Hollywood's Hot New Job: Startup Investment Specialist
"Before, they were just winging it," says one adviser helping savvy stars sink money into the next (hopeful) Uber or Airbnb as even traditional reps look far beyond showbiz.
Celebrities have flocked to startup investing over the past few years like it was a new kind of California gold rush. But after more than a few busts, Hollywood is undergoing a transformational change in how it approaches investments to ensure that the opportunities don't dry up.
As stars maneuver to make more strategic investments, their advisers are rising to meet that demand. Agencies are bringing investment deals to clients, reps are boning up on Silicon Valley deal flow, and there's even a new breed of investment adviser catering directly to stars.
The whole era of celebrity investing is maturing. "I wouldn't call it sexy anymore," says entertainment attorney Kevin Yorn, referring to the days when stars like Ashton Kutcher made a killing by investing in Uber and Airbnb. "It's just part of our business now."
At one time, celebrity startup deals looked more like glorified endorsements. Some A-listers would exchange the use of their name for a slice of the company. Now, they are investing real money — deals can range from $50,000 to $250,000 for a point or two of equity depending on the size of the company — while also more actively helping the business grow. Bill Maher, for example, followed up an investment in millennial news site ATTN by creating a video about Donald Trump that went viral. That kind of media savvy was what ATTN co-founder Matthew Segal was looking for when he asked Maher to come on board. "When we pursue investors, we want them to add value to the business," says Segal, whose startup has raised nearly $25 million. "We don't want them to be a sexy name on a sheet of paper."
Parsing such opportunities traditionally falls to business managers and attorneys. But some of these reps are turning to specialists for help. For example, Yorn works with an outside firm called PLUS in vetting deals for such clients as Ellen DeGeneres and Scarlett Johansson. The firm — part consultancy and part business incubator — specializes in helping celebs research investment opportunities. "We wanted to create an infrastructure where we could help people back companies," says PLUS founder Adam Lilling, who works with Kevin Spacey, among others. "Before, they were just winging it."
Talent managers and agents traditionally have refrained from advising clients on investing, though that's changing. WME-IMG, for example, reached out to clients who were MMA fans after the agency's $4 billion acquisition of UFC in July and offered to cut them in on a funding round. A group of more than 20 clients, including Ben Affleck, Conan O'Brien and Tyler Perry, ended up participating.
Where the agencies often can be most helpful is in working with clients who want to mimic the success of ventures like Jessica Alba's Honest Co. CAA, for example, brokered the deal for client Kate Hudson to co-found e-commerce brand Fabletics. UTA, meanwhile, has formalized this effort through its ventures group. It now helps clients turn ideas into businesses much like it did with AwesomenessTV. Sam Wick, head of UTA Ventures, says technology has given clients an entrepreneurial platform. "The disruption in media and growth in technology is creating an opportunity for talent to be their own brand," says Wick. "For the first time, talent is able to build businesses based on their direct relationship with fans, social reach and personal brand."
L.A.-based PLUS also has found a niche helping celebrities build businesses. Through its PLUS Foundry division, which is co-founded by former Agency Group executive Paul Conroy, the firm recently worked with singer Hayley Williams on the launch of vegan hair-coloring company goodDYEyoung, among other deals. "We've crafted our process so that we are positioned to be impactful and additive and bring process to the table," says Conroy, who will work with talent to put together business plans and recruit executives, among other services.
To be sure, money managers view startups as one of the riskiest bets a client can make. Even the most successful venture capital firms see a return on investment from only about 20 percent of companies in which they invest. Merrill Lynch's Bruce Munster recommends that stars allocate less than 5 percent of their capital to startup investments, warning that stars may want to temper their ambitions: "There's a perception from folks that since they're rich, they can afford it, while in reality, most of them cannot."
GROWING CELEB ENTREPRENEUR CLASS
Through her Ellen Digital Ventures joint venture with Warner Bros., the talk show host has invested in music app Chosen, launched the Heads Up app and started a digital network for programming from web stars like Tyler Oakley.
Since backing away from plans to join Relativity as chairman, the House of Cards star has found more time for startup investing. Since September, he has backed video-sharing platform Frame.io and writing collaboration tool Madefire.
One of L.A.'s most active individual investors, Leto has backed meditation app Headspace, restaurant booking app Reserve and Reddit. The Suicide Squad actor also has incubated his own business, streaming-video startup VyRT.
A version of this story first appeared in the Nov. 11 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.