Industry that is Off-Limits

It was interesting for me to notice how many Venture Capital bloggers took on the subject of “Venture Capital funding of the porn business” and more specifically why they would not invest in the adult industry. As a newcomer to the VC business, I was curious how an industry that generates 25% of all internet searches can be left out of the venture capital investments list.

Digging through a few articles and VC bloggers publications I found out that there are two main reasons. First, it seems that this industry makes a lot of LP’s uncomfortable and raises moral and ethical issues. However, though unfortunate, “moral and ethical” haven’t always been the main guiding factors for some venture capital funds, but still the lack of investments is a fact. Hence, comes the second and more compelling argument, which suggests that the adult industry would not fit the VC’s models and return expectations. For example, the average investment in an adult production would be too small for the average VC standards – only about $100,000. Also, there is not a great possibility for an exit strategy. And lastly, it is worth noticing that the conversion rate of the aforementioned 25% of global searches is a meager .001%.