Whether it is Rana Daggubati, Alia Bhatt or Hrithik Roshan, stars are looking at startups and investing in them. What makes startups so appealing and why are startups looking at these A-listers?
From club soda, to hair oil, shoes to toothpaste and even itch-relieving powders, movie stars have been endorsing products, but never investing in them, but that is now slowly changing.
Over the last few years, cricketers and movie stars have been investing in startups. While producing and directing films seem like a natural progression for those in the movie business, and getting into the food space is commonplace, startup funding seems a little off the mark, but one might now ask, why not?
Today, the startup world seems to have a star-studded investor lineup as Alia Bhatt, Virat Kohli, Jacqueline Fernandes, Yuvraj Singh, Sunny Leone, Rana Daggubati, Shilpa Shetty, and Hrithik Roshan have jumped on the bandwagon.
Cricketer Yuvraj Singh has an investment firm YouWeCan Ventures which invests in early-stage businesses. The cricketer, who battled a rare form of lung cancer in 2011, launched the YouWeCan Foundation to invest in cancer research.
Yuvraj announced in early 2015 he would invest Rs 40-Rs 50 crore over the next three to five years in startups. Online beauty services venture Vyomo, logistics startup Moovo, healthcare startup Healthians, edtech startup Edukart, and online marketplace to charter private jets JetSetGo are some companies that are a part of YouWeCan Ventures’ portfolio.
When YourStory spoke to Yuvraj earlier this year, he said, “When you are an entrepreneur, you have more opportunities in life. You look at different aspects of life, of leadership and creating a good working environment.”
The oft-asked question when one hears of a celebrity investing in a startup is why not stick to traditional or safer bets such as real-estate, stocks and shares and even bullion, instead of a risky investment.
A Harvard Business School study shows nine out of ten startups fail, and close to 50 percent wind up operations after five years of starting up, and 70 percent after 10 years.
Yuvraj says that the business aspect is an extension of cricket, and explains, “I played cricket and I started my own NGO for cancer. For the NGO, I had this brand. So, it is all an extension of me. It comes to me naturally. It sends a good message to the community, and I would always like to pursue that.”
Most celebrities invest in companies that usually synergises with their profession. As an actor, entrepreneur, augmented reality (AR) and virtual reality (VR) enthusiast and producer, Rana Daggubati is a multi-faceted personality who juggles different roles with consummate ease.
In the course of different conversations with YourStory, Rana Daggubati had mentioned that while he is a technology enthusiast, he would like to invest in startups that have synergies with the work he does - primarily storytelling.
“Why not? I am very proactive about being enabled and giving opportunities and a platform for people to grow. We have lot of talent that needs to be nurtured. So if I find something that I believe in, I would invest my efforts and money. It could be startups, or it could be on the lines of sendmygift.com,"
Hrithik Roshan said after the launch of an ecommerce marketplace for gifting in Bengaluru.
Vinod Murali, Managing Partner, Alteria Capital, a debt-financing fund, has funded venture debt of Rs 30 crore to Universal Sportsbiz and Rs 8.5 crore to Fingerlix, both consumer firms. He believes many large family offices and individual investors have started building their ‘alternative’ investment philosophy, which includes funding startups.
He explains that whether the investors are celebrities or not, the intention is to have diversified asset allocation. In some instances, there are easier structures which allow them to invest, like in the case of furniture rentals businesses where there are periodic cash flows and the lock-in periods are not too long.
There is also the model of sweat equity for endorsements, or revenue participation with the brand where celebrities opt for such structures when there is a high level of resonance with the brand or business.
Typically consumer/retail businesses are attractive as it involves strong brand creation and positioning which is ideal for sports or movie stars.
“One of the companies I have funded is Universal Sportsbiz which has done a fantastic job of aligning brands with celebrities, ensuring a strong product proposition with a high level of differentiation,” says Vinod.
It is important to have similar characteristics for brand identity as well as celebrity endorsement to ensure the audience does not have any dissonance. So Indian cricket team skipper Virat Kohli, known for his aggression both off and on field, and WROGN go well together, given the personality and brand positioning involved.
But whatever be the positioning or strategy, one thing is clear. Celebrities get the real picture in business too!