“This startup is going to make a fortune. I’m out.” That was me reading a deal memo recently. And no, I haven’t lost my mind. Let me explain…
I was looking at an app that lets you buy lottery tickets on your phone. Right away, I knew this was going to be huge.
Every time I go to a convenience store, I’m stuck in line behind someone buying a dozen lottery tickets. Who wouldn’t rather buy them from home?
But I didn’t want to be any part of it. That’s because like alcohol, tobacco and other vice startups, gambling is a category I don’t touch.
Gambling
Among vice startups, gambling apps is the biggest category by far.
I see every conceivable variation. Straight up betting, “fantasy” apps that involve betting actual cash, you name it.
And I pass on all of them.
I think people should be free to gamble. In general, I think more human freedom is good.
But I also think gambling is absolutely terrible for people. It becomes addictive behavior, and the addiction is especially strong when it’s inside your pocket, available any time.
Gambling apps use gamification and other hooks common in social media platforms. But while a social app might waste your time, a gambling app can bankrupt you.
I picture families ruined, homes lost. And I want nothing to do with it.
Tobacco
Ahh, tobacco. Easiest money there is! I love the Warren Buffett quote on this:
“I’ll tell you why I like the cigarette business,” he said. “It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”
And yet, Berkshire Hathaway doesn’t invest in tobacco, and neither do I. It’s a terrible, ghoulish business.
You’re making money off of killing people. Only the most absolutely unethical person could be involved in such a thing.
If you meet anybody like that, don’t do business with them. If they’re that unethical, they’re probably willing to steal from you too.
What’s more, I have a personal history with tobacco. I quit smoking in January of 2015.
It was one of the best decisions of my life. And I certainly would not want to encourage others to smoke.
I also don’t invest in any other form of nicotine…Zyn, vapes, etc. All nicotine is vasoconstrictive and very bad for you.
Alcohol, Marijuana, and Other Drugs
I think people should be free to use alcohol, marijuana, and perhaps other drugs as well. However, I also think that they can be disastrous to a person’s health and general course in life.
So I never invest in any of these areas. I don’t want to profit from ruining people’s livers, lungs and brains. It’s a dirty business.
Some drugs like ketamine may have some therapeutic uses. But they can also have serious dangers.
Out of an abundance of caution, I steer clear of this entire category.
Porn
I actually don’t have a problem with this one. But the issue is, companies involved with porn cannot be financed.
No institutional VC will touch it. After all, they can’t turn around and tell the Harvard Endowment, “Hey, we put your money in a porn company.”
I can’t be the only one investing in a startup. Any successful company needs to raise many rounds of funding.
So although I don’t have an issue with it myself, I don’t invest in companies involved with porn.
Wrap-Up
Gambling, tobacco, and other vice startups can make a fortune. But I’m lucky to be well off enough that I don’t need to do this kind of business.
I didn’t get into angel investing to addict people to drugs, alcohol and gambling. I got into it to be a part of creating an awesome future.
The minute this all becomes a meaningless cash grab, I’d rather hang it up.
What categories do you invest in, and what do you avoid?
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