January 30, 2019 WelchGroup

Snoop, Durant and Montana – A Quick Look at Their Latest VC Investments

When they aren’t prepping for the next Championship or walking down the red carpet, celebrities are becoming increasingly engaged in the start-up world. No longer are they just endorsing brands and collecting royalties; they are the ones writing the cheques and rolling up their sleeves in an attempt to cash in big in the hottest disruptive industries and companies.

It seems like an obvious fit; celebrities can tap into their existing fan base and use social media and their star power to quickly create markets and sales channels for companies and their products. Customer acquisition is becoming increasingly efficient – where a simple Instagram post can generate large, immediate and measurable increases in sales. Also, the line between Hollywood and Silicon Valley is increasingly blurred as celebrity entertainers, actors and rock stars are turning to technology investments, while at the same time, famous start-up founders are becoming celebrities of their own as part of main stream pop-culture.

We’ve already seen huge celebrity business success stories with the likes of George Clooney’s Casamigos and Jessica Alba’s The Honest Company and in an economy increasingly fueled by technology, the excitement around being part of the next big thing is too much to miss out on for some celebs, let alone venture capitalists looking for the next unicorn.

So, in that context, here is a glimpse of a few recent celebrity investments and the companies and industries they are investing in.

Snoop Dogg – Fintech/Payments:

American rapper, Snoop Dogg, aka Calvin Broadus – FashionUnited

No stranger to start-up investing, rapper/actor Snoop Dogg recently became a shareholder in Klarna (www.klarna.com), a $2.5 billion Swedish company that has developed an online payment platform designed to make online shopping easy and hassle-free. The company’s payment platform offers in-store, mobile and online payments with features like ‘Pay-Now’, ‘Pay Later’ and ‘Slice it’ that aim to enhance the shopping and check-out experience.

According to CB insights, investment in early stage fintech companies is at a 5 quarter low, however the total number of deals and total funding as at Q3 2018 was still on track for an all time high. What this likely signals is that as market forces and time shake out the winners and losers, it becomes increasingly obvious which companies can execute and which ones don’t. As a result, the risk profiles and line of sight on future profitability becomes increasingly clear. Therefore, investors’ dollars, including Snoops’, are being directed towards bigger companies targeting bigger funding rounds.

Kevin Durant – eSports:

NBA Star Kevin Durant, Haute Living

Golden State Warrior, Kevin Durant added Vision eSports (www.vvpllc.com) to his growing list of tech start-up investments as part of a $38 million dollar round last year. Vision, a holding company based out of Beverly Hills, invests in eSports companies and is also in the business of recruiting and developing professional esports ‘athletes.’

eSports audience, prize pool forecasts (2019E- 2022E)
2019E 2020E 2021E 2022E
Audience Size (MM) 194 225 250 276
Prize Pool (MM) $256 $307 $359 $413
Source: Goldman Sachs Global Investment Research

Despite professional gaming’s massive increase in popularity over the last few years, it’s still an industry vertical that isn’t widely understood outside of a small demographic and even within the industry, there appears to be differing opinions about what eSports is. At its core, eSports is a form of competition using video games – where the field of play is on the computer screen. It’s also the fastest growing spectator sport in the world, already outpacing the NHL in viewership. A professional athlete’s involvement in eSports like Durant’s can serve to be a direct influence in helping to pivot their pre-existing interest of their fanbase towards gaming – all in an effort to make eSports more mainstream.

Joe Montana – Cannabis

Football legend Joe Montana, ESPN

San Francisco 49ers football legend, Joe Montana recently cut a cheque for $75 million for an investment in Caliva (https://www.gocaliva.com), a San Jose based cannabis retailer and grower. The company is expected to use the investment to grow their product portfolio and expand its reach into California though retail, wholesale and direct to consumer channels.

The opportunities in the US for companies operating in the cannabis industry are expanding as the lines between medical and recreational marijuana continue to blur. In an effort to further differentiate the company and brand, Montana is helping to position Caliva around its focus in making a positive impact on America’s opioid abuse epidemic with the aim to provide relief to people fighting the addiction. As Caliva positions themselves for growth, it’s an apparent and significant advantage for existing marketing participants to invest heavily in supply chain and distribution infrastructure to ensure that market share can be quickly captured once changes in legislation help to create it.

Symbiotic Relationships

Some start-up CEOs state that they don’t want investors for the sake of having investors indicating that the relevance of having celebrity investors is purely ego-driven. However, the distinctions between a celebrity investor as opposed to a fund or high net-worth individual are relevant. If Montana, Snoop and Durant are any indication, their ability to raise the profile of the companies they invest in (either to drive revenue, to encourage additional investment, or to leverage their followings) should not be underestimated.

As a result, a company that raises funds through celebrity investment accomplishes the goals of raising cash, generating global interest and acquiring clients. Furthermore, high-profile individuals can make unique and valuable contributions to companies because of their rare skill set, life experiences and understanding of what is takes to be the best on the planet.

However, with any start-up, big funding does not automatically translate into commercial success. In most cases only a rare few ever turn into long term, sustainable companies so for now it’s a bit of a waiting game for Montana, Snoop and Durant to see who will come out on top.

References:

• Goldman Sachs Global Investment Research
• Pitchbook

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