Top VC backs adult toy startup

JimmyJane, a startup looking to become the Montblanc of vibrating sex toys, late last year raised a $1.1 million Series C financing from a group of investors that includes a limited liability company controlled by Tim Draper, PE Week has learned. The round is still open as the company aims to raise $2.5 million.

Based on its sales growth, VCs would be hard-pressed not to at least take a peek at JimmyJane. The San Francisco-based startup sells a premium line of gold and platinum vibrators along with sensual candles, silk and suede blindfolds, body jewelry and fragrances. JimmyJane began selling its products online in 2005 and added retail store sales midway through the year. Company founder Ethan Imboden says that revenue grew 300% during 2006 and he expects sales in 2007 to grow 900% over last year.

“Last year was like pulling back a slingshot,” says, founder Ethan Imboden. “This year, we’re letting it go.”

However, raising money for the startup hasn’t been easy. “I can’t even tell you what a challenge it was to get people to understand what we were doing when I only had a few sketches,” Imboden says. “But we have reached a scale now and a level of dialogue with consumers that investors really understand.”

Draper—managing director of Draper Fisher Jurvetson—is the kingpin of investing in young companies that become viral successes, such as Hotmail and Skype Technologies. He did not respond to requests for comment. But a source familiar with the firm said the deal did not involve any DFJ money.

But he isn’t the only VC involved with JimmyJane. Phil Schlein, a venture partner at U.S. Venture Partners, is listed as one of the company’s directors. Schlein was president and CEO of Macy’s California for more than a decade and has focused on the retail sector while at USVP. Schlein invested his personal money into JimmyJane, but did not commit USVP's money. “People are much more open and aware of their sexuality and ways to enhance it,” he says. He's also optimistic about the startup's international appeal. “Europe is way ahead of us. They're just more open about these things.”

Another director is Amy Schoening, who was the chief marketing officer of clothing store Gap, where she helped redirect the Banana Republic brand. She now runs a brand consulting company called True Story in San Francisco and has been working with companies such as the Levi Strauss & Co. to help sell more of its Dockers brand.

Companies that sell sexual devices, sexual content or sexual services are traditionally high growth, high-margin companies. And they fit well with the online market of distribution. Adult websites hold at least 11 spots among the 500 most-trafficked online destinations in the world, according to website tracking company Alexa. The highest ranking adult site is Adultfriendfinder.com, which is ranked No. 77 among all Internet companies, followed by Pornotube.com (No. 195) and Nastydollars.com (No. 207), whose catchphrase is “porno guys that care.” To put those numbers into context, those three adult sites garner more Web traffic than the likes of Skype (No. 236), Slashdot (No. 244) and Monster.com (No. 298).

ComScore Media Metrix says that in June 2006 there were 64.8 million unique visitors to its “Adult Sites” category, though the Web researcher doesn’t provide details on individual adult sites, only top line figures. Still, 64.8 million is roughly half the number of unique visitors received by Yahoo during the same month.

And websites are just the tip of the iceberg. Some analysts estimate that the online adult content market is valued at roughly $50 billion.

Markets that size should naturally pique the interest of venture capitalists and Draper isn’t the first to invest in a sexually related startup. Last fall, Spark Capital invested $12.75 million in Los Angeles-based TwistBox Entertainment, a company that derives most of its revenue from distributing adult content to mobile devices. TwistBox—via its Waat Corp. subsidiary—signs exclusive mobile distribution deals with adult entertainment purveyors, such as Vivid Entertainment Group and Girls Gone Wild producer Mantra Films. It then pushes that content to cell phones and other handsets via agreements with more than 60 major mobile carriers.

Spark says that it did not have any complaints from its limited partners, but some LPs require their VCs to sign so-called “sin clauses,” or to follow side letter agreements that bar the general partners from making certain types of investments. Shar’ia-compliant LPs, for example, often will prohibit investments in pornography or alcohol, while certain European institutions have caveats about weaponry. Some of these agreements are outright restrictions, while others are more like discouragements.

The regulatory filing for JimmyJane’s Series C lists more that 20 accredited investors, including an LLC that Draper registered with the California Secretary of State.

Phil Schlein says more than one DFJ partner invested in JimmyJane, but would not say who else was involved. When asked why he thought the partners had not returned press inquiries, he said: “We have a little bit of a puritanical attitude in Silicon Valley that can be hard to shake.”

Though the identity of the other investors remain a mystery, what is known is that JimmyJane has scored distribution deals with high-profile brands, such as the W Hotel chain, which distributes some of the startup’s products to guests who purchase its weekend getaway package.

Imboden, who studied electrical engineering and genetics before exploring an interest in design, says that he has innovated several key engineering elements of vibrators to produce his company’s high-end versions. JimmyJane’s first model, called the “Little Something,” has one utility patent filed. It’s latest model, the “Form 6,” has six patents filed, primarily around its ability to be waterproof and rechargeable, Imboden says.

His interest in pursuing the development of sex toys is understandable from a market perspective. Some 46% of U.S. residents have confessed to using sex toys, according to a 2004 study conducted by condom maker Durex. Similarly, in some European countries, the usage ranges from 30% to 50 percent. Yet there are few name brands. Popular vibrator models, such as the Rabbit Vibrator that the character Samantha talks about in the television show “Sex and the City,” are made by various manufacturers.

“There is a big brand vacuum and nowhere is brand more relevant than here,” Imboden says. “This is a multi-billion dollar market.”