In recent years, there has been an increase in celebrity investing of tech startups. Although official statistics are hard to come by, as a group, these investors are putting in tens of millions of dollars to work each year. From Hollywood stars to professional athletes, market participants have included Ashton Kutscher, Leonardo DiCaprio, Lebron James and Shaquille O’Neill. There have also been tech startup investments made companies that are involved in the production of entertainment, like Disney, Comcast, WME Ventures and CAA.
A question I often hear from entrepreneurs is whether taking in such money really provides any additional value?
In the past several years, I have been fortunate enough to get a front-line view on this very topic as I have been active in startups which have received investments from a range of performers and public figures such as Beyonce, Troy Carter, Carmelo Anthony and Barbara Corcoran. Given the choice, private companies that can secure celebrity capital can benefit in five ways.
1. Market awareness
By definition, many celebrities have prominent public profiles and substantial social media followings that can number in the millions (Ronaldo has 48MM Twitter followers alone). Generally speaking, when they disclose an investment, it tends to get covered in the business and tech press. This can help a startup that’s trying to make a name for itself gain market recognition and provide PR value that would be expensive or difficult to achieve otherwise. Such heightened awareness tends to get noticed by many of the company’s important stakeholders, including potential business partners, customers, investors and employees.
2. Closing a round
If a celebrity investor is perceived as strategic, his or her involvement can also help a…