The CEO of a startup that recently raised money from actors and producers on the hows and why of attracting Hollywood stars. By Lydia Dishman (Contributing Writer, Women 2.0)
It’s hard enough to attract funding to an unknown startup, so making a quantum leap into the land of rainbows and unicorns sounds about as easy as snagging a celebrity investor. But that doesn’t mean you shouldn’t try.
Alex Elias, co-founder and CEO of Qloo, says celebrities obviously bring name recognition, newsworthiness, and help to market your product. Beyond those benefits Elias observes, is that A-listers tend to be comfortable with calculated risks and volatility--critical when funding a new venture. "In many ways they're perfect early stage investors," Elias asserts, "because they get the ebb and flow. They know firsthand how difficult it is to build a great brand from scratch."
He should know. Qloo, a mobile app that brings together recommendations for music, dining, nightlife, travel, books, films, fashion and TV shows based on a holistic view of your interests, recently closed a $3 million round of seed funding with participation from Danny Masterson, Cedric the Entertainer and Tommy Thompson a founding partner of Cross Creek Pictures who produced Black Swan.
Getting Your Startup in Front of the Stars
Elias admits he was friends with Danny Masterson long before he launched Qloo. But Cedric the Entertainer came through the old-fashioned way, through an introduction from another investor who had already committed to Qloo. "It’s just like securing a meeting with any other investor or venture capitalist,” says Elias, “You need three things: a warm introduction, a strong narrative, and a great product – there’s no shortcut."
No Song and Dance, Just Resonance
To attract celebrity seed funding, Elias recommends approaching them just like any other investor. "They need to see and believe in the vision," he says, "The standards are no different."
Elias says it helped that Masterson instantly connected with Qloo’s focus on bringing the different areas of culture together. As an actor, a DJ with a recording studio that showcases interesting artists, and a fashion boutique, he is also involved with bars and restaurants. "To him it was absolutely intuitive that your taste in different areas such as music and film, or dining and fashion, come together," Elias says, "Danny immediately saw that the future of personalization needed to involve a more holistic view of your taste."
Separating Business From Personal
Masterson’s initial hunch about Qloo led him to volunteer to write a check rather than wait until his friend asked. Elias says he wouldn’t have shied away from asking for funding, though. "Most people who are in a position to invest tend to separate the friendship from the business decision and analyze the opportunity in a very objective way. Our business relationship remains separate from the friendship," he maintains.
That said, Elias notes that in addition to a cash investment, the value of a celebrity investor doesn’t just come from their star power. As Porter Gale opines, "your network is your net worth." Elias says that Masterson opened the door to "countless business relationships" because he meets so many people, he’s able to connect the dots like no one else.
Celebrity investors are often expected to make a bigger commitment to a startup because their status can be leveraged to market the product or service. "I’ve learned that it is extremely important to discuss exactly what the mutual expectations are on that front," Elias says, to avoid conflict later on.
Most angel investors, regardless of VIP status, have packed schedules thanks to their own businesses and a portfolio of investments. "Getting value out of a celebrity investor is the same challenge as any other very busy investor – you have to be extremely proactive and clear about what you need from them," Elias advises.
Is Your Business Ready For Prime Time?
He also cautions against assuming a star investor will want to be so public about their involvement. "They may prefer to be silent at times," Elias says.
On the flip side, if a celebrity wants to be very involved, the founding team should be careful how it presents the involvement, says Elias. "In certain cases their recognition could be so large, or the involvement presented in such a way, that it overwhelms the young startup’s own identity," he points out.
Either way, it’s important to remember that a Hollywood association guarantees gold. Remember Fashism? Despite a $1 million infusion from Ashton Kutcher and his former wife Demi Moore among others, the business wasn’t able to generate enough revenue from social to survive.
Based on what he knows from the entrepreneurial trenches, Elias believes the phrase "celebrity investor" is backwards. "The emphasis should be on 'investor' first and 'celebrity' second," he says. "If they have no skin in the game, or don’t believe in the company, then at best you’re going to have a momentary blip in attention."
About the writer: Lydia Dishman (@LydiaBreakfast) is a veteran business journalist writing about the intersection of technology, leadership, commerce, and innovation. Her work appears in Fast Company, Forbes, Entrepreneur, Popular Science, and the New York Times, among others.