Over the last few weeks we have published a number of articles discussing celebrity investors and what part they can play in the early life of a young start-up. Only yesterday we published an article about how many famous celebrities turned to the franchise system to build significant business empires. We have the likes of Ashton Kutcher leveraging his wealth and his ambition to create an enormous and growing business portfolio. So, are celebrity investors worth more than money for young start-ups?
The oxygen of publicity
You only need to read the financial papers to see how much publicity a celebrity investor can bring to a promising young start-up company. The oxygen of publicity should never be underestimated and the fact these celebrities have invested cold hard cash suggests they will do what they can to make it successful. However, those who believe that publicity is all it needs to make a company successful need to think again!
Protecting your reputation
Celebrities will not put their funds into a company which they do not believe can be successful in the longer term. Those who use their reputation and their following to publicise these companies would never risk their reputation and we can only assume they have done their homework. The fact is that celebrities need to protect their reputation because at the end of the day what else have they got?
This in itself should be another positive when looking at future investments. If a celebrity investor has put cold hard cash into a company then they will have done deep research which the investor on the street can only dream of. They are in effect doing your job, rubberstamping a company investment and putting their own money where their mouth is.
Life after publicity
We have seen many companies hit the headlines; attract a celebrity following, only to fall by the wayside in the short to medium term. In order for a company to be successful there needs to be a viable business underneath all the fluff and publicity. There needs to be a focused plan for the future, a realisation the company cannot live on publicity alone and very often the need to go quiet and actually get on with the day job.
The world of business changes so quickly that a good investment today could be replaced by a competitor tomorrow. This is why start-up companies with a celebrity or a non-celebrity following need to make the most of their position at the time and build on it. Those who sit back and think they have cracked the investment arena will at some point learn a very difficult lesson!
The stock market does not forgive investors and company officials who sit back and enjoy the limelight. Analysts have no time for company’s living on past successes and refusing to move with the times. Celebrity investors come and go, some will stay for the long term, but at the end of the day it is not all about the celebrity following but about the prospects for the company.
Conclusion
Celebrity investors may be useful to get a company noticed, boost a fundraising and help to develop a profile going forward. However, at the end of the day there does need to be a viable business beneath the froth otherwise the company will be found out and nobody will benefit.