Some might snicker upon hearing that Disney singer/actress Selena Gomez has Angel invested in a photo app but I think it’s great and makes total sense. The trend of ‘celebrity angels’ doesn’t surprise me at all and with correct expectations on both sides, it can be a clear win-win. Why are we seeing celebrities become more involved in tech investing?
1. Technology is approachable & hot
We forget that any celebrity under the age of 30 isn’t too different from any of us. They grew up in a world of mobile phones, game consoles, the Internet, etc. They are digital natives who use technology as professionals and people. Investor Peter Lynch once suggested that most of his great ideas came from walking around a mall and seeing where people were shopping. Well, celebrities are much the same way – they see what technologies their fans are using, their managers are showing them the latest and greatest, companies are sending freebies. I’d be more skeptical if Justin Timberlake was studying up on currency hedging than believing he has an insight or two into how to turn around MySpace.
2. Celebrities now have direct connections with their fans
Before Facebook, Twitter, Google+, etc brand endorsements by celebrities essentially meant a TV commercial or billboard featuring the face of a movie star or musician. The conversion event (buying the product) was still separated from the advertising – you needed to later decide to drive to a store and recall that Halle Berry thinks Revlon is swell. Now an influencer can often drive a conversion event directly and efficiently through social media. A tweet from a celebrity drives more product trial than an article in a major newspaper. It’s the new PR, the new sales channel. And celebrities are empowered like never before to directly build and talk to their audience. So for products they believe in why not move upstream and invest in the entity itself. Sort of like musicians wants to own their recordings, not just get paid by the record company.
3. Traditional investments suck
Any time you are looking at a possible investment you need to judge the opportunity cost – what else could you be doing with that money. In general, traditional investments like stocks have been risky and returning lower than historical rates. Just as pension funds seek to diversify into alternative classes such as venture capital or private equity, celebrities are thinking the same. I wouldn’t be surprised to hear that there has been an increase in venture funds bringing on celebrities as LPs. And clearly these angel investments – often at preferable terms due to the value they can bring above and beyond the money – round out a portfolio.
So long as celebrities are willing to work on behalf of their investments (like every other angel!) this should be a sustainable trend. What do you think? will celebrity investing pan out or is it just a bubble?