What makes a habit a “vice” isn’t innate immorality, it’s stigma. And for traditional venture capital firms, it’s a legal clause. To invest money from endowments, nonprofits, and foundations, many VCs vow to avoid businesses in the alcohol, cannabis, nicotine, gambling, and sex industries. Catharine Dockery founded Vice Ventures in 2018 to change the conversation, and funding, around vices. Her focus is on harm reduction, rather than risk avoidance. Wine isn’t evil, but alcoholism is deadly. Vice Ventures’ investments include cleaner nicotine, sexual wellness, and CBD products. So far, they've all paid off, especially during the pandemic, as people self-soothe and bring their vices into the home. 

Dockery’s career path zigzags from studying neuroscience and finance at NYU, working on the floor of the New York Stock Exchange, joining Walmart’s M&A team, serving as Bonobos’ chief of staff, to personally investing in a canned rosé business and eventually selling her New York apartment to fund more vice brands. Dockery has since raised around $25 million from family offices and investors like Bradley Tusk and Marc Andreessen. Last year, she earned a spot on Forbes’ 30 Under 30 list.

The Business of Business spoke with Dockery about the growth of vice industries, how they’ve evolved, and their post-pandemic future.

BoB: Why are vice industries booming during the pandemic? What makes them recession-proof?

People are just afraid. They have a lot of anxiety. One way to calm the nerves is having a glass of wine or smoking a bowl. They want to go to Vegas and gamble. With the pandemic, you have to bring your vice consumption into the home. And because of that, you see people spending more on alcohol. And not just in quantities, but also in higher dollar values. Instead of buying a $20 bottle you’d put into a rum and coke or whatever, people are now buying $50-100 dollar bottles and they're making good cocktails or learning how to sip it straight.

I think behavior has changed drastically as people are starting to learn more about their products, if something is ethically sourced, where it comes from. Natural wines are having a huge moment right now, for example. People want to be fully aware of what they're consuming.

Tell me about starting Vice Ventures, the why, when, and how. 

I had the idea in 2018. I couldn't file for a trademark or do anything while I was working at Walmart so I left pretty abruptly in August, and then I just focused on [Vice Ventures]. I took a side job. I didn't have a lot of money at the time. That's kind of when I put the decks together. I had the legal entity, and I thought very hard about doing this, and then I decided just to go all in. When people spend over $200,000 on business school, I would rather spend $70K plus on legal fees and learn more about business than I would in two years [at school] and still have an income while doing it. For me, the risk/reward was very obvious. 

Who was the first person to take a chance on your idea?

I thought, okay, who is the smartest self-made brilliant investor out there? Marc Andreessen, duh. I just cold emailed him and he responded within a few hours and was like, "This is great. Please come out and visit, we'd love to meet you." That’s where I realized that this fun project I was working on could actually be my dream. 

What are some challenges you face working in "bad" industries?

Something that’s very topical is advertising and monitoring who you're marketing your product to. We're a firm that would never back a [vice] company that was marketing products to children or people under 21. A lot of investors were very nervous about that because they saw Juul was so big and then had this massive exit. Another hurdle for us was that a lot of institutional capital don't want investors to invest in any of the categories that we invest in, hence the vice laws. So we had to go to high network individual founders and people who manage money who really understood our thesis and its ability to return profit quickly.

I think a lot of VCs love to say what they can and cannot do, determined by whatever narrative they're spinning.

VCs want to take risks, but they won’t touch vices. Why? 

They're legally contracted not to. Think about it: If you take money from [a renowned endowment fund], they're not going to want you investing in nicotine. They're not going to want you investing in cannabis or alcohol. If you think about venture capital in general, it's the smallest portion of the financial system by a long shot. So a lot of fund managers don't have the ability to be super picky with who they can take money from. That’s why a lot of these firms have been left with vice laws, why nobody’s really funding alcohol companies, or why Juul was so big. Juul was funded by Tiger Global and Fidelity! 

I think a lot of VCs love to say what they can and cannot do, determined by whatever narrative they're spinning. A great example is WeWork. WeWork was backed by SoftBank, who’s backed by Saudi Arabia. All of a sudden, WeWork was like, "We are no longer reimbursing any meat expenses!" Obviously, Saudi Arabians didn’t want their investments to be paying for pork. It was pretty clear to me that it was just a brilliant PR stunt. But in reality, I think it was a lot darker of why this company decided to do that.

What makes something a vice?

We see it as cannabis, nicotine, alcohol, sex tech, sexual wellness, body positivity...we’ve also looked at ketamine and MDMA. But more importantly, we don't look at is anything where the product is meant to harm somebody by virtue of using it. So for example, we would never invest in cigarettes. We would never invest in guns, which is funny because we see a ton of deal plugs for “smart guns.” We would never invest in a pepper spray or a for-profit prison. We have some pretty smart, hardened guidelines.

How do you determine when a vice could be harmful? Alcohol could lead to addiction, for example.

We’re investing in harm reduction. We consider ourselves to be more of a mission-driven firm than people expect us to be, just because we're so hyper focused on investing in growing products that are somewhat better for you than the previous product was. These vice products that do really well are focused on harm reduction, and they're focused on delivering whatever that mechanism is to you in the cleanest way possible. So you can enjoy whatever your vice is, and you can do it in a way that you don't necessarily always have to think, "Is this going to kill me?" That's something that we're very, very proud of. It's something that we take very seriously.

Is there one vice industry in particular that's leading the charge?

I think nicotine is having a whole moment. Tobacco use, for the past 60 years, has been on a steady decline. Literally, it's like you're looking at a stairwell that's going to a basement. And if you look at nicotine use, it's the polar opposite. Nicotine use is growing and growing and growing, and you have this whole new generation of nicotine users, and they're going to want to get off of Juul. They're going to want to see alternatives to clean nicotine. 

How do you think the stigma around vice industries has evolved or will evolve?

If you just look at all the elections that have happened in terms of drug laws, you see people are moving towards an understanding of what a vice is, of what it can be. So 78% of Americans right now are okay with cannabis legalization, but of that, 17.5% actually admit to smoking weed, both through the black market and the legal market. So you have all these people who don't smoke, but know that by legalizing it you're going to regulate it and that it's going to bring in much-needed tax dollars to a lot of these states that have been completely fucked by COVID. I think attitudes are changing, both for selfish reasons and also for the sake of the state. You also saw it with sports gambling. One thing that I think was wrong is some states actually put a heavier tax on all nicotine products without realizing, again, that all nicotine isn't the same.

You can enjoy whatever your vice is, and you can do it in a way that you don't necessarily always have to think, "Is this going to kill me?"

What happens as these industries become normalized?

I can see alcoholism going down. I can see people being much more aware of what they're doing and what they're drinking and what drugs they're taking and being more open about it. There's all this awareness, but if people just keep brushing it under the rug, then it's not helping society, right? Deeming all vices are terrible without understanding what they are, where they come from, or why people use them, isn't helping our society whatsoever.

How do you see vice industries operating in a post-COVID world? Do you think they'll maintain momentum as people return to public life?

Yeah, I think it's going to have a huge impact on vices in general. Once everyone gets their vaccines and people feel comfortable going outside again, there's going to be a lot more on-premise alcohol. You're going to go to brunch and everyone will be like, "Drink this alcohol, it's brand new." So I think we're going to see a ton of alcohol companies fighting for space at restaurants, and I think there's going to be a resurgence of vices in general, of all vices. It's going to be a great time for brand discovery.

What advice do you have for people who either want to invest in or start vice companies?

Be a brave, brave soul. If you're starting a business in the vice world, it's so important to know all the laws. Know liquor laws. Know nicotine laws. Know what the FDA looks for if you have to go through the FDA. Understand who you're marketing to, as if you're marketing it by accident. You need to understand who is on these social media platforms that are looking at what you're selling. So for me, any time we talk to a vice brand, I always ask very pointed questions so I know that you're prepared or you're not prepared.

Starting a spirits company is very different from starting, say, a vitamin company. It's a different business model. They're playing in very different regulatory spaces. I think it's incredibly important to have lawyers, to trust your lawyers, to know when you don't know something, and to constantly be educating yourself on all of the regulations.

You have a wide-ranging background. You studied neuroscience, you worked with Walmart. How have your experiences affected your work ethic and goals?

I think life is an experiment. Everything is an experiment. I've never been the person with a to-do list. I've always been the person that asks, why is this something I have to do? 

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