Podcast Summary
Vice Investing: A Unique Approach to Venture Capital: Traditional VCs often avoid vice industries due to ethical concerns, leaving a gap in the market for firms specializing in vice investing, which can potentially offer high growth opportunities
There are various approaches to venture capital investing, including by stage and vertical focus. However, one unique vertical that has emerged is vice investing, which targets industries that traditional VCs often avoid due to ethical and reputational concerns. Katherine Dockery, the founding partner of Vice Ventures, shared her experience of encountering this issue firsthand while interviewing for a new role at a venture capital firm. Despite her pitch of an alcohol-related business, Bev, the firm couldn't invest due to their vice clause in their agreements with their limited partners. This underscores the existence of a gap in the market for a venture capital firm that specializes in vice industries, which can potentially offer high growth opportunities.
VCs have restrictions on investing in 'vice' industries, creating an opportunity for a harm reduction fund: VCs cannot invest in legal businesses involving alcohol, cannabis, nicotine, sex, tech, online gambling, esports, and certain food types. A harm reduction fund invests in businesses reducing harm associated with vices, attracting investors like Marc Benioff and Reed Hastings.
Venture capitalists have "vice clauses" in their investment agreements that prevent them from investing in businesses involving alcohol, cannabis, nicotine, sex, tech, online gambling, esports, and even certain types of food. This means that they cannot invest in a wide range of legal and acceptable businesses, despite their interest in the founders and the businesses themselves. This creates an opportunity for a fund that invests in such "vice" industries, following a harm reduction approach. Harm reduction means investing in businesses that reduce the harm associated with vices, rather than encouraging addiction. For instance, instead of investing in companies that market e-cigarettes to children, a harm reduction approach would involve investing in companies that develop nicotine replacement therapies or e-cigarettes with safer designs. The speaker had a positive experience when raising a fund focused on such industries, as many investors saw the need for such a fund in the market. However, the speaker believes that companies like Juul could have done better with their marketing to keep children away from their products. The speaker also managed to attract big names like Marc Benioff and Reed Hastings to invest in their fund.
Cold emails can lead to significant opportunities, even in niche industries: Mark Andreessen invested in a company after receiving a cold email, highlighting their potential. Experienced investors and lawyers, like Katherine Dockery and Scott Walker, are valuable resources for entrepreneurs in vice tech.
Cold emails can lead to significant opportunities, even in niche industries like vice tech. Mark Andreessen, a well-known venture capitalist, invested in a company after receiving a cold email. The vice clause in investment agreements, which can be restrictive, has deeper origins in religious organizations. Katherine Dockery, an investor in vice tech startups, raised a $25 million fund and got her start in venture capital by working for an experienced investor. The discussion also highlighted the importance of working with experienced lawyers like Scott Walker, who offer efficient and transparent services for entrepreneurs.
Venture Capital and Adult Entertainment Industry: Despite the allure of certain adult businesses, not all are venture-backable due to unclear exit strategies or industry stigma. Technology can make these businesses more attractive, but investors must evaluate legitimacy and profitability carefully. The cannabis industry, for instance, presents challenges in ensuring product safety and consistency.
The world of venture capital attracts various types of businesses, even those in the adult entertainment industry, such as sex dolls or virtual reality porn. However, not all of these businesses are venture-backable due to the lack of clear exit strategies or the stigma surrounding them. For instance, the incel movement and sex doll companies face challenges in finding investors, while cannabis companies, which have a clearer exit strategy through the Canadian stock market, are more likely to secure funding. The use of technology, such as precise dosing devices for nicotine or cannabis, can make these businesses more attractive to investors. However, it's essential to evaluate the legitimacy and potential profitability of these businesses before investing. The cannabis industry, for example, faces challenges in ensuring product safety and consistency, which can impact investor confidence. Overall, the venture capital industry requires careful consideration of various factors before investing in any business, regardless of the industry.
Power dynamics between corporations and suppliers: Apple and Walmart wield power over suppliers, dictating harsh terms, while psychedelic companies face challenges in scaling and passing clinical trials, but potential investment opportunities exist in this emerging market.
Large corporations, such as Apple and Walmart, hold significant power over their suppliers and can negotiate harsh terms, including dictating profit margins. This was discussed in relation to Apple's dealings with suppliers and Walmart's reputation for being brutal to suppliers. Another topic touched upon was the potential investment opportunities in psychedelics, specifically in companies producing synthetic psilocybin, despite the challenges they face in scaling and passing clinical trials. The conversation also touched upon the decriminalization of certain psychedelics in certain areas, which could potentially lead to a national referendum on psychedelics in the US.
Exploring Opportunities in Psychedelics, Cannabis, and Gambling: Stay informed about various sectors and trends to identify potential investments. Utilize LinkedIn for hiring and reach the right candidates. Opportunities exist in skill-based betting and venture-backed psychedelic businesses. Separate fact from fiction when evaluating potential investments.
There are various opportunities in different sectors, such as psychedelics, cannabis, and even gambling. In the case of psychedelics, there's potential for venture-backed businesses, with companies like Johnson & Johnson being potential buyers. However, the protectability of these substances is a question. Meanwhile, in the cannabis industry, investments have already been made. Regarding hiring, LinkedIn is a valuable tool to reach the right candidates at the right time. As for gambling, there's an opportunity in skill-based betting, where success depends on the individual's skill rather than chance. It's essential to stay informed about various sectors and trends to identify potential investments. Additionally, Marion Williams, known as the Crystal Lady, is a notable figure in the psychedelic space, with a unique perspective on love and crystals. However, it's important to separate fact from fiction when it comes to her beliefs. Overall, the discussion highlights the importance of staying informed and seizing opportunities in various sectors.
Determining Skill vs Chance in Betting: Games like chess and esports have clear skill components, while chance plays a larger role in games like roulette. Poker, considered a game of skill, still involves chance, making it complex for regulation. Skill-based betting platforms are growing in popularity.
Not all games or forms of betting are created equal when it comes to the intersection of skill and chance. In games like chess and esports, where ratings exist and practice can significantly improve one's abilities, skill plays a dominant role. However, in games of chance like roulette or games where the outcome is influenced by elements beyond the players' control, like poker, chance plays a larger role. Poker, despite being considered a game of skill, still involves an element of chance, making it a complex issue when it comes to regulation and legality. Companies like Players Lounge, which offer skill-based betting platforms, are thriving by allowing individuals to wager against each other based on their skill levels in specific games. Despite the challenges in determining the exact percentage of skill versus chance in certain games, the landscape of betting is evolving, with traditional sports leagues embracing in-game betting and technology making it easier to determine skill levels and settle disputes.
Family offices and money managers fuel investment in harm reduction beverages: Family offices and money managers are the main investors in harm reduction beverages, attracted by potential exits and returns in specific sectors like alcohol. Success depends on understanding distribution, marketing, and consumer appeal.
The investment landscape for harm reduction companies is primarily being driven by family offices and money managers, rather than traditional LPs like Harvard, Yale, and Dukes. These investors are drawn to the potential for exits and returns in specific sectors, such as alcohol, where there are proven exit opportunities. The investment process involves understanding the distribution channels and marketing strategies, as well as the appeal of the product to consumers. Tequila and canned wine are current examples of successful beverage investments, with tequila experiencing a surge in popularity due to celebrity involvement. However, not all sectors are attractive for investment, such as combustible cigarettes. Ultimately, the success of a beverage investment depends on a combination of factors, including the product's taste, image, and distribution strategy.
Revolutionizing Sleep and Connections with Technology: The Eight Sleep mattress customizes bed temperatures for better sleep, while genuine conversations are key to building connections.
Technology is revolutionizing various aspects of our lives, from sleep to sex. One exciting innovation is the Eight Sleep mattress, which allows individuals to customize the temperature of each side of the bed, improving sleep quality and overall health. Meanwhile, for those struggling to connect with others, a simple and effective tip is to be normal and initiate genuine conversations. In the realm of sex tech, the speaker has met with numerous companies, but did not elaborate on specifics. Overall, the conversation highlights the power of technology to enhance our experiences and relationships.
Navigating Advertising Challenges in Sex Tech: Sex tech companies face unique advertising restrictions, leading Mon.Maude to sell massage candles as their primary product to bypass censorship and attract customers, showcasing the need for a more inclusive approach to discussing and investing in sex tech.
The stigma surrounding sex tech and the restrictions on advertising have created unique challenges for companies in this industry. The case of Mon.Maude, a gender-neutral sex tech company, illustrates this issue well. Mon.Maude cleverly bypasses advertising restrictions by selling a massage candle as their primary product, attracting customers who can then discover their other offerings. The world's advertising policies, particularly those of Google and Instagram, create a bizarre landscape where a man can show his nipples but a woman cannot, and where sex toys and vibrators are censored while massage candles are not. This inconsistency highlights the need for a more open and inclusive approach to discussing and investing in sex tech. Vice Ventures, for instance, has a thesis against investing in anything that harms others, but recognizes the importance of addressing the taboo surrounding sex tech and the unique challenges it faces.
Determination and a strong business idea in VC: Determination and a strong business idea can help newcomers succeed in the VC industry despite lacking traditional backgrounds or connections.
Determination and a strong business idea can lead to success in the venture capital industry, even if you don't have a traditional background or connections. The speakers in this conversation, Natalie and Arlen, were able to start their own funds by sending emails and pitching their ideas, relying on their credibility from their past experiences and the strength of their business thesis. They faced challenges, but their persistence paid off. As they move forward, they plan to hire team members and build their own talent pool, allowing them to maintain control and avoid potential conflicts with partners. The venture capital industry can be difficult to break into, but with determination and a strong business idea, it's possible to succeed.
The Importance of Hard Work and Understanding Risk: Success comes from hard work and understanding risk. Hire employees with significant funds to reflect on accomplishments, beware of the risk of ruin in gambling, and invest wisely in startups.
The speaker, who has had success in business and gambling, emphasizes the importance of hard work and understanding risk. He shares his experience of hiring a young employee with a significant fund, which made him reflect on his own accomplishments and the different approaches to risk-taking. He also discusses the phenomenon of gamblers who seek the rush of losing everything, known as the risk of ruin, and shares his own strategy of minimizing risk in gambling. Lastly, he touches on the topic of sports betting and its legalization in certain states, and the importance of careful investment in startups, drawing parallels between the two.
From humble beginnings to venture capital success: Catherine Dockery, a self-made venture capitalist, shares her investment strategy focusing on the vice industry and her email address for pitches.
Despite humble beginnings, Catherine Dockery, a venture capitalist, has achieved great success in her career. Her parents, who were a bartender and a nurse, instilled resilience and determination in her. Catherine grew up as a latchkey kid, but she didn't let that hold her back. She went on to attend Stuyvesant High School and eventually founded Vice Ventures. The American Dream is still alive, and Catherine's story is a testament to that. During the podcast, she shared her investment strategy, which includes a focus on companies in the vice industry, such as gambling, sex, psilocybin, cannabis, and nicotine. She also mentioned her check size, which ranges from $100K to $500K. Catherine encouraged listeners to pitch her at bicenjors.com, though she jokingly mentioned that her email address might be misspelled. The conversation also touched on the importance of attention to detail and the potential benefits of having a unique email address. Overall, Catherine's story is one of perseverance, hard work, and a willingness to take risks. She's an inspiring figure in the world of venture capital, and her podcast could provide valuable insights into the vice industry.
