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A man in a vaping shop blows smoke while another examines the wares.

Juul is a $15 billion company. So what’s so wrong with Silicon Valley investing in sin?

Some Silicon Valley VCs have limits.

Matt Cardy / Getty

There is money to be made on our vices. So why do so many investors refuse to make it?

That’s an age-old question thrown into sharp relief this summer as Juul, the e-cigarette company that teenagers are gaga for these days, raises a round of financing that values the company on the same par with names like Lyft or Snap. There is perhaps no better market than one we are addicted to, but puritanical Silicon Valley typically refrains from industries that call upon our taste for sin.

So that means not to expect to see a marquee venture capital firm behind a new marketplace to organize the Adderall industry, even if there is surely a better way to connect dealers and buyers. Or behind a new technology to muffle the blast of a pistol, even if tens of millions of firearms are sold each year. Or behind a new innovation in how we experience pornography, even though the virtual reality platforms that firms’ portfolio companies build could very well revamp an estimated $100 billion industry worldwide.

Silicon Valley is certainly leaving money on the table. And it raises an intriguing question about the ethical obligations of venture capitalists: Is their job a soulless quest to make money for their own investors? (Which, by the way, happen to include public universities, charitable foundations and retirees on public pension plans.) Or is their job more akin to professional athletes — making big money, yes, but driven by a love of the game and some public display of finesse? Should they only invest in technologies and businesses that make the world a better place?

Here’s the deal: By rule in some circumstances — and by tradition in others — premier venture capital firms don’t touch the industries that prey upon our worst angels. That’s generally to please their own investors, known as limited partners, who might be doing good, expensive work but put in place these “vice clauses.”

“All investment opportunities are evaluated through the lens of what is consistent with our values,” said Kleiner Perkins, the oldest of the old-guard venture capital firms, “and we have no current investments in the categories of alcohol, tobacco and guns or businesses that are illegal in any state.”

That’s long been modus operandi at Silicon Valley’s most brand-conscious firms. The reputational risk is real — or, at least, was real.

What’s new is the liberalizing of the country’s mores on topics like drugs, with growing parts of both the left and the right pursuing criminal justice reforms that treat drug addiction like more of a business problem to be solved than an industry to be eradicated.

Take marijuana: As states like Colorado began legalizing weed, effective in 2014, about $700 million has flowed into the cannabis industry. From investments in delivery startups like Eaze, backed by DCM Ventures, to providers like PharmaCannis, some venture capital firms have shown that they do occasionally change with the times.

Founders Fund, for instance — an eagerly contrarian firm co-founded by Peter Thiel, yet one that is still a top performer thanks to bets in mainstream companies like SpaceX and Airbnb — stands out in a more timid industry for doing a number of weed deals.

“We don’t have any vice clauses in place,” Founders Fund told Recode. Its limited partners “invest in Founders Fund because we seek out the best entrepreneurs regardless of sector or popularity among other VCs. We’ve earned our investors’ trust and that allows us the freedom to invest in anything that has the potential to be a great business.”

Hemant Taneja, a top investor at General Catalyst, said his firm was searching for not only great businesses but ones that are “also in the long-term interest of society.” That’s not just because their limited partners value that, he said, but also because that sort of mission attracts better talent and builds a better startup.

That brings us to vaping and Juul.

“The company has executed exceptionally well and is a consumer phenomenon by all measures,” Taneja told Recode. “What’s unclear to us is whether Juul is helping consumers get off an unhealthy addiction or is it creating a new addiction for them. In the absence of knowing that, we were hesitant to pursue the investment.”

Taneja is not alone in not totally knowing what to make of Juul. Teens have flocked to the battery-powered device that dispenses a flavored nicotine vapor — one meant to simulate smoking but, in the eyes of its proponents, without the addictive or destructive health consequences. Is it actually moving pack-a-day teens toward a less-bad alternative — vaping? Well, it’s still nicotine (which 60 percent of youth users don’t know), and there is some evidence that vaping actually serves as an entry point for eventually buying cigarettes.

The ethics are murky, yes. But the business? Not so much. The company reportedly brought in about $250 million in revenue last year and has grown to take over about 70 percent of the U.S. e-cigarette market. Sales surged to almost $1 billion within the last year, according to CNBC, and since only about 10 percent of high school seniors say they’ve vaped in the last year, there’s plenty of room to grow.

Here’s how Jeremy Liew, the first major institutional investor in Snap — who keeps a close eye on phenomena among high schoolers — sees the business: As a social network.

Liew, who is not a Juul investor, said its colors and flavors make it “super fun”; that it can grow virally as more people use it and a camaraderie develops within its user base, and notes that there’s a budding Juul culture on social media like Instagram. It doesn’t sound that different from Snap.

Now, there are still some financial holdups for venture capital firms seeking to capitalize on this bonanza. Not unlike the cryptocurrency industry, the vaping industry could encounter tough regulators. In April, the U.S. Food and Drug Administration asked Juul for documents as part of an attempt to determine why it is so popular with minors (it is only supposed to be available for purchase to those over 21).

Plus, as one other top-tier venture capital firm described it, it’s unclear how startups that thrive on vice eventually return money to their investors. Can they go public as an independent company? Maybe, but how would they be valued? And who would acquire a company like Juul?

And then there’s a related question among some investors about whether these companies are even truly technology companies and whether they should be in the domain of venture capitalists in the first place.

The firm that is reportedly leading the financing of Juul isn’t a typical blue-chip Silicon Valley firm. It’s Tiger Global Management, a powerful New York-based late-stage investor that led a marijuana deal this spring as well.

Despite its landmark investments in companies like Spotify and Flipkart, the firm famously shuns the spotlight. But it’ll have no luck avoiding scrutiny when it’s at the center of the vaping craze in our schools.

This article originally appeared on Recode.net.

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