
Ask YC: Would you fund an adult themed start up? - smakz
First a preamble - I know and realize the history for big exits with these types of enterprises is notoriously bad and usually I think that is a mismanagement issue related to the senior leaders in these companies. But my question for HN would be - would you consider funding a adult themed start up for the YC program, and is there a line which you wouldn't cross?<p>Three categories of adult themed I might be thinking of:<p>"Maxim" style, where it's targetted at males, but doesn't have nudity.<p>"Playboy" style, which is similar to "Maxim" style but does have nudity.<p>"Porntube" style which is full on pornography.<p>Personally I think there is big potential in the disjointed and mostly pirated adult themed sites of today. Three benefits I see of this business could be:<p>- easy(easier) to gain traction, several sites I know which launched in the 2008-2009 time frame have reached top 100 sites globally.
- lack of innovation in this space, mostly pirated content and taking an existing paradigm and switching it to adult themed (playboy does an online version of their magazine, various you tube copy cats)
- large profit potential, I know several low(er) traffic sites which are making plenty off ads, there is an IPO potential here I'm sure<p>Long story short, I have several ideas for adult themed "hacks" which could be big.<p>But the fact reminds I know of no YC funded adult themed web sites and am not sure the YC program would support such a thing.<p>I posted this to HN also to generate some hopefully insightful discussion.
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jacquesm
I've by coincidence and lack of foresight become the owner of a site that has
an adult component, even though that was not what we had in mind when we
started out.

We've had contact with VCs and some very large companies that we have
partnered with, and invariably the one thing that floats to the top is brand
damage.

This is the big fear of any large player, as soon as there is even the
remotest risk of that you have a problem.

That pretty much rules out your second and third option, leaving the first.

And YC being a tech oriented investor rather than a media company I figure
that that would not be their cup of tea either, but in the end the best way to
find out is to ask Paul Graham directly or to simply apply.

My guess is you'll be turned down, but that's worth very little, it's just a
guess. Based on the companies that they've invested in in the past and what I
know about the people behind YC.

The first is something that you'd have to spend quite a bit of time and money
on mocking up to the point where you can show a potential investor what you're
planning to do.

The people you'd pitch to would probably be established players in the market
that are looking at expanding their offering without taking on more employees.

Personally, I'd rather get _out_ than in to such a line of business, the
website that I run with the 'adult component' has been quietly on the market
for years but so far no takers.

~~~
paraschopra
Then is there is an opportunity for adult-themed angel fund? Brand damage
would be a non-issue for such a niche fund.

(A fund on lines of fbFund or iPhone apps fund.)

~~~
jacquesm
I just posted a link to something like that below, but I think they went
under, there are some rumors of fraud.

I don't think there is really room for such a fund, simply because the
competition is so fierce that you would have to do 100's or more investments
to get one that gives you a good ROI. The successful ones can bootstrap, the
others die and try again.

One of the more interesting observations that I read on the adult market
somewhere (I can't find where, sorry) is that the adult and the gaming
industry are the only two 'mature' internet industries, in the sense that the
cards have been dealt and new entrants have a very hard time getting traction.

That alone would be a reason to make an investor very skittish.

~~~
zaidf
Agreed. Both those industries are decent ones to be in if you want to make a
secure income without shooting for the stars.

------
temporaryacct
You left out a critical fourth category: the world's oldest profession.

* This is LEGAL just about everywhere other than the US (including Australia and the UK).

* The market size is huge

* People will pay serious cash money, unlike online porn

* Far less competition and tech in the business (see myredbook, cityvibe, and erosguide for the state of the art)

* Given the dogfooding imperative, recruiting lonely male programmers would probably be very easy

I say all this only half tongue in cheek. With a little bit of technology you
could become the world's biggest pimp.

~~~
ErrantX
> including Australia and the UK

Prostitution is legal. Pimping is not. (at least here in the UK).

This is standard across large parts of Europe (with a few obvious exceptions;
Holland, Germany etc.)

~~~
sailormoon
/me looks out the window at the "massage shop" across the road

~~~
ErrantX
hehe. Yeh ok (ironically there is one just round the corner from here too!).
There are plenty of "escort" websites as well. But it's still illegal.

In terms of a viable business you couldn't _really_ hide it under coy terms
like "massage parlor" and "escort services" if you had VC funding :D

------
leif
I wouldn't go for funding. Porn seems like the sort of thing you can bootstrap
yourself. Hell, it seems like the sort of thing that would bootstrap _it_
self. It also seems like the sort of thing that doesn't need a huge amount of
attention (set up a simple uploading video server, set some upload caps so you
don't get spam, and check back on it once in a while), so you can do it while
you work somewhere else.

Dang, this is starting to sound like a not bad idea.

(I'm with vaksel too: remember Betamax? I don't, but I've heard stories that
porn didn't choose it, so it died.)

------
mattblalock
In general, this conversation has left technology and gone into philosophy and
ethics and some things I think I discussed in that Sociology 110 class I took
in college. That's pretty much how all conversations about adult technology go
for me too, though, so I understand.

I'm in the adult industry, and it happens. We've approached several VC's,
angels, and some other investor folks, and we get a lot of "You want to do
what?" or "Did you say 'adult'?"

We get slapped around, yelled at, and cursed, but honestly, we run a clean
business. We've never had a chargeback in our 6 months with nearly 4,000
transactions. We receive a letter of praise on amazing customer service
regularly, and with the exception of an eBay sale to Brazil, we've never had a
complaint.

No matter, there's no explaining it. Most VC's and angels run away, for they
have some vision of lawsuits and chargebacks, but that aint the way it works
these days. Sure, we're shunned, but honestly, its a hell of a lot of fun, and
we're not doing too bad.

So in my opinion, bootstrap it, e-mail me, or that guy who has unlimited risk
allowance, and run with it. But be prepared for the fury of porn customers who
will try to pretend they don't even know what exactly porn is.

------
petercooper
You're going to face a lot of problems, mostly cultural ones.

Porn sites are like the "your parents have sex" realization in Internet
business terms. We all know it's there and it happens, but we like to put our
fingers in our ears over it. Even though most of us here are surely regular
purveyors of pornography, not many people of a certain class/culture or over a
certain age want to admit it or acknowledge they like porn. This love/hate
relationship makes it easy to get traffic but hard to succeed (whether
financially or to just get funding).

------
vaksel
the answer is no.

p.s. "lack of innovation in this space"...I'm pretty sure it's the other way
around. From what I understand porn has been driving innovation for a lot of
things

~~~
jacquesm
> From what I understand porn has been driving innovation for a lot of things

Absolutely. First credit card payments, first (live) video delivery, first
affiliate systems and so on.

~~~
whatusername
is that still the case? I heard how porn drives innovation, but I'm not sure
I've seen too many examples in the last 4/5 years.

~~~
jacquesm
Hard to tell without being hip-deep in that world, but the number of players
makes it an ultra-competitive market, possibly the most competitive segment of
all online business.

And that includes gambling / gaming and so on.

Right now I think the major players in the market have all gone through
several boom-bust cycles, and are concentrating on billing and other
financials.

Some of the larger ones own their own IPSPs and are facilitating payments for
third parties, ironically most of them non-adult. This is to manage the
charge-back rates, because historically large adult companies have been
literally blown up by taking their banks down.

I used to be fairly close to people working in the adult business, so my
knowledge is at least a few years old, the innovation right now is centered
more around business models, finance, diversification and other non-technical
items.

I think that is in part because all the basic components to run an online
business are now well understood and there are plenty of ways to deliver
media.

edit: maybe mobile devices will really create a shift, but from what I've seen
so far it will be an incremental thing rather than something that just hits
one year and will leave the way we interact with online resources
unrecognizable from the year before.

I doubt if there will be any major technological development, inside or
outside porn until we hit something like 'the street' from Stephensons novels.

~~~
mattblalock
The only real development I know of going on in the porn industry right now is
3D. They're all on it. I'm not sure who's doing what with what technology, but
I'd look out for some very Idiocracy style pornography in the near future.

[note: I'm in the adult industry, as many of you found out tonight here:
<http://news.ycombinator.com/item?id=1193169> ]

~~~
jacquesm
Ah yes, good point, 3D would be a logical next step.

I completely overlooked that :)

------
dwaldman
I used to work at a content publisher with an adult focus that took in a
significant amount of VC money from credible investors. It's true that many
VCs will shy away from adult but not for the reasons you might think.

Whether or not YC will back your "hack" should be secondary to whether or not
you can create a credible business. Youporn was a "hack" created by 2 guys and
is now despised by the rest of the industry and is largey credited as letting
pandora out of the box. They're also not rolling in cash. If you have a
solution to "solve" the current situation adult publishers face then you've
got something of real value.

The adult industry is in an awful state due to the rise of free sites and
talent brain drain over the years. That makes for a perfect environment for
companies to try and innovate in this sector and do what Apple did for music -
but you've got to understand the business before you try to fix it. And being
a consumer of the product is a lot different than creating a business out of
it.

------
wgj
This doesn't answer the question about YC, but adult web startup Zivity
started with real Silicon Valley VCs behind them. It looks like that
relationship didn't last though.

[http://www.dailyfinance.com/story/company-news/amicable-
spli...](http://www.dailyfinance.com/story/company-news/amicable-split-for-
zivity-and-vc-investors/19109225/)

[http://techcrunch.com/2009/07/23/zivity-splits-employees-
exe...](http://techcrunch.com/2009/07/23/zivity-splits-employees-execs-
venture-funding-into-two-companies/)

------
Jun8
I have also thought about this as well as many other people I guess: A porn
site or Netflix-like company but run by techie people, not industry insiders,
a Google-like no-nonsense approach if you will. Apart from the investor killer
aspect (as well as the social stigma: e.g. how many women can accept that
their fiancee/husband are the owner of a porn startup) that most people point
out there are other problems: 1\. Customers are indiscriminate: There are many
well photographed sites but how many of your prospective customers are willing
to shell out monthly fees when bad quality content also "does the trick". 2\.
Service providers may be jumpy. You might have difficulty using some of the
channels that are common to early startups, e.g. Amazon's S3 once prohibited
"obscene" content; they now have:

11.6.3. ensuring that any materials posted on your site or within your
Application are not illegal and do not promote illegal activities, including
without limitation any activities that might be libelous or defamatory or
otherwise malicious, illegal or harmful to any person or entity, or
discriminatory based on race, sex, religion, nationality, disability, sexual
orientation, or age;

What if someone at Amazon decides that some of your content falls into this
category and yanks it off. Remember how quickly Apple booted off iPhone apps
with such content.

I think the best way to go about this is: (1) Go after a niche area to reduce
the huge amount of competition, e.g. "porn for women" and (2) partner with a
content provider so you don't get into the intricacies of producing content. I
thought the Fyre Box
([http://www.usatoday.com/tech/products/services/2008-01-10-po...](http://www.usatoday.com/tech/products/services/2008-01-10-porn-
set-top-box_N.htm) had an excellent idea (streaming movies with detailed
search functionality) but they have disappeared.

------
qeorge
I doubt YC would fund an adult site, but who knows?

I'm not categorically against it though. For one thing, porn is a proven money
maker, and as evidenced here at least some of your potential competition won't
touch it.

Regarding the 3 styles, I think #3 (hardcore) is the only one that would work
as a startup. To be blunt, the less hardcore the porn the prettier the models
have to be, and you can't afford Maxim or Playboy tier models.

~~~
philwelch
I think if you're producing the content yourself you're doing it wrong.
There's a lot you can do in distribution and marketing without ever having to
photograph a single naked woman.

------
SwellJoe
The investors I've heard speak on the subject have pointed out the
unlikelihood of an exit, though that has very recently (as in the last five
years) begun to change, though very slowly. Since VCs and angels in the valley
need an exit to make money, they don't invest in porn. Given that we can count
the number of really good exits for porn companies on one hand, and have
fingers left over, I think it'll be a while before current tech investors
start falling over themselves to get in on the trend.

I don't think ethics, brand damage, or any other factor would keep investors
out of the field if they thought they'd make a lot of money on a porn
investment. Thus, I think investors still doubt the ability of most porn
companies to have an exit. It doesn't mean porn companies aren't or won't make
money, possibly even a lot of money, just that they probably won't do it in a
way that leads to the investors making a lot of money.

~~~
cookiecaper
That merely requires a different pattern of investment. There is a ton of easy
money in porn. One wouldn't have to have a big exit i.e. acquistion or IPO to
make a lot of cash as an investor in such a business, just a pattern where you
collect a certain percentage of the revenue stream for x years.

~~~
SwellJoe
I think you overestimate the ease of making money in porn. It is a highly
competitive space.

But, yes, there could be other ways to structure deals that don't require an
exit to make everyone happy. But most current high tech investors don't invest
that way.

------
cperciva
This question has come up before, and IIRC the answer was "no, because VCs
don't want to touch porn sites".

~~~
jacquesm
Hm, my earlier reply to you seems to have vanished.

There was this thing called 'adultvest', but I think they've died.

<http://en.wikipedia.org/wiki/Adultvest>

------
samd
The adult industry seems pretty good, anywhere you have people acting
economically irrational is an opportunity to make money.

~~~
jacquesm
It is true that there is lots of money going around in that world but the pie
has to be divided by a _very_ large number of parties, who are very adept at
analyzing and copying each others ideas and business models.

To gain and keep an edge in that world is very hard work.

~~~
samd
But that's even more true of the Internet at large where queasiness isn't
preventing throngs of people from competing.

~~~
jacquesm
I think you have that backwards.

Queasiness isn't preventing throngs of people from competing, the amount of $
going around in porn is what is encouraging lots of people to compete.

The word 'sex' is present (according to google) 574 million times, and is
probably the one of the heaviest SEOd keywords on the net outside of some
medical bits & pieces.

------
olalonde
Hey smakz, I'd be interested in getting in touch with you (see email in
profile). I might have some things you'd be interested in.

------
trickjarrett
No

~~~
trickjarrett
Sorry, I forgot myself and just said 'No' rather than 'No blah blah blah.'

------
cookiecaper
No, I wouldn't. I believe that peddling pornography is the same as peddling
drugs -- both are addictive, dangerous substances that do great harm to
families. No matter how much easy money is in it (and there's a lot), I would
keep my name and any money I had as far away from it as possible.

~~~
javert
Woah, people! Down votes on HN comments are only supposed to be used for
malicious or spammy comments.

He's expressed a valid opinion. Don't downvote.

~~~
sown
Not really. He made broad, sweeping and unreasonable assertions, incorrect
assumptions and no one has any real reason to believe anything written up
there.

It was a personal opinion that many disagree with.

~~~
cookiecaper
>Not really. He made broad, sweeping and unreasonable assertions, incorrect
assumptions and no one has any real reason to believe anything written up
there.

I shouldn't have to _convince_ you to be respected. I have other things to do
with my life than gather together a compendium of research on porn. The truth
is out there for all to see. You can find it yourself if you want to. The
thing is not malicious, it's just an alternative opinion. I don't stand in
your way, you are free to live your life as you like. If I condemn a thing you
want to think is good, you don't need to take personal offense, just politely
disagree and let's all be on our ways.

EDIT: I'm truly curious to see this one get downvotes. Do you guys really want
people to call you out on every opposing opinion and make you run to and fro
gathering a corpus of data, anecdotes, and other evidence to support every
claim you make? I just don't have the time for it, and I don't have the
interest because I know that I won't be changing any minds here, it'll just
get written off with, "Well that psychologist/victim/whatever is a religionist
so obviously he's backward", etc. Be sensible here, please.

~~~
ErrantX
I didnt vote but I dont like to see downvoting go unreplied - so here goes.

> I shouldn't have to convince you to be respected.

Here, like anywhere really, respect is definitely earned. To make a broad
statement like you did without supporting argument you are going to need
"respect" for your experience in the field.

For example Tptacek can make pretty broad statements about
cryptography/security, Patio11 about business/startup etc. etc. without much
clarification because we know their expertise is supporting the statement.

Yourself we know nothing about; except you consider pornography a problem on a
level with drug abuse. Which is definitely not going to put your comment on a
good footing to start off with. It sounds personal - and while we can respect
you feel strongly with it the way it was presented is discouraged.

> If I condemn a thing you want to think is good, you don't need to take
> personal offense, just politely disagree and let's all be on our ways.

There are some problems here. Firstly the main problem downvoters will have
had is how sweeping your statement was with no supporting evidence. You didnt
even add "In my opinion".... presenting a theory without evidence is frowned
on here :)

Secondly the statement is worded in a way that suggests either your trying to
cause offence or trying to brand people who might think porn is ok (probably
the majority actually) as bad/imoral/wrong/ destroying their families.

I hope that helps :)

