The Celebrity Investment Boom in Startups and Crypto
In the past, celebrities usually grew their wealth and status by acquiring real estate, opening restaurant chains, or launching fashion lines, but today’s celebrity is more likely to purchase cryptocurrency or invest in a high tech startup. Data provided by PitchBook has shown that celebrity investors are targeting innovative, emerging industries like tech and crypto, for a variety of reasons, from personal preferences to smart investment choices that diversify a growing portfolio or make good profit.
Celebrity Investment Is on the Rise
Although a select group of celebrities have already been investing in startups for a long time, the last five years have seen a boom in the number of famous people from the worlds of music, movies, sport, and fashion who have invested millions of dollars in the tech startup sector. There are now even businesses that specialize in connecting celebrity investors with startup opportunities, while some celebrities have started their own venture capital funds, and a few have created their own tech startups.
Since the start of the pandemic in March 2020, the crypto market has also seen strong and consistent growth. Cryptocurrencies have become extremely popular investments and not just for individual investors. The crypto market has been flooded with institutional investors in recent years, with hedge and pension funds, endowments and banks all climbing on board. Celebrity investors are also looking to ride the crypto bandwagon by backing new coin that could either deliver huge returns or become the next meme stock.
Celebrity Investment in Startup Companies
Considering this particular interest in tech startups and crypto, it is important to look at the role celebrity endorsement plays and the effect it has on these markets. Celebrities certainly have more flexibility to take risks without affecting their primary income streams, unlike mainstream venture capitalists whose careers and reputations are negatively impacted if the startups they invest in fail. Beyond the potential profit to be made, personal branding is also a factor for people in the spotlight. Being involved in tech has become a status symbol, leveraged by some celebrities to demonstrate their relevance, brand themselves as more than just a movie star or athlete, and align the startup’s targeted consumer with their already existing followers.
One of the most active celebrity investors this year was actor and former biochemical engineering graduate, Ashton Kutcher, who backed at least 13 different companies in 2021. A long-term angel investor, Kutcher’s previous activity in companies like Uber, Spotify, Airbnb, and Skype already turned a $30 million investment into $250 million. In 2010 he co-founded tech-focused VC firm A-Grade Investments before founding his own investment firm, Sound Ventures, in 2015.
Some celebrities pursue a passion or a commitment to a cause, such as Oscar-winning actor Leonardo Di Caprio. Already outspoken about climate change and clean energy, Di Caprio has also been a keen startup investor for over a decade. He holds an undisclosed stake in Polestar, the electric car company that is backed by over $600 million from Volvo, and he was an investor in Beyond Meat before the company went public in May 2019 for $241 million.
The Fame Effect in Existing Markets
The potential impact of celebrity involvement in cryptocurrencies deserves particular attention. A study from Yale and the University of Rochester recently highlighted how the price of crypto assets is not linked to financial performance but primarily driven by two other intangible and volatile factors — trading momentum and investor attention. Celebrity influence in this sector can change the market overnight, as evidenced when meme coin Dogecoin became the 12th most valuable crypto by market capitalization, after Tesla CEO Elon Musk published one single tweet about it.
Similarly, Donald Trump’s new media venture is expected to radically reshape the social media environment when it launches its new app, Truth Social, later this month. In October 2021, the Trump Media & Technology Group, TMTG, agreed to merge with blank-check firm Digital World Acquisition Corp at a valuation of $875 million. Since then, Trump supporters and retail investors have snapped up Digital World stock, betting that Trump’s continued popularity with his Republican political base will turn into a commercial runaway success. TMTG is currently valued at $4.3 billion.
Celebrity involvement evidently has important consequences, not just for startup growth but also share prices and entire markets. Nowadays, celebrities are becoming investors and many investors have assumed the role of borderline celebrities. As the line between fame and business becomes increasingly blurred, it is essential that we investigate and understand the effects of celebrity involvement in the startup space.
