Fame = Success? Celebrities go startups!
What to watch out for with public figures as angels.
🖖 Welcome to Closing The Gap by JVH Ventures. After founding multiple companies, investing directly in 50+ startups and 10+ funds, we realized that a common understanding between founders, angels, and VCs is often missing.
We want to close this gap and combine perspectives from all sides.
Our goal is to look behind closed curtains and tell the honest truth.
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Especially over the last couple of years, public figures started to emerge as startup investors. The startup fever spread through all different types of public figures includes celebrities, athletes, actors, musicians, influencers, and so on. And it’s definitely not just a phase. While most of them started with some basic angel investments, some even went on to start their own funds and more or less became full-time professional investors, like Ashton Kutcher with A-Grade Investments.
Given their nature, Public Angels are recognized faces from B2C sectors - and while many of them bring substantial budget to the table, there are other younger celebrities or influencers who invest smaller tickets, but dedicate more time towards their ventures. Their journey into angel investing is marked by their high public profile rather than a background in startups or industry-specific experience.
This breed of investors often receives quite a lot of investment opportunities due to their fame, and sometimes given their potentially strategic value for marketing and validation purposes of B2C products. Viewing angel investing as an alternative or supplementary career path, they embark on a journey less traveled by their peers and often actively seek investments opportunities beyond their field of activities, heavily driven by a deeper purpose.
Therewith, celebrities became a vital part of the startup ecosystem and bring a distinctive flair to venture capital. In this piece, we explore the nuances of the Public Figure Angels, looking deeper into their journey from the limelight to the forefront of startup financing.
Goals and Challenges
For Public Angels, the foray into angel investing is not just about financial returns; it's about diversifying their career, expanding their brand, and exploring new arenas of influence, personal growth, or supporting a broader societal or environmental purpose, for example. They face the unique challenge of diving into the startup world, while being in the spotlight.
Lack of Expertise and Learning Curve: Many public figures come from backgrounds unrelated to technology or business. Their limited experience in these domains can make it challenging to assess the potential and risks of startups accurately.
The learning curve in understanding these intricacies of startup investment, venture capital ecosystems, and startup lifecycle stages can be steep, especially for those whose primary expertise lies elsewhere.
Without a background in investment, public figure angels might find it difficult to develop a strategic approach to their portfolio, potentially leading to scattered investments without a cohesive theme or strategy.
Over-Reliance on Personal Brand: While their public profile can open doors, there's a risk of overestimating the impact of their celebrity status on a startup's success. The actual needs of a startup might extend beyond what their public persona can offer. Balancing a demanding public life with the due diligence required for startup investment can be challenging. Public figures often have less time to dedicate to thoroughly evaluating and supporting their investments.
Risk of Public Scrutiny And Existing Brand Conflict: Their investments and associated startups often come under intense public scrutiny, which can be a double-edged sword. While the investment can bring visibility, it also puts additional pressure on both the investor and the startup. Their existing contracts, endorsements, or public roles might conflict with their investment interests, leading to complex situations that require careful navigation. Take, for example, Kayne West’s involvement with adidas and Yeezy, which backfired tremendously because of his increasingly unacceptable personal perspectives and statements.
Dealing with High Expectations: Startups might have unrealistic expectations from public figure angels, assuming their involvement guarantees success. Managing these expectations while providing meaningful support can be a delicate balance.
High Public Awareness: Due to their exposure, Public Angels receive a lot of interest also from the investment world. This could lead to massive amounts of deal flow, which is not necessarily of high quality. In addition, Public Angels should - as always - watch out for black sheep in the industry and be careful to consider investment advice from others, if interest don’t align.
Time Constraints: As implied by the name, Public Angels normally have a demanding job, leaving little time for side hustles like angel investing. Not just mastering the steep learning curve, but also sorting through tons of deal flow and supporting portfolio companies requires a substantial amount of time, which is often not available for them.
What to Focus On
Reflect Motivation: Public Angels should carefully consider their underlying motivations. Are they seeking financial gains, personal growth, or a way to support causes close to their heart? Answering these questions early on will help to set priorities and map out the portfolio structure. For example, high stake, emotionally involved investments require larger ticket sizes and more attention, whereas a classical angel portfolio follows the Power Law in order to discover the next unicorn.
Here, they need to decide if they want to invest for the sake of investments, or if they rather want to leverage their personal brand and also act as an ambassador of the startup. Depending on the strategy, there is another layer in the decisison making process, to align their individual brand with the startups they want to support.
Network and Learn: Networking with experienced investors and participating in co-investment programs can provide invaluable learning opportunities. It might be interesting for public figures to start with investments into VC funds that offer co-investment opportunities. Next to high quality deal flow, they learn deeper insights about how the startup game works.
Actively seeking cooperation partners (not just VCs) who are familiar with the startup scene will help to learn faster and understand the specifics of this investment vertical. While many Public Angels will be warmly welcomed, it’s always a challenge to build a new network in an undiscovered field. However, as startup investments remains a “people’s business”, it’s absolutely crucial to establish close and trusted links with key people.
Partner Up: Once getting to actual angel investments, we observed that many Public Angels work together or hire investment managers to take care of their deal flow and portfolio management. Additionally, it makes sense for Public Angels to join (exclusive) investment clubs and syndicates. They do not just act as a supportive function along the whole process, generate deal flow, but also multiply branding effects.
Patience and Building Reputation: Starting off is always difficult, but when it comes to startups also celebrities can not jump the queue (as they are used to 😉). Differentiating good from great is a difficult, key task that requires patience and time to learn. While waiting for the big exits to occur, it’s important to gain others trust. Easy ways for this is of course by displaying gained knowledge, but also by openly sharing deal flow.
Build Own Perspective: Even if monetary returns are the sole focus, developing a wider individual perspective is key for sustainable success for Public Angels. Ashton Kutcher, for example, has transitioned into a successful venture capitalist by focusing on tech startups and partnering up with industry leading minds. Another famous example is Ryan Reynolds who went on to co-found and invest in multiple ventures, always being heavily involved as he called them “emotional investments”. Right now, he already accumulated exit returns in three-digit millions with his companies.
Expand Personal Brand: Often Public Angels actively extend their personal brand in the direction of their investments. For example, Mario Götze (a famous German soccer player) has continuously and patiently build his household name in the German startup ecosystem and is now recognized as an active investor, just as he is as a soccer player.
Founders Perspective
Increased Visibility and Branding: Obviously, Public Angels bring substantial media attention and consumer awareness to a startup. It can also add value to the brand itself. While this is especially helpful for B2C startups, it also helps other company types to get wider attention from potential customers and investors. Of course, this can work both ways, as it heavily depends on the personal brand.
A recent example is the involvement of Cristiano Ronaldo as an investor with luxury watch marketplace Chrono24, driving well-aligned international attention for the startup.
Making Sure to Align Expectations: There might be a gap between what startups expect from Public Angels and what they can realistically offer. Public Angels' busy schedules and diverse interests could limit their availability and attention to the startup. Also, expectations regarding advertising and marketing support should be aligned. It even can happen that celebrities are not allowed to “privately” endorse a product they invested in, if there are so additional terms with their agency. One way or the other, it seldomly happens that Public Angels are becoming the face of the investment and turn around the ship by coming on board.
Fresh Outside View: As we know, experts are not always the best to judge or even support your startup. As athlete or actor, there might be refreshing views to old problems from a completely new angle.
What’s Next?
We will explore all angel types in our continuous series. In the meanwhile, feel free to check out our guide on portfolio building for angels and other helpful insights.
Thank you for reading! If you liked, feel free to share it with someone else who could profit from it - angels, founders, VCs, anyone :)
PS: We are always happy to answer your questions or take on topics you want to hear about to close the gap! Just let us know.