Any ‘venture capitalist’ worth his/her salt already knows that having an “A-List” Celebrity on the A-Round list of investors could be a public relations coup for the VC firm’s marketing and branding strategy. Inevitably, a good PR mention, whether its in Page 6 or any other ‘rag’ read by starry-eyed investors (from Wall Street moguls to the many deep-pocketed socialites and “players”who aspire to have their names displayed on the closing credits of a Harvey Weinstein film) will advance funding from Round A to Round Z faster than a New York minute.
In the venture capital and hedge fund world (the latter being more sensitive to the notion of disclosing their investors’ names) if you have a Hollywood celeb on board (not on “The Board”, just on board and next to the Silicon Valley titans who have signed up with OPM, the PR and Marcom folks call it “another good way to leveraging assets.” In the corporate marketing world, its called exploiting your investors’ brands to advance your own brand. And, it works.*
*This isn’t meant to suggest that the investment made by the celeb actually works out in the end, if you just arrived on Planet Earth, here’s what you might not know: a majority of venture capital funded deals don’t work out. Same rule applies to those who put up money for a film, a theatrical production or any other vanity investment. But we digress from the title of this post, which intends to lead you to a fun read courtesy of today’s NY Times Deal Book column “Sprinkling a Little Celebrity Stardust on Silicon Valley” submitted by STEVEN DAVIDOFF SOLOMON…Below is the opening excerpt, you’ll want to read the entirety via link back to NY Times..
Snoop Dogg is raising a venture capital fund to invest in the marijuana industry.
That’s not a headline from The Onion. The hip-hop star is indeed putting together a $25 million fund to invest in marijuana-related industries, according to TechCrunch.
He is part of a growing wave of celebrities — including Justin Bieber and Ashton Kutcher — investing in start-ups. It is easy to interpret this phenomenon as a possible sign of the coming apocalypse, but it may be something more, highlighting the always precarious nature of the venture capital industry itself.
Celebrities have always tried to make extra money through investments and endorsements. Elizabeth Taylor had a clothing line and a perfume. Planet Hollywood, which fell into bankruptcy, was started with help from Sylvester Stallone, Bruce Willis, Demi Moore and Arnold Schwarzenegger.
These kinds of investments and endorsements were different. Celebrities were trying to cash in on their fame, selling or investing in things that their association would enhance. Sean Combs may have known little about selling vodka when entered into a deal with Diageo to market Ciroc, but he knew a lot about style.
The model now is Bono, U2’s lead singer, who invests without trying to leverage his celebrity to make that investment work.
In 2004, he joined the venture capital firm Elevation Partners. The idea was that Bono could be a visionary in the media and technology world. Bono may be the coolest person on earth, but that coolness didn’t really translate for Elevation Partners. The firm made some pretty bad investments in Palm and others, and was saved only by a big trade in shares in Facebook before its initial public offering. It returned a fair profit to its investors, but the fund has not raised a new round of money. In short, it is hard to see how much value Bono provided.
This hasn’t stopped him, however. Bono and Mr. Kutcher recently announced that they would be advisers to the private equity firm TPG Capital on investments. Bono may do better this time around, but one wonders what value he brings to TPG other than that 1980s-era hipness.
Why would experienced deal makers want rock stars and actors to advise them? Why would entrepreneurs seek their money?
There is a certain cachet with all that stardust, of course, and perhaps some free publicity. As far as investing goes, however, some might cynically suggest that celebrities’ dollars are merely dumb money that companies are happy to take.
But there is more to it.
In the venture capital industry, profile is important. Andreessen Horowitz, for example, arguably gets better deals because it is known for paying fat prices and hitting some big home runs in its venture investments. In such a competitive market, a celebrity investor is like another badge. It is a sign of honor and a signal that someone important cares about you.
This is the stardust theory, but again, there is more here. Celebrity investing may really be about the thing that drives Silicon Valley — networking. One top venture capital lawyer recently mentioned to me that he attends more 100 lunches a year. That’s a lawyer.
And celebrities are good at networking and dealing with people.
KEEP READING!..Here’s the NYT link
A-List Celeb Investors Help Venture Capitalists Advance Beyond "A" Round