Crave Inc., said he was surprised by how easy it was to raise $2.4 million from angel investors and that stigma wasn't a barrier. "This is a massive market opportunity with very few players and a community eager for a new product," he said. "I don't think it's true that it's difficult to get funding. I think good businesses get funded and less compelling ones don't."

Kickstarter, the world's largest crowdfunding platform, refuses to fund sex toys - but the numbers imply it's on the wrong side of history. After it was rejected from Kickstarter, Crave used now-defunct site CKIE to raise $100,000 in six weeks; VibeEase, an app-controlled vibrator company, raised $100,000 more than its original $30,000 goal via IndieGogo and is currently raising a seed round (for more freaky fetish concepts, there's Offbeatr; one erotic text-based game raised $193,000).

A few entrepreneurs said JimmyJane, the first big-time design-centric sex toy brand, may have scared off investors by failing to deliver after receiving more than 10 million from angel investors since it launched in 2003. "They haven't been a failure, but I don't think the returns have so far hit the hopes for more traditional venture capital investments," said Krieger. "If there's a huge success, it makes it easier for similar companies to get some backing, and if there's not, it can have the opposite effect."

JimmyJane founder Ethan Imboden said he's in no rush to be acquired just yet, and he's seeing more and more new sex toys at start-up incubators and hackathons. A decade ago, Imboden said, he was ridiculed at adult industry conference XBiz; last year, he was asked to give a keynote presentation on the future of pleasure products.

"Our investors didn't just invest for the love of the company, and I do believe there will be a return for those investors," he said. "It's very clear that the category is going mainstream."