Sex, Tech and Money: The Rise (and Future) of Sextech

Healthy Pleasure Group CEO and venture capitalist Dominnique Karetsos discusses what’s new and what’s next in sextech.

• Sex is a universal fact of life, but sexual health and wellness is still beset by cultural taboos, misinformation and stigma. In the midst of the COVID-19 pandemic, with both health and technology at the forefront of our lives, that’s changing more quickly than ever before.

• Healthy Pleasure Group CEO and venture capitalist Dominnique Karetsos says the market for sexual wellness products is massive and largely untapped.

• Dominnique shares her insights on how her business has grown over the last year, the need for funding to empower innovation, and why data privacy is one of the most important aspects of the sextech space.

For all the years Dominnique Karetsos, CEO of Healthy Pleasure Group, has been working in the sexual wellness industry, she still encounters people who are surprised that it’s a thriving, lucrative business. After all, sex is … well, nothing new. 

“It’s how we got here, sunshine,” she says. “And it’s not going anywhere. It’s recession proof. It has survived.”

But, whether due to cultural and religious taboos, public/governmental policies or both, everything from contraception to supplements, sex toys and erotica has been either literally or figuratively sold from “a dark alley in a brown paper bag,” Dominnique notes.

That’s changing fast, in part because of the COVID-19 pandemic.

“Without dismissing the loss we all experienced on some level, it put health on our agenda,” she adds. “And now it’s put female health on the agenda –– not only for the consumer.”

Dominnique explains that large companies are realizing that sextech and femtech is a huge, largely untapped market. Companies like Boots, CVS, Target and Walgreens stock a range of sexual wellness products beyond the traditional “family planning” range of condoms and pregnancy tests. Even Bloomingdale’s has its own sexual wellness shop. They’re responding to unprecedented demand among women for products that solve problems (like period underwear) as well as those that offer more empowerment and pleasure, like audio erotica, which is a super-hot category right now.

In this new era, more and more companies are looking to invest in innovation as well as tackle challenges that are specific to the sexual wellness space. For example, social media marketing is tricky when you’re banned from Instagram for showing a female nipple. And customer data privacy is paramount for a startup with an app that tracks STI testing and empowers users to share their sexual health status.

With expertise on these issues and more, Dominnique and her team are instrumental in shaping the next generation of sexual health tech brands entering the market. 

I was pleased to welcome her back to my podcast Tech on Reg for a conversation about how her business has evolved in the last year, the future of sexual wellness, and the particular issues around regulation of this dynamic industry.

“We get to talk about sex, tech and money –– the three most powerful things in the world, right?” she says. “And it’s particularly satisfying to talk about those things as a woman.”

Strap in, readers –– it’s about to get oh-so-slightly NSFW in here.

Memo to investors: Wellness isn’t ‘vice’

“Our entire business is geared for investment, innovation and education,” Dominique explains, noting that Healthy Pleasure Group has four distinct areas of business: a full-service advertising and marketing agency; a “demand center” for sales and distribution strategy; a lab that develops its own intellectual property; and Amboy Street Ventures, its venture capital arm, which funds sexual health and women’s health technology startups. 

The “real magic” at Healthy Pleasure Group happens in the lab, where leading urologist, andrologist and sexual medicine expert Maria Fernanda Peraza Godoy, M.D., leads the company’s development of intellectual property (IP). This includes everything from FMCG products for vaginal dryness to a wireless penile implant. 

Healthy Pleasure Group is “the only global ecosystem dedicated to sexual health in tech” –– plus, Amboy Street Ventures is the only fund that invests solely in sexual health and women’s health technology startups, which until now have been considered “vice” by VC firms, says Dominnique. 

But funding, as well as strategic product development (and marketing and sales, of course) is necessary to meet the demand from consumers. 

Amboy Street Ventures doesn’t own the market, but “there’s a massive market to be owned,” she says. Her hope is that “we’ll get other funds to see that this is not ‘vice.’”

For innovation to happen, more investors need to “wake up and realize that this is a fast-track industry,” Dominnique explains. “It is, however, a fragmented industry.”

For a consumer brand, a focus on digital or other technological innovation can be “difficult to valuate, or valuate with meaning,” she adds. Right now, there’s a lot of consolidation happening in the women’s wellness space, “which is great, because without consolidation, we can’t fast-track this industry.”

Sextech is a big business

Consumer demand has created a variety of ever-expanding (and lucrative) categories. Menopause is a $600 billion industry –– “much higher than the erectile dysfunction market,” she notes. The female wellness market overall, which encompasses everything from menstrual products to postnatal care and sexual health, is projected to grow to about $79 billion by 2027.

To illustrate her point, Dominnique talks about the category of menstrual underwear, which isn’t altogether new but “wasn’t such a big conversation a year ago,” she says. Now, most women “expect to be able to go online and buy it … and will be expecting to buy period athletic wear soon.”

And these categories have a way of bleeding into others (pardon the pun): “We’ll want disposable incontinence underwear for when we’re 80 that looks like our underwear today, not a nappy pull-up,” she says.

Dominnique thinks the question for business is: “How do we propel and put those solutions out to consumers a lot faster, and make them more accessible?” 

Sexual health requires sexual education  

When Dominnique was last on the show, we talked about the difficulty sextech companies have with access to capital, even though “they are truly technology businesses,” she says. 

“That was really driven by two factors: the categorization of these businesses as ‘vice,’ whether or not they actually were or not –– plus the diversity challenges that female founders have generally, regardless of the businesses they’re trying to raise.” 

That hasn’t really changed: “We’re still not seeing enough investment going to female founders, irrespective of the category,” she notes. 

In fact, female-founded businesses receive less than 2% of venture capital investment, which numbers in the billions overall. Why? 

“It comes down to patriarchy, parity and the preconceived idea that women do business differently,” Dominnique argues, pointing out that female executives often focus their efforts on building relationships and collaboration –– which are “often seen as not strong leadership,” despite the glut of case studies and data that prove this assumption wrong.

The “vice” aspect is still pernicious. There’s a “very digitally censored landscape” when it comes to advertising and marketing, though that is slowly changing along with our cultural norms. The bigger challenge might actually be misinformation.

For example, “there’s a lot about menopause we don’t know, and not enough research is being done,” Dominnique says. But it’s a season of life that every woman must deal with, sometimes for an entire decade. Yet there’s a shocking amount of WTF-style falsehoods out there about menopause. Apparently, if you Google “menopause” in Cyprus, you’ll learn that if you have semen in your uterus at the point you have your last period, you will die.  

The only way to combat that kind of stuff is education –– for consumers, for the industry, and for investors as well.

Data privacy, data security and regulation: Sextech is the ultimate in ‘sensitive information’

Dominnique applauds the brands she works with for their leadership on data privacy. When it comes to tech-enabled products that help prevent premature ejaculation, track fertility, or enable STI testing, “these are topics that are innately intimate for us, and are difficult even to communicate with an intimate partner,” she says. 

So sextech companies invest heavily in cybersecurity regulations and often work to anticipate new ones. STI testing app iPlaySafe even delayed its launch by a year to ensure its compliance with “the upcoming speculated MDRs [European Medical Device Regulations], which are a hybrid of medical and personal data,” Dominnique explains. “They weren’t going to jeopardize themselves or their customers.” 

Consumer data privacy isn’t just about safeguarding the actual data we generate when using products –– like the preferred settings for a WiFi-enabled vibrator, for instance. Thanks to Alexa, Amazon probably knows a lot more about you. So privacy must extend to “what you purchase and what you buy” as well as what you download, Dominnique argues. 

There will always be a certain amount of risk associated with this kind of data, whether it’s one’s membership on Killing Kittens (a platform for “female-empowered sex parties”) or the kind of audio erotica one listens to. However, the U.S. could do much more to create regulations around sensitive data like this. There are no federal cybersecurity privacy laws on the books at all.

In Europe, data about a natural person’s sex life falls squarely into special categories of data under the EU’s GDPR security standards. Ironically, attitudes toward sex are more relaxed overseas, but there’s more respect for privacy. Here in the States, there are more social taboos –– and more risk.

AI in sextech and the innovation to come

Since AI is one of the hottest topics in tech, I had to ask Dominnique about her perspective on AI in sextech.

Education is a big part of the sextech space and “AI obviously facilitates that,” but she has questions about how that will work –– because when it comes to machine learning, “your output is dependent on your input,” and accuracy is so key to health and wellness.

From the Healthy Pleasure Group perspective, she sees AI as a tool to enable customizable and/or anatomically precise devices and other products. 3-D printing is “a core competency in our lab,” she says, pointing out that it has changed the game in the hearing aid industry. It is now economically feasible for manufacturers to 3-D print bespoke hearing aids. 

Hmmm, what else could we 3-D print to be anatomically precise? 

3-D printing technology can also reduce the cost of product development, particularly prototyping, Dominnique adds.

“In our space, we are at the mercy of manufacturers in China and Hong Kong,” she says. By making their own prototypes, Healthy Pleasure Group can cut costs and time as well as improve accuracy.

As she looks to the future, she thinks our sexual wellness will benefit from the rise of telehealth and other digital healthcare technologies.

“As humans who have given ourselves the social permission to include sexual wellness in our life, we are going to invest more in exploring and discovering that,” says Dominnique. “I believe that sexual wellness and sexual health care will be reshaped from an online experience, but also from a physical tangible perspective,” such as in retail spaces.

She hopes that in the next 12 months, as the world begins to open up again, “people will hopefully wish to satisfy their curiosity, which was the drive during COVID –– and satisfaction is often a tangible thing. It’s not just digital. People wish to connect again.”

This article is based on an episode of Tech on Reg, a podcast that explores all things at the intersection of law, technology, and highly regulated industries. Be sure to subscribe for future episodes.