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Female founders are dominating the sextech sector despite facing serious funding issues

Written by Eric Johansson on Wednesday, 07 November 2018. Posted in Disruption, Analysis

Female founders are breaking the sex taboo. But before British entrepreneurs can spearhead the worldwide sextech revolution, they must beef up their cybersecurity and overcome VCs’ reluctancy to invest

Female founders are dominating the sextech sector despite facing serious funding issues

Stephanie Alys didn’t always believe tech could improve people’s sex lives. For the longest time after the launch of the first iPhone, she feared it was the other way around with smartphones increasingly becoming the first and last thing people touched in the day. “Technology was starting to distract people from intimacy with their partners rather than enhancing it,” Alys says. She only reconsidered when she and some friends contemplated how modern wearables adjusted themselves to users. “We just felt there was this really big space especially within the luxury category to create a product and a brand that was very forward-thinking around technology but also about sexuality and pleasure,” Alys adds. In 2014 this insight led to her becoming the co-founder and chief pleasure officer at MysteryVibe, the sextech startup creating smartphone-controlled vibrators adjusting themselves to users’ bodies.  She’s hardly alone.

From online pornography and pelvic floor trainers to sexbots and cryptocurrencies simplifying sex industry payments, entrepreneurs worldwide are developing new gadgets and gizmos galore to boost people’s sex lives. “Over the last two, three years there’s been an explosion,” says Emma Sayle, founder of female-centric sex community Killing Kittens and the SafeDate app, designed to make modern dating safer. Indeed, the industry comes in 50 shades of green with the global sexual wellness market being worth $39.42bn, according to Stratistics MRC, the research agency. Moreover, the market value is expected to jump to $122.96bn by 2026. However, that assessment could be on the cautious side as some innovators believe the industry could be worth trillions in the next decade. And the interest in the market is palpable with sextech hackathons and accelerators popping up all over the world. “It’s now morphed into the mainstream world, it’s much more accepted and there are many more online offerings – even the toys are becoming a lot more tech-specific,” says Sayle.

There are a number of reasons for the rise of sextech entrepreneurs. For instance, it can be attributed to how online communities have opened up the conversation about sexual health and made it more accessible. “I remember watching Sex and the City and seeing these women talk about using jumping rabbits sex toys, dating and sleeping around,” Sayle says. “You could watch and talk about it with your friends but there wasn’t a big platform where you could go and discuss all the topics it brought up.” But just as smartphones have given birth to numerous dating apps, it’s also enabled users to spend more time online finding people to talk with. “That has enabled different voices to be heard and the movement to happen,” explains Sayle.

Intimately linked to how the conversation about sexual health has gone viral is the domination of female founders spearheading the sextech revolution, something few would’ve predicted a decade ago. “The adult space has been very much a male arena,” says Sayle. Everything from pornography to sex toys used to be developed by and for men. Not only did this lead to a misogynist market but it also meant products had bad designs with poorly placed buttons and often weren’t enjoyable for women to use. Fortunately, women are now very much on top of the industry. “The combination of women being a lot more in control and having our own voice, freedom and even the whole #MeToo campaign, everything just kind of merged [and] has opened up the sex industry as well,” explains Sayle. Case in point: organisations like Women of Sex Tech have been founded in the past few years to actively champion female founders in the space.

And it’s safe to say women need the encouragement as getting a business off the launchpad in the sextech industry is far from easy. Not only do entrepreneurs in this space have to tackle lingering social taboos but also have a harder time attracting VC capital than other innovators. “Raising money as a company with a crazy idea is always tricky but within this sector specifically, it’s [even harder],” Alys says. For instance, when MysteryVibe first attempted to attract investors it soon noticed how many VC firms have active clauses against investing in anything related to sex, drugs or gambling. “My understanding is that it all has to do with risk, both financial and reputational, which is crazy because sex sells, right?” she says. Moreover, female founders in general have a harder time raising VC investments than men do. So with many women leading the industry it’s easy to see why a lot of sextech entrepreneurs seek out alternative finance like crowdfunding and angel investors to fill their coffers.

But finding money is only part of the problem – entrepreneurs in this space also struggle to set up even the simplest forms of financial infrastructure. “Banking and payments are a big problem with sextech companies,” says Darren McKeeman, co-founder at KinkBNB, the Airbnb-inspired lodging startup where kinksters can rent dungeons from each other. The problem of finding a bank or a payment service is especially challenging in the US with many national banks refusing to open accounts for companies in the sex industry. However, startups in Europe are also affected as they often have to find alternative payment solutions to provide their services in the States. “A lot of these problems with money are the reasons why people don’t think that this is a business to get into,” argues McKeeman.

And it’s not just finance that can be tricky for sextech startups – just getting their products out there can be a challenge. As an example, Apple banned La Petite Mort from the App Store in June 2016 after the game where the player aims to stroke a pixelated vagina to orgasm was deemed to be inappropriate for the platform. “Everybody has sex,” argues McKeeman. “So it seems sort of stupid to me to be prudish about it.”

Cybersecurity is another huge challenge for sextech startups. “There is nothing in this world that’s completely unhackable anymore,” says Alys. You don’t have to look far to find examples of sextech companies erring on their digital defences – the hack of the smart We-Vibe4 Plus vibrator in 2016 and the Ashley Madison breach in 2015 both resulted in massive headlines at the time and rightly so, given the intimate and private nature of the data leaked. “My advice to all the companies within our space is to take cybersecurity as a top priority,” says Alys.

But luckily it seems as if the surge of female founders is changing people’s perception of the sex industry. “People are starting to understand how sexual health and sexual wellness is such a huge part of your overall health and wellness,” says Alys. And many female-led sextech startups are increasingly incorporating this attitude in their offerings. As a result, they’re beginning to change the perception of the sector among the public and VCs alike. For instance, Elvie, the British pelvic floor training startup, raised a £5m series A round in May 2017 and in 2016 period product startup Flex was one of the companies that joined the prestigious Y Combinator accelerator. 

And European sextech startups have an opportunity to lead the industry thanks to the US becoming increasingly toxic for the sector. “We’re messed up as a country sexually,” says McKeeman. “People are really prudish about it in the United States in general.” And it’s getting worse after the government introduced the The Stop Enabling Sex Traffickers Act and Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA-SESTA) in April 2018. The law gives victims and organisations more power to fight trafficking online. While well-intended, FOSTA-SESTA has caught many sex-related sites and services in the middle with them being forced to closed down as a consequence. 

Even though this has made it more challenging for UK sextech startups to operate in the States, it could be a blessing in disguise. The reason is it has provided an opportunity to get ahead of the competitors. “I think the Europeans could be quicker than the US side just because of what’s going on in the States,” argues Sayle. She adds that European founders are free from the legal restrictions their US counterparts struggle with and can also operate in a more liberal context, making it easier to woo the public and potential investors. “The French and the Italians have a massively more relaxed attitude when it comes to sex,” Sayle continues. “It’s a massive part of people’s lives and it’s perfectly normal and accepted and you’ve got some big funds based in Italy.”

So what’s next for the UK sextech sector? It depends on who you ask. Some would point towards sexbots reminiscent of the ones in movies like Ex-Machina, Blade Runner and Austin Powers. Others would say more subtle products like vibrators or smart home solutions that boost the mood are the way forward. But Alys argues only focusing on either of those areas would be missing the point. “We can get really obsessed with feature of products, gadgets and bits and bobs,” she says. “Ultimately, what matters to people is how that technology makes them feel, how it helps them explore their sexual health and be curious about that pleasure and how they can be more intimate with themselves and their partners. So yeah, that’s the most important side of this industry to me.” 

About the Author

Eric Johansson

As acting web editor and resident Viking, Johansson ensures EB is filled with engaging and eclectic entrepreneurial stories. While one of our most prolific tech writers, he has sharpened his editorial teeth by writing about entertainment and fitness. Follow him on Twitter at @EricJohanssonLJ to catch up with his stream of consciousness.

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