from www.forbes.com – Up until then, their negotiations had been perfect.

“They seemed pretty excited about it,” says Ethan Imboden [pictured], founder of adult toy startup Jimmyjane, about his discussions with contract manufacturers for the firm’s line of vibrators for women.

Towards the end of their conversation, the contractor, who also made handgun parts in another section of his facility, asked Imboden about the cylinder-shaped object. “It’s a vibrator for women,” the 42-year-old entrepreneur explained. Imboden says the contractor backed out the next day citing “moral reasons.”

“So, this is a company that had absolutely no issues, from a morality standpoint, manufacturing handguns but absolutely refused to work with a company involved in sexual health and well-being,” he muses.

That was just the beginning. Over the years, Imboden has had to deal with magazines pulling out his product ads at the last minute and credit card services confusing Jimmyjane for a sex service.

In the adult toy industry, Imboden is a pioneer of sorts.

He started Jimmyjane back in 2003, when the industry was dominated by cheap and badly-designed products. Much has changed as Imboden successfully carved out a niche market of audiences interested in his upscale products. However, much remains the same as entrepreneurs working in this, otherwise, taboo industry have discovered.

Manufacturing costs and rapid prototyping regularly top the list of issues for most hardware startups.

For adult toy startups, however, morality and religion cast a long shadow on an entrepreneur’s journey. In turn, they trump financial considerations in making several critical decisions, whether those decisions are related to investment or manufacturing.

“Sex and porn are generally lumped together,” says Jackie Strano, executive vice-president at Good Vibrations, San Francisco’s oldest adult toy store. This association has had a negative effect on branding for the adult toy industry. It has also affected entrepreneur and investor perception of the adult industry. “They (entrepreneurs) are fearful because of stigmas around sex and pleasure in this country,” says Strano.

Entrepreneurs in the adult toy industry prefer to categorize their products as consumer goods. The Adult market listing on Angel List, a popular database of companies and angel investors, lists 38 companies and zero investors. None of the startups listed in this category is located in Silicon Valley. Instead up-and-coming startups, such as Crave and Minnalife, and established companies, such as Jimmyjane, are listed under Consumer Goods category.

Imboden from Jimmyjane charted a different path and struck out on his own ten years ago. In recent years, some, not many, entrepreneurs have joined him. This is partly due to entrepreneur inhibitions about associating themselves with the industry.

Dema Tio from Vibease, another San Francisco-based adult toy startup, says he was asked to “go to the porn industry, instead of coming to tech/startup conference” by fellow entrepreneurs.

“Entrepreneurs prefer working in spaces that are “sexy” but don’t involve sex,” says Justin Wilcox, who designed an Android app – CloserToGetHer – that records and transmits vibrations.

After he won second place at a startup event last year, Wilcox researched the adult toy industry to convert his app into a business. “Watching some of the interactions between businesses and their customers (think cam girls), it felt a little skeezy,” he says.

Wilcox talked to his mother, who handles his bookkeeping, before launching the app in the Android marketplace. “Her reaction was actually very positive and supportive,” he says. But, he adds, she hasn’t shared this app on Facebook unlike other apps that he built.

Investors seem to share adult toy the entrepreneur’s inhibitions about associating with the adult market. Over the last couple of weeks, I contacted several venture capital firms and angel investors for this post. None was available to comment on their investments or the industry’s prospects. I also also scoured Google for references to previous investor interviews with investors in this space without much success.

Lack of information or commentary from investors is surprising, especially so in Silicon Valley, where the window of time between a successful startup and disaster is extremely short. In such a scenario, public statements and interviews provide rapid customer traction and publicity. They also set the stage for further investments in the industry.

Even as he regularly comments on news, legendary investor Tim Draper from Draper Fisher Jurvetson, a venerable Silicon Valley venture capital firm, has remained silent about his investment in Jimmyjane. Phil Schlein, member of the board of directors at Jimmyjane and a personal investor in the company, provided a clue to the silence when he said that Silicon Valley has “a bit of puritanical attitude.”

That attitude is also a result of conservative limited partners. “A lot of big money is still tied to people with certain religious or cultural beliefs,” says Strano from Good Vibrations.

Michael Topolovac, chief executive officer at Crave, another startup working at the intersection of adult toys and technology, can attest to that. “To the extent that we have faced pushback, it has mainly been due to religious reasons,” he says. He says his pitch to institutional investors was rejected because the investors were answerable to their partners who consisted of Catholic institutions. His co-founder Ti Chang also relates another story about their job listing being disallowed by an open job board because it was for an adult toy startup. “Religion always gets in the way of culture,” she says.

Incidentally, Topolovac is a serial entrepreneur, who raised more than $33 million for his previous cloud-based startup.

“There’s a time and place for that,” says the forty-five-year-old. This time around, the amount he has raised is much less (in single-digit millions). This is despite Crave being a hardware startup with larger upfront costs. “It enables you to be capital efficient,” he says, referring to the amount he has raised.

After he was rejected by multiple investors, Brian Krieger from Minnalife explored alternate funding options such as Small Business Association (SBAs) for his startup. “Their morality clauses were a deal breaker,” he says. “It definitely takes a certain kind of perspective to see the possibilities in this space,” he says.

Tio from Vibease says investors are also adopting a “wait and see” attitude towards the yet-unproven industry. “Will it (future direction) be in hardcore adult industry or will become a sexual wellness industry?” he asks.

In the absence of traditional funding routes, several entrepreneurs have opted for to crowdfund their products. For example, Krieger recently held an Indiegogo campaign for Limon as did Vibease. Similarly, Topolovac and Chang raised funds for their product from CKIE.com, a crowdfunding site exclusively for adult products.

Before that, however, they were “kicked off” from Kickstarter, arguably the most popular crowdfunding platform. According to Topolovac, they researched and complied with all project guidelines on the crowdfunding site before submitting their video. “Nothing in their project guidelines suggested or implied or stated that vibrators were not allowed on their site,” he says.

Still, their submission was rejected. Topolovac is still unclear about the reasons for their rejection. “They basically said, “we don’t allow vibrators on Kickstarter” or “we don’t like vibrators,” he says, adding that the site decided to censor (instead of curating) their product.

I contacted Kickstarter but they refused comment for this post.
“You think getting VC money for an adult toy business is tough? Try getting a line of credit from a bank!”

At least, that’s what Stacy Rybchin, founder of mysecretluxury.com, an online provider of adult services says. According to Rybchin, she was denied payment and credit card processing services by several mainstream banks and credit card processing services because of the line of business she was in. “I had to spend a longer time than other entrepreneurs to find services that were willing to work with me,” she says.

The roots of Rybchin’s problem goes back to the association between adult toys and the porn industry. That association, as it turns out, is not without justification: several adult services, including entertainment and toy services, share common infrastructure elements with the porn industry. This is because mainstream providers bar such services to the adult industry due to the high risk and number of chargebacks associated with the industry. For example, Bank of America and U.S. Bank do not provide merchant accounts to the adult industry.

In their absence, a parallel (and more expensive) industry has emerged. This network of payment processors (used mostly by the porn industry) are a Hobson’s choice for the recent crop of entrepreneurs. Even as they seek to distance themselves from the lower end of the spectrum, an entrepreneur’s choices are limited. “It goes against our corporate values but we have no choice,” says Robin Elenga from Revel Body about his company’s use of payment processing engines associated with the porn industry.

Some mainstream payment services have revised their policies to accommodate adult toys. Paypal, an aggregator of payment processing engines, provides such services to vendors after a review of their websites and product catalog. According to Albert Schweitzer, spokesperson for the company, Paypal allows use of the service for “certain forms of adult content that is neither violent nor depicting illegal acts.” In recent times, the company has also piloted use of their service to pay for access to adult online content.

Even then, some vendors face problems. For example, a well-known credit card company called Imboden to check on the high number of chargebacks for his service. Further investigation revealed that, in fact, there were no chargebacks or transaction reversals for Jimmyjane. The official had simply mistaken the company for a sex service.