Why Most Celebrities (Hollywood, Professional Sports, Music Stars) Suck as Startup Investors

Clearly I am generalizing. The examples of Ashton Kutcher, Joe Montana, Troy Carter, Nas, Serena Williams & various folks from the Golden State Warriors are effective counterpoints. All are super savvy individuals who have also built ties and have incredible mentors from Silicon Valley. Each one is an exemplar in tech investing and probably have better portfolio companies than me. But I would argue these are the exceptions.

If you look at the majority of celebrity investors, due to the mindset of where they come from, it’s almost always short term & opportunistic (ahem Chainsmokers & Manny Pacquiao). This is contrary to the mindset needed for tech investing where the time horizon could be up to 10 years.

Not a surprise when they come from industries where fame & influence tends to be short. Perishable might be a better word. That’s why it’s common when you see stars hit the big time, they start to cash in on this. All of sudden you see them doing all these random sponsorship or licensing deals with all types of random products. This is called the “great cash grab” to monetize as much as you can while you can. Fame & Influence is fleeting in that world, so this is a very logical behavior. This is not a value judgement, but an observation. If I were in their shoes, I would do the exact same thing.

Additionally, a big driver for this movement into Tech is that it is (or was) very hot. Nothing motivates someone more than seeing their peers make money in something. Also its sign of coolness, so why not. Hence the dabbling.

For the record, it’s not a bad thing to take a celebrity’s money as a startup. It actually makes A TON of sense if you are running a Media startup, Direct to Consumer or Consumer brand focussed biz or something related to Hollywood, Sports or Music. But outside of this, not sure they can add a lot of value to other sector startups.

So if you do take money from them, just make sure you manage expectations clearly with them. They are dabblers and may not understand how long it will take to get liquidity (if any).

Manage your own expectations as founder on what these celebrities will be able to contribute. They all have busy careers in other realms, so your startup is most likely not a priority. The famous poet Ehsan Sehgal said: “An opportunist runs away and disappears if it fails it’s targeted opportunity. ”

Just remember these folks are tourists, not settlers in our world here, so word to the wise :)

PS: Most Investors, Angels and VCs suck too. It’s called Pareto’s Law. But they underperform for a multitude of other reasons which go beyond a short blog post.

Ever curious: Tsundoku, Reader, Aspiring Shokunin, World traveller, Investor & Tech/Media exec interested in almost everything! www.marvinliao.com

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