It has been my experience that folks who have no vices have very few virtues. Abraham Lincoln
Fifty years ago, when someone heard the word vice, they may have thought about the seven deadly sins: envy, wrath, lust, pride, sloth, pride and gluttony.
But what you should be thinking about is how vice-related companies are quickly evolving to be the next unicorns, i.e. the next Airbnb or Snapchat (combined value: $41.5 billion).
Vice technology, or ViceTech, is turning sex, drugs, and rock n roll into viable, trustworthy companies that power some of our cultures most loved products and experiences. This newfound accessibility for consumers and businesses is erasing past taboos and, in return, is allowing people to have more fun, and thats driving more vice companies to launch, grow, and get noticed by the investor community.
Lets do the math: PlentyofFish, an online dating site, sold to Match for $575 million. WeedMaps, a cannabis dispensary directory, is valued at $300 million. And Ticketfly, a live-music ticket seller, recently sold for $450 million to Pandora. Just to name a few.
ViceTech has a market opportunity of more than $341.8 billion in the United States alone when you look at just the sex (dating, sex), drugs (alcohol, cannabis, tobacco), and rock n roll (music) subsets. Throw in gambling and lottery and it adds another $110 billion to the market with unicorns like DraftKings and FanDuel, which are both valued at over $1 billion in less than six years, and Amaya Gaming that bought PokerStars and Full Tilt Poker for $4.8 billion.
Even more importantly, ViceTech companies are gathering a data layer of real-time usage that can be programmed to help users monitor and manage their revelous activity in the future. The addiction industry is $35 billion, so there is a huge incentive to develop technology that supports our most vulnerable community members.
That brings the total vice industry size to $456.8 billion (at a minimum, and its growing), which is tied together by four major shifts that are defining not only the technology industry, but the future of modern society.
Shift #1: Society is coming out of the closet
Historically, and inevitably, everything moves towards liberalisation. That means that humans tend to become more accepting over time. Even with the occasional speed bump and mounted opposition, increased open-mindedness, appreciation of living in the moment, and the valuing of social experiences tend to overcome.
Alcohol made it through prohibition in 1933, and dry Sundays are quickly disappearing today. The War on Drugs is considered a complete failure; countries like Portugal, who did the opposite and decriminalized all drugs over a decade ago, have become healthier and happier.
Today, the cannabis industry is on track to go from a $5.4 billion industry in 2015 to near $40 billion in the next five years. Its a necessity, as there are currently over 1.13 million medical marijuana patients (and counting) in the U.S. that rely on cannabis as medicine. These patients arent stoners; these are people that have Cancer, Multiple Sclerosis, Parkinsons Disease, chronic pain, nausea, and high levels of stress.
The growing awareness and public support of marijuanas medicinal benefits has paved the way for tech companies to support the growing cannabis industry from farm to table, hardware to software, recreational to medicinal.
With the connected world serving as a catalyst, society is opening up more rapidly than ever before with a common desire to see and do more. This is most visibly seen in the new acceptance of online dating and, more recently, dating apps including Tinder, Bumble, The League, Coffee Meets Bagel, Hinge, Happn, and Raya. What used to be once considered as anti-social or odd is now a normal way to go about finding a mate or meeting new people. Weve finally started to open up to the whole scope of gender identities and lifestyles that people live everyday, and its about time!
Its gone so far that celebrities like Aziz Ansari, Chelsea Handler, and Neil Strauss have even written in-depth articles, books, and TV shows about the modern relationship. All in the name of sex.
Shift #2: Millennials want experiences > products
Baby boomers owned a lot. Millennials want to see a lot. Its never been easier (or cheaper) to fly around the world, gain access to lifes curiosities, and do what you want to do when you want to do it.
This change in experiential access has led to a drastic flip flop in attitude. No longer does the majority of the population want to hoard goods. They want good service. They want more, richer experiences. And thats where the money is being spent.
More than 3 in 4 millennials (78%) would choose to spend money on a desirable experience or event over buying something desirable, and 55% of millennials say theyre spending more on events and live experiences than ever before.
Its most true in music, where all forms of owning music (a.k.a digital music) are slowly declining in revenues while live music is flourishing.
A large part of the growth of live music is due to festivals, and, in a secondary role, the music at those festivals, specifically electronic dance music or EDM. Festivals are rocketshipping the worlds largest live music brands to scale globally. What started with Woodstock has turned into household names like Coachella and Bonnaroo. Lollapalooza, a music festival that started in Chicago, is now in six countries. Tomorrowland, the Cirque de Soleil of festivals, started in Belgium and is now in the U.S. and Brazil.
In 2014, 32 million people attended at least one music festival in 2014, according to Nielsen Music. Thats a minimum of $6.62 billion spent at an average cost of $207 per festival goer at one festival only. As these events scale they have an increasing need for new technology to plan, organize, and control the live music experience as seen with companies such as Ticketfly, EventBrite, Songkick, GigSalad, BeatSwitch, Marcato, and Splash.
Shift #3: Software is eating the world (in style)
Music also moves people. The self-proclaimed largest music festival in the world is Summerfest, an 11-day event in Milwaukee, Wisconsin with an annual attendance of nearly 1 million people. This means the barriers to experiment with new events anywhere in the world is extremely low, and theres more music event tourism than ever before due to the ease of discovery and purchasing. You can track and buy tickets on-demand via platforms like Songkick, Concertwith.me, Rukkus, BandsinTown, Jukely, or Ticktate, as well as bottle service at nightclubs on apps like BottlesTonight.
Not only is live music spreading at a rapid pace, but culture shifts are, too. Its driven by how easy it is to hop on a flight to events happening around the world, as well as the communication happening with the underlying communities online leading to event discovery. One of those shifts that interconnectedness and festivals are driving is the acceptance of personal choice and cannabis.
Realizing inevitable liberalisation, over 50 percent of the United States is now legal or medicinally legal, and that happened in less than a decade. Canada is now considering federal legalization in the 2016 election cycle, and Mexico who is also eyeing legalization helped start the trend by decriminalizing personal cannabisuse in 2009.
Another five to eight U.S. states will put recreational (legal) cannabis on the ballot for 2016.
This rapid change in the regulatory environment requires fast innovation. Thus, cannabis startups, including Eaze, Privateer, WeedMaps, MassRoots, Billowbyand Baker, have raised hundreds of millions of venture dollars in the last five years from the likes of Paypal co-founder Peter Thiel, Snoop Doggs Casa Verde Capital, DCM Ventures, 500 Startups, Poseidon Asset Management, The ArcView Group, Fresh VC, and more investors are entering the market every day.
Cannabis legalization has also hit the mainstream where majority of Americans now support legalization, Napster founder Sean Parker is backing legalization efforts, Snoop Dogg has launched a startup of his own (a marijuana media network called Merry Jane), and intellectual rapper Lil Dicky did a product placement for Weed Maps in his music video $ave Dat Money that garnered over 32 million views.
As technology continues connecting the world and the public becomes aware of how distorted the War on Drugs was, well see the pendulum shifting towards widespread legalization with incredible speed.
Shift #4: The incessantly stable Sindustry
The Viceconomy never declines in recessions. People will always have drinks with friends, party on the weekend, and work hard, play harder. Canada figured this out early on and performed a governmental growth hack by shifting more taxes towards sins. Often called the Sin Tax, Canada taxes alcohol and cigarettes higher than other countries. These same monetary benefits have come with the legalization and regulation of cannabis where tens of millions in new tax dollars flood into the the respective U.S. states accumulating a tax surplus, funding education, and supporting social goods.
Governmental organizations have found ways to financially capitalize on vices for some time, but the private market hasnt quite done the same. Whats been lacking is investment vehicles for more ViceTech companies to get off the ground and scale.
The reason behind that is simple: money often comes with stipulations. In conservative eyes, vice investments can be looked at as negative and risky. The reality is that the era of telling others how to live their lives is dead. From equal rights to marriage equality to cannabis legalization, choice is the new black.
Because of the antiquated biases surrounding sex, drugs, and rock n roll, we need to reset our thinking when it comes to supporting and investing in vice-related companies. Apply the same investment philosophy you would to any other company strong founding team, fast growth, big market and you end up at the same conclusion: invest.