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Kobe Bryant says that as a basketball player his ultimate goal was to win. These days he got involved into a field where the stakes are even higher and the competition is severer: venture investing.
Bryant made an announcement that he is about to launch a $100 million investment fund cooperating with a former Web.com CEO Jeff Stibel. To launch the fund, Bryant joined forces with celebrities from Robert Downey Jr. to Lupe Fiasco, who said they are ready to invest money into a big win.
Since the technology has become an inevitable part of our lives, it is not at all bizarre to see the Yahoo CEO rub shoulders with celebrities at the Met Gala on “Silicon Beach”, or to get to know that Priscilla Chan and Mark Zuckerberg are a new Brangelina. However, it might not be such a well-known fact that Carmelo Anthony brought to life Melo7 Tech partners, while Ellen Degeneres started Ellen Digital Ventures, and Tyra Banks launched Fierce Capital.
Jon Vanhala, a start-up investor, and adviser at Crossfade Partners said that in the world of investing, it is not just enough for the product to be approved of to be successful, it has to be appealing and attractive. Vanhala himself had been chasing a career at Island Def Jam Music Group before he became an investor.
Vanhala also commented that being on top in the music industry and the ability to satisfy finicky music gourmands requires “taste and tenacity”. One of the most difficult challenges of being a band is a desire to overcome the rejection. Learning from mistakes makes a transition to the start-up world natural, he said.
“They were unknown at some point and now they are global social super stars,” Vanhala said. “They all started out somewhere. 99% had to fight their way to the top. They have a lot of built-in empathy for early stage creators. They know how challenging it is got get someone to pay attention to you.”
He stands out such a band like Linkin Park — whose investor, Machine Shop Ventures, invested in Lyft, Blue Bottle Coffee and Hyperloop One.
“They’ve been super stars, they’ve played in the same band since high school,” Vanhala said. “Some of them are focused on the visual presentation, other might be focused on new technologies, and have come to a comfortable place that they each have the role to play.” However, Machine Shop claimed that Linkin Park should not be classified as “celebrity investor.”
This classification becomes relevant as numerous celebrity start-ups have encountered criticism. Jay-Z’s Tidal, which sports equity shareholders like Nicki Minaj and Kanye West was severely criticized when its long-awaited launch failed to sell the details of the service.
Cortney Harding, a digital strategy consultant and author of “How We Listen Now: Essays and Conversations About Music and Technology” said that while a top-level capitalist can ensure guidance at every turn, entrepreneurs seeking fame for fame’s sake might end up with little in the long run.
He commented the following:”I think the issue is that there are pop stars who are like, ‘That seems fun, I’m going to do it.’ It’s their money to lose. But as a start-up, it may be worse to take money like that — a year down the line, you’re going to get a lot more help from a boring investor rather than someone you put in a press release.”
And indeed, the extent of participation in the technology field differs greatly amongst celebrities.
For example, stars like Jared Leto and Ashton Kutcher are famous for their wide-ranging portfolios. Such successful artist managers as Troy Carter and Scooter Braun are fully dedicated to their start-ups.
Harding also added that having a trustworthy team to rely on with due diligence makes a whole load of difference.
Critics like to bring to the light the effort of celebrity-driven ventures like Lady Gaga’s Backplane. Charlie O’Donnell, a venture capitalist at Brooklyn Bridge Ventures claims that the majority of venture-investments are destined to fail anyway, and that’s not always a reflection on the celebrity. After all, there is no guide book into the world of investment.
O’Donnell said: “Anyone can functionally do it. Whether or not they do it well is another thing”.
And yet, the peak of the trend has coincided with the time when venture investing has become extremely challenging. KPMG and CB Insights figured out that venture deal count was down 26 % year-over-year in the second quarter.
“Studying up enough on this ecosystem to get outside of your bubble, figure out who to trust — it’s probably the biggest challenges,” O’Donnell said. “It’s a challenge for a lot of family offices, celebrity or otherwise. It’s doubtful [Kobe Bryant]’s going to put his email address up the way mine is. But if the only people you talk to are people you already know …. They aren’t in the industry. It’s not an easy thing to figure out who to open up to.”