About a year ago, Catherine Dockery founded Vice Ventures, a firm focused on such controversial products as cannabis, CBD, sexual wellness, gambling, nicotine alternatives and addiction recovery. Her pitch to investors, who include Marc Andreessen and Bradley Tusk, was that these categories are fast-growing and recession-proof.
Dockery’s thesis seems to be playing out in a more dramatic way than she ever expected.
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“What is going on with covid-19 is terrible,” Dockery said. “But all of my portfolio companies had a significant sales increase since the lockdowns began.”
For instance, Lucy Goods, a Los Angeles nicotine alternatives company, had a 75 percent rise in sales over a few weeks. This surge in demand is possibly linked to news reports that smoking could increase the risk of having complications with covid-19.
Other Vice Ventures portfolio companies with a substantial uptick in demand include Recess, a CBD beverage brand from New York that doubled its online sales over the last week. And Players’ Lounge, a Brooklyn, N.Y.-based online platform where video games can be played for cash, grew its customer base by 41 percent over the same time frame.
While it is not surprising that the so-called vice products are in great demand when people are stuck at home, most VC firms do not benefit from the surge in their sales.
Many institutional LPs bar venture capitalists from investing in controversial businesses. Dockery got around this limitation by raising capital only from family offices and individuals.
Vice Ventures announced its maiden fund last summer with $25 million in commitments, but Dockery is still fundraising toward a $50 million target. While now is a difficult time to raise capital in the current economic climate, Dockery said that she has received commitments from LPs since the pandemic started and she anticipates having a final close of the fund at the end of June.
The New York-based fund currently has seven portfolio companies, and it will back up to 30 startups, Dockery said. She is seeing good opportunities in vice categories and plans to continue to make investments during the pandemic.
In the last few weeks, Dockery has met with founders and is performing due diligence on deals via Zoom. She finds that videoconferencing works almost as well as in-person conversation, but she said that she won’t make final investment decisions until she meets the founders face-to-face.
“I am waiting a few weeks to see if valuations drop even more,” Dockery said, adding that she is already seeing a substantial pricing decrease. The firm writes checks from $100,000 to $1 million and invests in seed and Series A rounds.
While the vices category is doing great now, it still pays to be very diligent and selective with investments, Dockery explained.
Update: After the above story was posted, Vice Ventures supplied more recent updated figures on the growth of their businesses.