Meet The Special People Helping Celebrities Invest In Startups
The New York Times has located a new breed of hustlers trying to convince Hollywood celebrities to make money off startups instead of traditional endorsement deals. It's not even a hard sell, according to Timothy Karunaratne: "I think it's a fair statement to say most people would rather be Mark Zuckerberg than Will Smith."
Despite that dubious assessment of humanity's hopes and dreams, Karunaratne, founder of The Startup Agency, is one of many networkers leveraging the desire for 50 Cent-style payout, but from little known quasi-technology startups.
Now some celebrities — both established and up-and-coming — are lavishing their promotional love on start-ups rather than big brands. Often, those deals involve equity. In exchange for a small percentage of a company, a celebrity investor agrees to provide publicity, feedback and valuable connections. Celebrities who have taken this route include Ashton Kutcher, Tyra Banks, Bono and Drew Barrymore.
There's another misleading statement, after all Kutcher is a prolific investor through A-Grade Investments and Bono is a cofounder of Elevation Partners, which has invested in Facebook and Yelp. Their respective talents as financiers aside, both have the counsel of people who know what they're doing (if you consider venture capitalists to be people who know what they're doing). Nonetheless the Times seems hella bullish on the upside:
With equity, of course, there is a risk of losing money. But if a celebrity picks a company that turns out to be a hit, it's a gift that keeps on giving, unlike most endorsement deals. And investing in a start-up generally requires less legwork than, say, starting a clothing line or opening a restaurant — other celebrity pet projects.
Okay now that is a wildly misleading statement! Equity does not keep on giving. It gives once if the startup you back has an exit and that's a big if—that is unless it's Facebook stock, you have a ton of it, and you sell it off in batches.
But people like Karunaratne, a Goldman Sachs i-banker turned William Morris mail room guy, help lessen the light "legwork," says the Times. The paper also points to Anjula Acharia-Bath. She used to work at the Forsyth Group, an executive search firm for startups before becoming CEO of DesiHits, "which connects Hollywood producers with South Asian stars."
Both seem to be angling to become the next Shervin Pishevar, an Uber investor and pioneer in the bringing-celebrities-into-startup-deals space.
Karunaratne says he "linked" Kutcher with a startup called Gyft. He also linked Janina Gavankar, the actress from The League and Debra Messing's new show, with the Hunt, where singer and and actress Christina Milian is also an investor. Acharia-Bath connected Siva Kaneswaran, member of the British boy band The Wanted, with a company called the Muse.
Based on those examples, it seems like the equity is being offered to people who might not otherwise secure an endorsement deal. Not a bad side hustle if your expectations are reasonable. However, according to the Times:
Ms. Acharia-Bath finds herself fighting the expectation that every start-up will have a Hollywood ending, with a heady initial public offering and huge payouts.
"Now people are so savvy about big exits to the point where it's unrealistic because everyone thinks everything will be like Facebook or WhatsApp," she said, referring to Facebook's recent acquisition of WhatsApp, the messaging platform, in a deal worth as much as $19 billion.
Can you name the CEO of Gyft, The Hunt, or The Muse. Can you name what those startups do? If not, they're probably more the next Blackjet than the next WhatsApp.
Update: Kathryn Minshew, CEO and founder of the Muse, reached out to Valleywag to shed some light on her cap table:
Just to clarify, Siva from the Wanted & Tyra Banks both invested in The Muse (formerly The Daily Muse) as normal investors — no special equity provisions - and they've been great to have on board. That said, I can see how the NYT piece gave a different impression, and I can't speak for the other founders/investors mentioned.
To contact the author of the post, please email nitasha@gawker.com.
[Image via Associated Press]