External Link/Members OnlyInside OnlyFans’ Limited Venture Capital Options—And How VC Would Handle An OnlyFans 2.0"To understand OnlyFans’ VC prospects, one must first consider the “vice clause” (or covenant) that venture capital firms make with the investors whose money they deploy (venture capitalists typically only play with a relatively smaller pool of their own cash, in exchange for a somewhat larger share of the upside). These agreements limit how venture firms can invest away from their core focus. (Such restrictions on holding public equities and cryptocurrency investments, among others, are a big reason name-brand firm Andreessen Horowitz moved in 2019 to re-designate itself as technically not a VC firm.)
Larger and more established VCs seek out universities, endowments and nonprofit institutions as backers of their funds. And for those organizations, the nightmare scenario is this: a headline like “Cornell University Early Investor in Massive Online Porn Firm: Report,” one of several that ran after a deep dive into PornHub’s owner by the Financial Times added to the scrutiny on the porn site last winter, and swiftly forced major changes to what content the company kept on its site. As such, the most common such clauses make taboo any investments in areas such as sex, tobacco or historically illegal drugs.
Some firms have no vice clause. Even then, such investments can face extra scrutiny due to the potential for government investigations, crackdowns by payments processors and backgrounds that don’t fit the pattern matching of Silicon Valley software businesses. (Forbes has previously reported on OnlyFans’ majority owner Leonid Radvinsky’s roots in adult entertainment’s sketchy early era online.)
OnlyFans met with some of venture capital’s biggest names in its early days (it was a fledgling site when Radvinsky bought control in 2018). One firm passed when it became clear that the site’s future appeared to be mostly porn, says an investor with knowledge of the meeting; at Founders Fund, a firm with no vice clause, former investor Cyan Banister, now a partner at Long Journey Ventures, remembers the firm meeting with OnlyFans and passing because of concerns about its lack of record-keeping on its performers and creators, from age verification to tax information.
“A lot of companies with user-generated content, they think that because they are community-driven, they are not responsible, but they are,” Banister says.
More recently, firms have met with OnlyFans during its boost in cultural relevance and a sense from investors of its fast pace of growth, sources say. But many were more interested in meeting OnlyFans out of curiosity, speculates a partner at one top-tier firm. “I’ve met with companies because I think they’ll be really cool meetings, knowing there is 0% chance I’d want to invest,” that investor says. “Some VCs just love business stories, hearing how it happened and what they were thinking.”
I know Onlyfans have backtracked but still interesting info anyway.
