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The Difficulties Of Running A Sex-Inspired Startup

When a startup centers on sex, it will meet a host of roadblocks from funding to advertising. Here's a look at how sex- centric startups find ways to pay the bills—without compromising their missions.

The Difficulties Of Running A Sex-Inspired Startup

[Image via Shutterstock]

Cindy Gallop has a thing for younger men.

It was her experience dating younger men—and her realization that they were overly influenced by pornography—that led her to launch MakeLoveNotPorn (MLNP), a user-generated digital marketplace trying to "normalize" real sex.

Gallop’s reasoning is that our anti-sex culture prevents us from talking about sex and it’s becoming increasingly difficult for us to differentiate between "real sex" and, fake sex, or porn sex. The former advertising consultant has made it her mission to change society’s outdated views, but said it has been difficult to find investors. Amazon, PayPal, Apple, Android,d and even Chase Bank refuse to do business with her and others like her.

"Every obstacle that a tech startup encounters—if it has to do with sex, you triple that struggle for us," says Gallop. "Every piece of business infrastructure that every startup takes for granted in setting up, we can't because the small print always says ‘no adult content.’"

The Funding Problem

It is hard for her to find adequate funding because no one wants to publicly raise their hand and announce that they’re pro-sex.

"It’s all about fear of what other people think," says Gallop. "A young VC approached me last year...and he totally gets [my vision], but he said, ‘At the end of the day, it’s not about what I think. It’s about what every other partner and every investor in my firm will think.’"

Kit Murray Maloney, founder of adult entertainment company O’actually, heard about the VC horror stories from other entrepreneurs and decided early on that she "wasn’t going to go anywhere near it."

"I did the initial research and knew it was going to be a complete waste of my time," says Maloney, who is currently funded by an Angel investor who she says is "really connected to our vision."

If entrepreneurs decide to go the crowdfunding route, the problem they’ll face is that "people won’t rally publicly around sex," reasons Gallop.

The image problem

Dema Tio, the founder of wearable smart vibrator Vibease, quickly realized that crowdfunding would be a challenge after Kickstarter rejected his campaign because the platform doesn’t accept projects with "pornographic materials."

"In the beginning, a lot of people told me not to go to the tech industry [with this product], but to go to the porn industry instead," says Tio, who created the product for his wife during their long-distance hiatus from one another. "But for me, this is not porn. This is not kinky stuff. This is about intimacy because a lot of couples are looking for solutions to maintain intimacy."

If sex innovators make it through the funding process, they may find that their business is too sexy for a bank, too.

"I cannot open up a business account anywhere," says Gallop. "Nobody will allow me to open an account for a venture that has ‘porn’ in the name … I spoke to the startup banks, I spoke to Silicon Valley bank, I spoke to Square One bank and they wouldn't touch me."

Gallop eventually got a bank account with Chase, but "some senior guy" at the bank became uncomfortable with the nature of MLNP and told Gallop to take her business elsewhere.

Colin Hodge, founder of Down, a hook-up app formerly known as BangWithFriends, also had a bad experience with Chase when he applied for a company credit card and received a letter notifying him that the banks don’t allow accounts "in that industry."

"We need someone who has the willpower who can step up and say, ‘Hey, this is a legitimate industry and we shouldn't have to turn down legitimate businesses,’" says Hodge.

These entrepreneurs fear that the inability to find a payment system that allows users to pay for services and products will eventually make it impossible for their businesses to thrive.

In 2002, Visa and MasterCard decided that adult content should be classified with a "high risk" merchant code, meaning payment processing companies that deal with these businesses will be charged higher fees. Due to this, PayPal announced it would no longer work with adult content companies.

Gallop is campaigning against this on her company’s site and asks users to email PayPal’s president David Marcus to ask him to work with MLNP.

"If MLNP could work with PayPal, Amazon, AmEx, Google, Stripe, and other mainstream credit card processors, we would double our income overnight without doing anything else," says Gallop. "If people could find it easier to pay, more people would pay."

According to Gallop, these companies won’t work with her because they don’t get what she’s trying to do. And they charge extortionate rates of interest because her company is adult-industry specific.

But the challenges don’t end here. Sex-inspired startups are often booted from Apple’s App Store, like Hodge’s business was last year, and can’t use social media platforms like Facebook to advertise their services or products. Even something as seemingly simple as finding an email partner to send membership emails to can be problematic.

Even entertainment entrepreneurs not involved in the adult industry experience the stigma of porn. Nick Blake, who runs a mobile streaming channel, tries to make sense of it all. "For the majority of us, [sex] is a very intimate, private thing, but in the world of business, it’s a very public thing," he says. "You want to have big things in your portfolio that’s acceptable by everyone. You want brand appeal. Adult content is tricky, because everybody wants it, but nobody wants to talk about it."

As for Gallop, all of these challenges are only making her think about starting her own bank.

Bottom Line: "The next big thing in tech is changing the world through sex," she says, and no one is getting in her way—not even America.

Vivian Giang most recently launched the entrepreneurship vertical at PolicyMic where she recruited, edited, and brainstormed story ideas closely with writers. Prior to that, she launched the careers vertical at Business Insider focusing on the evolving office, growing industries, and how technology, education, and the rise of freelancers play a role in the future workplace.

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