Will.i.am, Tom Odell and Jay Z are joining startups’ world
Read full story in the new issue of Money Of The Future 2016\2017 report
New digital banks turn to celebrities to boost sales — singers Will.i.am and Tom Odell show interest in UK fintechs. Rapper Jay Z is putting his money to work in start-up and technology investing. By setting up a firm, Jay Z joins a growing crowd of celebrities that are bringing their brand to the tech world. Ashton Kutcher, Kobe Bryant, Lupe Fiasco, Robert Downey Jr. and Justin Bieber and about 10 celebs more have also done technology deals.
Jay Z, also known as Shawn Carter, will partner with venture capital firm Sherpa Capital, which has invested in companies like Uber, Airbnb and Slack. The “99 Problems” singer — who is married to pop star Beyonce — is no stranger to the business world. Jay Z’s entertainment company, Roc Nation, has made some investments in tech startups such as private-jet rental company BlackJet and French audio equipment company Devialet, according to Crunchbase. Jay Z will partner with Roc Nation president Jay Brown for the new fund, the report says. On top of Roc Nation, Carter has invested in Uber and music streaming service Tidal.
Two of the UK’s new digital banks are bringing on board celebrities and raising millions of pounds from investors in an attempt to boost scale and appeal to millennial customers. Monzo and Atom are among a new breed of app-based banks that are focused on customers who want to manage their finances via their mobile.
Monzo, an app-based bank that gained its licence from financial regulators last year, has raised £19.5m from a group of investors, paving the way for the launch of its current account in the summer. The mobile-focused bank is also set to raise money from angel investors in the next few months, which could include British singer Tom Odell, who is also a customer of Monzo, according to a banker close to the plan. As well as raising money from institutional investors Monzo is targeting £2.5m in crowdfunding from its customers. Tom Blomfield, chief executive of Monzo, expected that 4,000–5,000 people would be able to invest in the latest crowdfunding round. He is aiming to turn Monzo into the main port of call for customers to manage their money. It will initially launch a current account, and will then connect with a range of companies, such as other banks, so that customers can change their energy bills or obtain a mortgage through the app. “A customer might have 10–15 financial services providers, and wants to control them through one interface — Monzo is building that interface,” Mr Blomfield said.
Monzo has closed £19.5 million in Series B funding — the second injection of institutional money — and is planning to raise a further £2.5 million through crowdfunding. The £19.5 million has been raised from New York-based Thrive Capital, with participation from longtime Monzo backers Passion Capital, and Orange Digital Ventures, the VC arm of telecoms network Orange. The funding values the two-year-old business at £65 million pre-money. Monzo is returning to Crowdcube for its £2.5 million crowdfunding campaign, opening pre-registrations for potential investors from February 28 to March 14. Investors will then be given the opportunity to invest through a random ballot. Last year investor demand was so great that Monzo — then known as Mondo — raised £1 million in just 96 seconds. Blomfield told BI that the total £22 million is “the big chunk of cash needed to launch the bank.” Monzo gained its banking licence last August and Blomfield told BI last year that the startup would have to raise at least £15 million to get certain operating restrictions lifted. Monzo employs a team of 80 people in London that Blomfield expects to rise to over 100 by the end of the year. While some of the money raised will satisfy banking capital requirements, Blomfield says “most of it is for operating expenses.” The startup is currently trialling current accounts and overdrafts internally and plans to begin transferring its existing customers — over 100,000 who are on pre-paid cards — to current accounts shortly. New customers should be able to sign up for them by the summer. By the time Monzo’s latest crowdfunding campaign completes, the startup will have raised £35 million since launching in February 2015.
Another app-based lender, Atom, which launched last year, is finalising a capital raising of about £100m from existing investors — and has signed a deal with record producer and singer Will.i.am to act as an adviser. Will.i.am is expanding his CV in a perhaps unexpected direction, striking a consulting deal with Atom Bank which could see him take a multimillion pound stake in the fintech firm. In return, Will.i.am will have the option to acquire up to 3.55m shares in the digital bank at £1.15 each during a three-year period. Will.i.am’s new role at the digital-only bank, which officially launched last October, will include taking part in public relations activities, attending board meetings and publishing social media posts about Atom.
Sources said that Atom had received commitments from existing investors BBVA, Woodford Investment Management and Toscafund to inject a further £78.5m into the company, with discussions continuing with other institutions about raising roughly £20m more. That investment is expected to mean that BBVA, one of Spain’s biggest lenders, would own more than 30% of the company — a level that would usually trigger a mandatory offer for the remaining shares under the UK’s takeover code. The company, whose chief executive is Mark Mullen, the former boss of First Direct, said in December that it had taken more than £110m in deposits across its fixed-rate saver accounts. It intends to diversify into mortgage products in the coming months. Headquartered in Durham, Atom now employs more than 250 people.
Read more: Neobanks across the world raised more than $300M
TV star Ashton Kutcher and Madonna and U2 manager Guy Oseary teamed with billionaire Ron Burkle to turn $30 million into $250 million with investments like Uber and Airbnb. Ashton Kutcher, one of the world’s highest-paid TV actors, can obviously afford that most essential of Los Angeles celebrity luxuries: a car and driver. But he still prefers Uber. Five years ago he and Oseary invested $500,000 in Uber — that stake is now worth 100 times what they paid.
Kutcher’s and Oseary’s portfolios, which number more than 70 investments combined, include a roster of grand slams way past Uber — Skype, Airbnb, Spotify, Pinterest, Shazam, Warby Parker — with valuable startups like Zenefits and Flexport still gestating. Except that a slew of self-made billionaires — including Ron Burkle, Eric Schmidt, Mark Cuban, David Geffen and Marc Benioff — gave them millions from their personal stashes to invest. And while those five have all been known to enjoy the taste of fame and glitz, a decidedly more staid backer, Liberty Media, recently tossed them $100 million to put to work — and to do so without Burkle, who until now has partnered actively with them.
Over six years they’ve turned their $30 million fund into a cool $250 million. The guy who until recently starred in Two and a Half Men has generated almost 8.5x. “If you can routinely return 3x, you’re considered one of the best VCs,” says Marc Andreessen, a Midas List regular who’s raised more than $4 billion over the years with his firm, Andreessen Horowitz. “If you can return 5x, it’s considered to be a home run. I took my math classes: 8x is seriously higher than 5x.” Andreessen invited him to plow $1 million into Skype in 2009. When Microsoft bought the company 18 months later, Kutcher’s outlay quadrupled in value. He was hooked. More important, he impressed his new friends in San Francisco, who were still recovering from the Great Recession.
Read more: “I am running a fintech VC without any finance or PE background — and who cares?”
Andreessen isn’t alone in his appreciation. Talk privately with the heavies in Silicon Valley who have spent time with Kutcher and Oseary and watched them in action, and you hear and see the same story: These guys are legitimately smart. No “for Hollywood types” caveats. Their surprising success underscores two universal truths: how simple it is to manage other people’s money and how hard it is to do it well.
Everything about Kutcher’s journey has been intuitive. Born to middle-class parents in Iowa, he didn’t grow up with any business know-how or lessons other than the most important: a strong work ethic. He was working construction with his dad by age 10; in high school he had a series of odd jobs, including janitor, butcher and factory worker at General Mills. The brains were always there: When he enrolled at the University of Iowa, he planned to major in biochemical engineering — until he won a modeling competition, dropped out and moved to New York, then Los Angeles.
He learned his lessons well. Kutcher is fluent in the language of tech startups, and it isn’t just token jargon. At a private dinner at the Forbes Under 30 Summit last year, Kutcher spent a half-hour leading a vigorous debate with a bunch of media heavies on the correct ratio to optimize Web traffic and digital advertising revenue. He is, in essence, the football jock who started hanging out with the math nerds and eventually demonstrated that he was one of them. “Once you learn how to identify a snow leopard,” says Kutcher, “it’s pretty easy to see a snow leopard coming along.”
Oseary, meanwhile, was undergoing a similar metamorphosis. Born in Israel, he moved to Los Angeles at 8 and ended up at Beverly Hills High School, where he started managing small-time hip-hop acts and mingling with the children of Hollywood power brokers like Freddie DeMann. The music manager hired a teenage Oseary to work for him at Maverick Records, the label he cofounded with Madonna. Through the mid-1990s Oseary rose from talent scout to chairman, overseeing a roster that included Muse and Alanis Morissette. “A lot of what I do now is very similar,” he says, “which is trying to identify talent and then help them market their music [and] their vision.”
Kutcher leveraged his massive social media influence — he holds the distinction of having the first Twitter account ever to top 1 million followers — to drive viewers to their portfolio startups. Kutcher’s career turn began attracting attention, albeit as a novelty. (The New York Times dubbed him a “handsome ditz” who “mastered the utopian lingo of Silicon Valley.”) He was most often lumped in with other celebrity investors, the likes of Justin Bieber and Lady Gaga, who knew enough to listen to their managers but not much more.
“There are a lot of celebrity ‘tourists’ in our industry these days,” says billionaire investor Chris Sacca, who graced the cover of last year’s Midas List issue. “Famous people lurking around trying to get a piece of the pie but without bringing any value to the table. For Ashton in particular it’s been a daily commitment to tech for at least eight years now.”
In 2011 Kutcher, Oseary and Burkle put $2.5 million into Airbnb, a stake now worth about $90 million. They also placed $500,000 in Uber — one chunk via Sacca’s Lowercase Capital, which got in at seed stage, and another directly in later rounds — now worth north of $60 million. “Every single person in our portfolio has our personal phone numbers,” says Kutcher. “They can call us at any point in time, 24 hours a day, whatever it is.”
Read full story in the new issue of Money Of The Future 2016\2017 report