Hedge Fund, Draper Invest in Sex Toy Maker JimmyJane

Sex toy maker JimmyJane raised $6.3M from a group of investors, including little known hedge fund Palo Alto Investors

JimmyJane, a startup looking to become the Montblanc of vibrating sex toys, raised $6.3 million in a Series D round from a group of investors that includes technology hedge fund Palo Alto Investors and a limited liability company controlled by venture capitalist Tim Draper, according to a regulatory filing.

Palo Alto Investors declined to comment on the financing. Little information is available on the firm, other than that it manages a $1.5 billion technology-focused hedge fund. In an unrelated press release, Palo Alto Investors recently described its investment strategy as “Focused exclusively on overlooked, misunderstood and undervalued segments of the equity market that have significant potential for positive returns.” It invested in JimmyJane out of its Micro Cap fund.

Draper—managing director of Draper Fisher Jurvetson—is the kingpin of investing in young companies that become viral successes, such as Hotmail and Skype Technologies. A source familiar with the firm said the limited liability company controlled by Draper does not involve any DFJ money. Draper could not be immediately reached for comment.

But he isn’t the only VC involved with San Francisco-based JimmyJane. Phil Schlein, a venture partner at U.S. Venture Partners, is listed as one of the company’s directors. Schlein was president and CEO of Macy’s California for more than a decade and has focused on the retail sector while at USVP. Schlein invested his personal money in JimmyJane’s Series C, and did not commit USVP’s money. He also could not be reached for comment about whether he participated in the company’s Series D.

JimmyJane has expanded its product line since raising its last round of financing, a $1.1. million Series C round, at the end of 2006. Its original line of high-end vibrating sex toys were pricey, starting at $175 and ranging up to $3,250 for its diamond-studded platinum vibrator. It has since added several down-market offerings, such as a the $90 “Iconic Rabbit” and a $36 vibrating ring.

Another addition to its line, pictured above, is a vibrator engraved with artwork by noted pop-artist Jamie Hewlett [image from JimmyJane.com]

In the past week, it added sensual massage stones for $25 each. Company executives did not return a call for comment.

The executive team has put together an impressive board of directors. Since its last financing, it added Jean-Michel Valette, who has served on the boards of several consumer-oriented products, including Samuel Adams brewer The Boston Beer Co.; Peet’s Coffee & Tea; and mattress maker Select Comfort.

Another director is Amy Schoening, who was the chief marketing officer of clothing store Gap Inc., where she helped redirect the Banana Republic brand. She now runs a brand consulting company called True Story in San Francisco and has been working with companies such as the Levi Strauss & Co. to help sell more of its Dockers brand.