The Celeb Quotient

Start-ups have found themselves a whole new group of investors. And we're not talking private equity (PEs) and Venture Capital (VCs) here, but Bollywood stars. Gone are the days when brands signed on celebrities as ambassadors to endorse their platforms, products or services. Now, start-ups are reiterating their celeb quotient by welcoming actors as strategic investors. Very recently, Shilpa Shetty Kundra came on board as an equity investor in New Delhi-based mother and childcare brand Mamaearth.

According to Varun Alagh, co-founder of Mamaearth, Kundra has a very strong and credible voice of her own as a mother, wellness ambassador and nature enthusiast. "And this we believe will help spread our brand message and purpose to millions of consumers. Having her on our side will give us a springboard in terms of brand growth," says Alagh.

Speaking of her investment in the start-up, Kundra feels the brand Mamaearth is the future and very relevant for today's India. "Parents like me are always looking for the best in quality products for their children which are safe and legit. The Mamaearth philosophy, especially the use of natural and non-toxic, chemical-free products, resonates perfectly with my green ideology as this does impact our lives in the long run."

Kundra's investment, an undisclosed amount, closely follows that of other celebrities who have taken on the avatars of start-up investors.

Last year, actress Jacqueline Fernandez invested Rs 3.5 crore in the cold-pressed juice brand RAW Pressery while Alia Bhatt picked up a minority stake in fashion tech start-up StyleCracker. Cricketer Yuvraj Singh, meanwhile, through his investment fund YouWeCan Ventures, invested an undisclosed amount in the co-working start-up Gurukul and in the start-up solution provider Startup Buddy Services.

Celeb start-up investors like Amitabh and Abhishek Bachchan have also reaped rich returns on their investments. The father-son duo who had invested Rs 1.6 crore in 2015 in a cryptocurrency firm Meridian Tech Pte, reportedly made a cool Rs 112 crore by 2017 end.

In a celeb crazy country, there is a great demand for celebrity invested start-ups, say experts. Indeed, enhancing the brand image and equity of the start-up (like in case of Mamaearth) is a key reason behind seeking investment synergies with a celebrity.

Says Nandu R Kumar, founder and CEO of law firm Spice Route Business, "Investments from celebrities, unlike product endorsements, are not paid arrangements. Getting an investment from the right celeb investor can be extremely lucrative for start-ups. Besides the investment money, the start-up will get a mix of other intangibles to give them the competitive edge."

Start-ups that have a celeb investor benefit from the star's brand value, audience reach, and resources, says Ashish Sharma, CEO, InnoVen Capital, a venture debt and lending platform.

Unlike signing on celebs as ambassadors, which are purely commercial arrangements, when a celeb invests, if often means they are real believers in the brand, consume the brand and feel that the venture has huge potential, explains Sharma.

"The celeb as an investor will be more involved in promoting the brand as an influencer,'' says Sharma.

Experts feel that start-ups which evolve from mere ventures providing a product or a service, to a strong brand that resonates with the target consumers, have a much higher chance of success. And celebrity investors play a crucial role in the transformation of a start-up into a brand of high recall value. Such a firm addresses the ambitions and desires of consumers and fits seamlessly into their lifestyles, point out experts. "With a celebrity as a key stakeholder, the start-up's brand image can be tailored around the celeb's personality. From products and design language to brand positioning, everything can revolve around the celebrity in question. This makes the start-up and its offerings more authentic," says Abhishek Verma, CEO of Mojostar, a celeb-driven house of brands.

Experts say the trend of celebs as start-up investors is still at its nascent level in India. In the West, stars like Ashton Kutcher, Leonardo DiCaprio, Madonna, Justin Bieber have all made substantial investments in start-ups like Uber, Airbnb, Mobli, Vita Coco, Spotify, etc.; all of which are now globally recognised.

Verma says that when celebs invest and help to co-create brands, they are much more committed to driving growth and are involved hands-on in the go-to-market strategies, product design, etc. "All of this certainly increases prospects of long-term growth and success for the start-up," says Verma.

While the stars who invest, also stand to gain. "The celebs can look to fully exploit their brand value and generate greater returns through their deeper involvement in brand building," says Sharma.

However, there is a major downside to celeb investors. Kumar says that seasoned investors bring in tons of exposure to the business and come with their industry contacts and experience from prior investments. "The experience of veteran investors plays a major role in future deal-making at startups. Celeb investors often fall short of these traits," says Kumar.