Why Investors Should Break Taboos: The Untapped Potential of Vice Markets

Impact investor Christian Tooley recently challenged the status quo at SXSW London, questioning why investors shy away from sectors deemed socially taboo. Vice clauses, often imposed by institutional investors, restrict funding to industries like sex tech, psychedelics, gambling, and tobacco, despite their potential for high returns and societal benefits.

Tooley argues that these sectors are ripe for innovation, offering financial, cultural, and systemic returns. For instance, the sex tech market is projected to reach $200 billion by 2032, yet it receives minimal venture capital. Companies like OnlyFans struggle to attract mainstream investors due to stigma, despite their profitability.

Investing in these areas isn't just about profit; it's about challenging societal norms and fostering innovation. Tooley has backed ventures like Polari Labs, enhancing anal sex safety, and linq, a secure platform for sharing intimate content. These examples highlight the potential for positive health and social impacts.

However, legal and reputational risks deter many investors. Cannabis, for example, faces regulatory hurdles, making it a risky bet. Yet, Tooley sees an opportunity for smaller LPs, family offices, and progressive funds to lead the charge in these underserved markets.

The conversation around taboo topics is evolving. Once-controversial subjects like menstruation now have venture-backed solutions like Flo Health, a unicorn period tracker. Tooley envisions a future where investors support psychedelic therapies, queer and trans biohacking, and advanced sexual health tools, driven by a desire to disrupt the status quo.