BENGALURU: Amid funding winter, start-ups in various sectors such as fintech, space, SaaS and AI have been receiving investments not only from venture capital and private equity funds but also from celebrities.
From cricketers to Bollywood stars, many have turned into investors and brand ambassadors. Last month, food brand Pluckk announced that actress Kareen Kapoor Khan acquired a stake in the start-up. This is Kareena’s first investment in this space. Cricketer Hardik Pandya last month invested in kids’ footwear start-up Aretto.
Start-up founders say celebrities create brand awareness. After roping in Kareena both as an investor and brand ambassador, Pluckk has seen its organic traffic moving upward, leading to an increase in sales. “As a mom herself, we feel it has created a positive reinforcement of our brand values,” Pratik Gupta, CEO and co-founder, Pluckk, told this newspaper.
This kind of initiative allows a brand to leap out from the crowd, and the right endorsement can add value as it is synergistic. “We have now a voice that will help get our story and value proposition across to a large audience, which will certainly create both intangible and tangible brand value,” Gupta adds. Will she be a part of the decision-making process? Gupta says, “In order to succeed and propel Pluckk forward, we will be working together on key Pluckk initiatives that will further add value to Indian families.”
A month ago, it was said that Reliance Brands was reportedly in talks to acquire actress Alia Bhatt’s children’s wear brand Ed-a-Mamma. Apart from this, Alia has invested in a sustainable baby and mom care brand SuperBottoms.
As per Tracxn, 28 celebrities including Sachin Tendulkar, Virat Kohli, Shilpa Shetty Kundra, Anushka Sharma, Shraddha Kapoor and Ranveer Singh, among others, have invested in 73 start-ups including the recent investment in Pluckk.
Though a few celebrities turned angel investors quite early, data sourced from Tracxn reveal many celebrities started investing actively in start-ups since 2020, and in 2022 alone, they have participated in 30 funding rounds.
Shetty has invested in start-ups such as Mamaearth, Fast&Up, Chicnutrix and Kisankonnect. She started investing in Mamaearth in 2018. Tendulkar has invested in companies including Spinny and Azad Engineering. In 2021, he invested $2 million in digital entertainment tech company JetSynthesys.
Cricketer MS Dhoni backed plant protein start-up Shaka Harry and picked up equity in it. “When celebrities choose to invest, they bring their reputation, influence, and network to the table. This can result in increased brand recognition and value, attracting attention from stakeholders including industry talent, distributors, retail partners, and customers. Celebrities’ involvement can offer start-ups a unique platform to showcase their offerings and stand out in a competitive market,” said Anand Nagarajan, co-founder and CEO, Shaka Harry. When asked about returns they receive, Nagarajan said returns on celebrity investments in start-ups can vary based on the success of the business, market conditions, and other factors.
Celebrities often participate alongside institutional and angel investors, and the returns can range from moderate to significant, depending on growth trajectory and exit strategy. They have invested in sectors from consumer, retail, fintech, health tech to edtech, blockchain technology, aerospace and media, among others.
“Returns seen have been in the forms of deferred payouts, as well as equity. The deals are structured in innovative ways, which help start-ups manage cash and celebrities can expect good returns,” said Shravan Shetty, MD, Primus Partners.
If the start-up see rapid growth, attracts a large customer base, and achieves a successful exit via an acquisition or IPO, the celebrity investor could realise significant returns on their investment.
“Some start-ups may achieve moderate success and growth without becoming unicorns. In these cases, celebrity investors might see positive returns, though they might be more in line with market averages. Not all start-ups succeed, and there’s always a level of risk involved in investing in early-stage companies. If a start-up fails to gain traction or faces challenges that lead to its closure, celebrity investors could see losses on their investments,” said Somdutta Singh, founder and CEO, Assiduus Global Inc, LP Angel Investor.
While celebrity investments can bring advantages such as enhanced brand recognition and value, there are certain considerations too. “Start-ups must ensure the celebrity’s values and image align with their mission and target audience. In some cases, negative public sentiment associated with a celebrity could impact the brand’s reputation. Start-ups should not solely rely on celebrity endorsements or investments; the core product or service quality remains paramount,”
Nagarajan said.
Start-ups have a high failure rate, and celebrity investors are not immune to this risk, say experts. “Despite success in their respective fields, celebrities might lack expertise in start-up business. This can lead to challenges in providing strategic guidance, which is something start-ups often seek from their investors.
Conflicts can arise if the celebrity’s involvement begins to overshadow the start-up’s core mission or if disagreements arise over key decisions,” said Singh.The legal and contractual aspects of celebrity investments can be complex. Both parties need to have a clear understanding of the terms, expectations, and rights, he added.