Nigel Woodforth, 43, ran the operation from the basement of his home in Reading, Berkshire, with 49-year-old Ricky Gage.
The pair were sentenced at Southwark Crown Court, in central London, after being convicted of three charges of providing sperm without a licence or third-party agreement.
Imposing a nine-month jail term, suspended for two years, Judge Deborah Taylor said: "Your disregard of the warnings you were given is, in my judgment, a serious aggravating feature in this case."
The court heard it was the first case of its kind to be prosecuted.
Nearly 800 women signed up to use the online service provided by the company, operating under various names including Sperm Direct Limited and First4Fertility.
Their website introduced would-be donors to women trying to conceive.
The men were reported to the Human Fertilisation Embryology Authority (HFEA) after one woman who used their service complained about their unprofessional standards.
Melissa Bhalla-Pentley was hoping to have a baby with her partner when she ordered the sperm through the Fertility First website set up by Gage and Woodforth.
She paid the men an £80 joining fee and a further £300, the cost of using the service for each menstrual cycle. She then had to pay a courier company £150 for each delivery of sperm, £50 of which would be given to the sperm donor.
A box, wrapped in grey polythene and containing a pot of sperm and a 10ml syringe, was delivered to her home late one night, the court was told.
Ms Bhalla-Pentley used the sperm for self-insemination but failed to get pregnant. She paid the company another £300 and arranged for another donation from the man the following month.
She contacted the company when a copy of the donor's medical tests was sent to her with his name visible. She asked for a refund, but she was told she could not have one.
Under the Human Fertilisation and Embryology Act 1990, the company should have had a licence. The law was brought in to ensure that both donors and women wanting to conceive had access to information and counselling, and to help protect against the risks of diseases including HIV.
The defendants claimed they did not need one as they acted only as an introduction database.
The website run by Gage and Woodforth promised women a "life-changing opportunity towards motherhood".
They were given the chance to choose the ethnicity, height, hair colour, education and hobbies of the sperm donor they wished to use. They boasted of having more than 300 donors nationwide and a 37% success rate.
Judge Taylor ordered the pair to pay a £15,000 fine each, to complete 200 hours of unpaid work and to pay £500 each towards prosecution costs.
She also banned them from working in the industry in future.
Sentencing the pair, she said: "In my judgment, the sentence in a case such as this must involve an element of deterrence and only a custodial sentence is appropriate.
"However, I take into account that this is the first prosecution of its kind.
"You, or anyone else in future who violates this law, can expect to go to prison."
She said there were "strong, obvious" reasons for the prosecution.
"This is a safeguard, not only for those supplying the means of conception but also for any children," she said.
"There are strong, obvious policy reasons why people such as you with no medical experience or qualifications in this field should not provide services in this field."
Miles Trigg, mitigating, said Woodforth was a "hard-working" and "pleasant" person - not "cynical" and "not simply motivated by money".
He added: "He is now financially in some considerable difficulty.
"He is now trying to find work as a courier to pay his mortgage. He has sold his one saleable asset - his car - to buy a van."
Justine Davidge, mitigating for Gage, said the companies were not solely designed as a money-making enterprise.
She told the court that the father-of-two had been involved in a "successful" printing company and that his wife was the main "bread-winner" in the household.
She added: "This case, whilst the first of its kind, is not, in my submission, the worst of its kind."
Outside court, Woodforth said the women were fully aware of the health checks carried out on donors.
"It was a choice made by them. There was no-one forcing them to do it," he said.
"The donors were tested. They were health-screened. That's something we insisted on."
He said no clients had contracted any diseases through using the donors.
Gage, also speaking on the court steps, said he was satisfied with the sentence.
"We are very relieved. I think it was the right sentence in the end," he said.
"If we knew we would end up in this situation we would never have carried on with it.
"We always believed we were doing the right thing. Obviously, it was found that we weren't and we have to get on with that."
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