Cannabis, sex tech and psychedelic startups deserve more than a stigma

Cannabis, sex tech and psychedelic startups deserve more than a stigma

Welcome to The TechCrunch Exchange, a weekly newsletter for startups and markets. It is inspired by the daily TechCrunch+ column from which it gets its name. Do you want it in your inbox every Saturday? Sign up here. Cannabis, sexual technology, and psychedelics are often lumped into the “vice” category, a characterization that prevents many venture capitalists from investing in these spaces. But does that make sense? We are going to explore. – Ana

It is (not) a sin

Isn’t cannabis really similar to coffee, wine and spirits? That’s the argument Emily Paxhia made in a Twitter space hosted by TechCrunch+ earlier this week to discuss our latest survey of US cannabis investors. Paxhia, managing director of cannabis-focused hedge fund Poseidon Asset Management , argued that marijuana-derived products have much more to do with wellness than the “sin” category they often fall into. The “sin clause” and “vice clause” are terms used by venture capitalists to refer to their inability to invest in certain categories of business, from pornography and gambling to alcohol and tobacco. When I explored fundraising strategies for sex tech startups earlier this year, I found that this veto usually comes from the fund’s limited partners or LPs. It’s understandable why investors wouldn’t want to put their money into certain types of businesses, let alone be known for doing so. But there is a fine line between moral posturing and stigma. “I don’t identify with the word ‘vice’ at all,” Andrea Barrica told me. Barrica is the founder of O.School, which she describes as a media platform for sexual wellness. “Wellness” is a popular term in both the sex tech and cannabis industries, because it makes them more palatable, sure, but also because it really reflects the impact that entrepreneurs hope to have. It is worth keeping in mind that cannabis is not just about providing a recreational high. In Europe, we hear from investors, it is medical cannabis that has most of the momentum. It is the prospect of health benefits that drives many entrepreneurs, who deserve better than cheap laughs. Likewise, a deep dive into psychedelics taught me that it’s about much more than drugs and fun. With investors sometimes entering this space after personal journeys with depression or burnout, and founders hoping to make a dent in the global mental health crisis, easy jokes quickly feel out of place.

getting lost

The vice clause applies only to certain types of investors, which is also problematic. The fund that manages your pension can transfer cannabis investments, but many family offices do not. This means that the returns on these potentially lucrative bets will be concentrated in the hands of the already wealthy. Some fund managers are also investing as individuals, Paxhia said, and it is they who will gain the upper hand. Meanwhile, trustees are missing out on returns and the impact they could have, for arbitrary reasons. After all, what is legal is not always moral, and vice versa. The most obvious paradox is that the tobacco, nicotine and alcohol industries are keeping a close eye on cannabis and whether consumption could change. Would the change be a net negative for society? Maybe not. As for psychedelics, there is ongoing research to use non-hallucinogenic derivatives to treat opioid addiction. With fentanyl and methamphetamine overdose deaths on the rise in the US, is this a vice? I do not think. You?


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