Beyond a glam connection – How celebrities are fueling the start-up ecosystem
When Falguni Nayar debuted Nykaa’s IPO on the bourses, standing next to her, and grabbing a fair share of the media attention, was actor Katrina Kaif. But Katrina’s presence during the event was not just a glam addition to the proceedings, she is also an investor in Nykaa. And so is actor Alia Bhatt.
The start-up ecosystem in India has been quite robust in recent times and the global pandemic has failed to slow down their growth, if anything, we, in fact, saw an acceleration with quite a few new start-ups being launched during this period and also several Unicorns emerging from their midst.
The atmosphere for start-ups has been very conducive for the last few years, with the Government of India giving further impetus to entrepreneurs in the form of a Startup Seed Fund and ease of doing business. Investors and venture capitalists have also been generous enough with infusing funds to grow the fledgling ventures.
According to a Financial Express report, start-up funding has touched a new high in the year 2021. In addition to the huge venture capitalists, the institutional investors and the pension funds are also investing in many new online businesses. In the Jan-March 2021 period alone investors have infused around $4.4 billion into Indian start-ups and this amount is 26% more than the investments made last year in the same quarter. The top gainers in the funding deals are the Fintech and Financial Services companies (123), followed by Retail and E-commerce companies (99) and EdTech companies (84). This shows that even after the turbulence due to the COVID-19 pandemic in India, the start-ups have found a way to stay aloft.
Among the growing crop of investors in start-ups are sports stars and celebrities from the film world. Over the years, we have seen famous names like Amitabh Bachchan, Sachin Tendulkar, Yuvraj Singh, MS Dhoni, Madhuri Dixit, Akshay Kumar, Virat Kohli and Deepika Padukone, to name a few, who have actively invested in start-ups. When celebrities invest, they generally look at products and services which are innovative and have the potential to grow. Generally, most of them eye the technology space, which is addressing Gen Next’s needs.
MS Dhoni launched Run Adam, an analytics-based sports technology platform, to connect athletes with resources such as coaches, sponsors, etc. According to reports, Dhoni said, “Run Adam will play a significant role in aspiring sportspersons’ life to help achieve their dreams. I have faced challenges during the initial stages of my career and I see Run Adam filling a vacuum.” He has also taken up equity in Homelane Interior.
Similarly, fellow cricketer Yuvraj Singh invested in Healthians, a Gurgaon-based health-tech firm, through his venture capital firm YouWeCan in the year 2015. Besides this start-up, the stars from the cricket world also made investments in beauty and wellness app Vyomo, JetSetGo - the marketplace for private jets, and Moovo, a technology-based booking platform for mini-trucks.
Amitabh Bachchan and his son Abhishek Bachchan have invested around $250,000 in a Singapore-based blockchain research start-up, Ziddu.com. Ziddu.com is a cloud service provider, which provides free file hosting in the cloud.
Start-ups like Digit, Supertails, Bumble, Phool.co, GOQii, Homelane, etc., have received heavy investments by big guns of the sports and entertainment industries. Digit, an insurance company, received Rs 2.5 crore from the celebrity duo of Virat Kohli and Anushka Sharma and now stands at a valuation of Rs 26,060 crore, making it the first unicorn company of 2021. Along with Nykaa, Alia Bhatt recently invested in a flower recycling start-up, Phool.co.
The stars and start-ups
Speaking about what drives celebrities to invest in start-ups, Himanshu Arya, Founder & CEO, Grapes Digital, explained, “It is quite evident that many stars are investing in the start-ups that they believe in. The foremost reason driving celebs towards the start-up ecosystem is that they don’t want to limit themselves to acting and hence, diversifying their portfolios gives them recognition and new ways to make money. They take it as a true business opportunity and put in the time, effort and resources required to build the company.”
When well-known figures show interest in a firm, it adds far more value to the brand than simply having a major figure come on board as an ambassador. It raises others’ confidence more than anything else since it reassures existing investors of the growth story they anticipated and thus engaged in, and it also aids potential fence sitters in making up their minds by making the brand more marketable and increasing awareness.
Talking about the reason for this investment buzz, Amit Purohit, Founder, Fantasy Akhada, opined, “We believe the prime reason why we see more of these big engines take interest in start-up investments is the need to diversify their portfolios. This diversification opens doors for them to have a few punts in their armoury, which could potentially help them get a much bigger upside than their other safe investments in play. Additionally, this is a good ideology to have some skin in the game in businesses which appeal to them, but paucity of time means their inability to manage/ run/ lead such ideas full time.”
Start-ups encourage more celebs to be the Brand Investor rather than the Brand Ambassador. This appears to be a tactic that has grown in recent years, with an increasing number of celebrities seeking ways to get their hands in the start-up game and support their sponsored companies by owning a piece of the pie, rather than opting for an all-cash transaction. Start-ups who are raising a lot of equity or capital can only afford to pay so much in cash. The rest has to be in the form of equity. And that’s the real driver behind celebrities joining as brand ambassadors or investors. While start-ups do have cash, they don’t have a whole lot of it which is liquid, especially if they are going after large celebrities. So, some choose to pay partly in cash and partly in equity.
According to Varun Sadana, Co-founder, Supertails, “Using the power of investment and the power of brand are two different decisions for a growing start-up. For a young start-up, using the power of money comes before using the power of branding and both are crucial at different stages of growth. A celebrity being a ‘brand investor’ blends this by bringing together the same credibility with business growth and brand growth.”
When a celebrity invests in a start-up, the investment leads the brands to have better marketing, valuation and a rise in stock value. Explaining this, Srikanth Iyer, CEO and Co-founder, HomeLane, remarked, “When a celebrity is investing in a start-up, he or she is looking at signing up with a brand for at least a medium term. They aren’t necessarily looking for a single year engagement, but rather a minimum of 2, 3 or 4 years. And during this time, they help the start-up raise more money and get more visibility. In other words, by being the face of the company and helping the brand grow, they are, in fact, helping themselves because they too are shareholders of that brand.”
“And in that time period, the celebrities are looking at increasing their value in the company as well, making their share price go up from say ‘x’ to ‘3x’ or even ‘4x’. Lending their image and credibility will benefit them as well,” Iyer further added.