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    Star Power: Celebrities turning into Strategic Investors

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    The funding landscape is changing rapidly and in recent years, new fund raises have been the talk of the town, alongside the buzz of IPO. The trend of funding started with bank loans and then moved further into the venture capitalist arena, which brought in a personal approach to investment. But with our growing economy, the trend changed quickly when our country India became the third largest startup ecosystem in the world, and also became home to more than 100 unicorns. A drift has been followed up in the investing pattern as celebrities, content creators, social media influencers and sports stars started foraying in the funding process and changing the whole strategy of how startup capital should be raised.   

    Superhero businessman concept

    Popular celebrities have stepped into the investors’ shoes and are betting big on new-age brands. The celebrities are investing strategically to secure their future growth. Bollywood celebrities are also contributing it with their financial power, and additionally also adding a flavour of glam and glitz by associating themselves with the brand. 

    Vision or glam?

    The drastic shift in this trend also raises the question of whether the celebrities associated with the brand connect with the brand’s vision or just tend to focus more on monetary purposes. Bharat Sethi, Founder, of Rage Coffee which got funded by the former Indian captain Virat Kohli told us, “It’s the most important thing to have the same vision, if the understanding and common objective of the brand and celebrity don’t get aligned at the time of association then it creates a lot of problems in the future. New-age brands are in a close loop with the customers, and if the same relationship is not built with the ambassador, it can create a backfire for the brand. If the celebrity doesn’t connect with the brand’s vision it will be easily visible and he/she won’t be able to add relevant value to the brand.” 

    The dynamics of the market are also changing, earlier celebrities used to charge a heavy amount of money to endorse the product/service, but now they are keener towards investing. “Earlier, celebrities used to take the money and endorse what they were asked for. But now with the changing trend the brand vision and its alignment tend towards more consumer-centric content and marketing approach through the various new-age channels”, Sethi mentioned.

    The celebrities are investing their money with a lot of research on the backhand. Bollywood actor Ayushmann Khurrana has turned investor for the first time and invested in Helios Lifestyle Private Limited, the startup behind the men’s premium grooming products brand, The Man Company (TMC). According to Research and Markets, India’s male grooming industry is poised to reach $1.2 billion by 2024 at a CAGR of about 11%. And this could be one of the reasons behind the investment. When asked by Hitesh Dhingra, Founder of The Man Company, whether the celebrity connected with the vision or not, he said “Absolutely, Yes. The onus is on the brand when they approach celebrities on board they make sure that they are compatible with the brand’s vision. In our case, 100 % of the vision was aligned with the endorser.”

    Choosing the right celebrity cum investor 

    The brands go through a lot of hurdles to find the right celebrity that can add value to a burgeoning business and sometimes a wrong partnership can also devalue the brand. The founders of the startup have to contemplate a lot before associating with any star. Investment by the celebrity is really impactful and the brand should strategically research how the star can represent a brand. When we talked to Avnish Chhabria, Founder, of Wellbeing Nutrition that got an undisclosed amount from the Bollywood actress Rakul Preet told us about their strategies and hurdles while onboardingthe right celebrity, “It’s critical to find a celebrity that imbibes and resonates with the brand’s ethos and values. Their lifestyle needs to mimic the ideal Target group that the brand is aiming for and it needs to be more synergetic and intuitive for their followers/consumers.”

    Beauty brands mainly focus on celebrity endorsement as it is full of flashiness. Nowadays, brands are focusing on content to commerce routes where it can inform/entertain the buyers and make them buy products. When asked by Sukhleen Aneja, CEO, Beauty & FMCG Brands, The Good Glamm Group which got an investment from Bollywood actress Shraddha Kapoor in their beauty brand MyGlamm told us, “The beauty industry has evolved in the last few years, we are building great product but also focusing on connecting the customers and understanding what they desire for. We wanted to leverage content, creator, and commerce. Hence we ensure that the celebrity partnering with us resonates with the brand’s value. Our brand onboarded Shraddha Kapoor as we admire her clean beauty and cruelty-free philosophy and the way she connects and resonates with over 70 million Instagram followers. She also resonated with the brand, as she saw the potential that brand has in this market.”

    Customers turning investors 

    Turning an investor into the company is poles apart from endorsing it. Earlier, celebrities used to endorse the product in the market because they used to get a chunk of money in their pocket. But now the tables have turned and celebrities are spending money in the exchange for the equity. As an Investor, it’s important to be the customer first, and then only a brand can succeed. When asked if the cricketing star was a customer before investing, Sethi responded “We actually got to know that the cricketers from Team India were using Rage coffee products. Our brand was trying to approach the team and we got information that Virat is also a regular user of our products. We got in touch with him and the team, and he surprised us by showing so much interest in our products and category. It was an honor for our brand that someone fit and healthy like Virat Kohli believes in Rage’s coffee quality and promise. At that time, we were not sure about the deal part, but his trust in us helped us to close the deal faster.” 

    Aneja highlighted this and mentioned “Shraddha Kapoor has been an integral part of our campaign, and also an avid user of MyGlamm makeup and skincare products.  She has also been an avid follower of the brand’s ideology and approaches to making the products the customers want. Through our brand MyGlamm, she hopes to understand and fulfill the beauty needs of her fans and followers.” 

    Investment as a marketing strategy

    When we make a purchase, our buying decision is influenced by opinion leaders (a group of people from whom the consumers get a stamp of approval before making a purchase). The funding from the celebrity also creates a headline in the news which eventually turns out to be one of the marketing strategies for the brands. As per a research conducted, it was found that 64% of users on social media networking sites, who follow a celebrity were four times more likely to follow a brand than a user who doesn’t follow a celebrity. Dhingra stated, “Getting a celebrity on board definitely helps in brand recall value. Even from the consumer point of view, there is a lot more promise associated with it as they are not just endorsing the product but also the business. As long as the values match the business and the endorser the relationship is bound to succeed.”

    Currently, Social media is turning out to be a game-changer and it is also driving as a revenue channel for the new-age brands. Research also found that 61% of the brands reach their customers through the use of social media platforms. As celebrities have a huge fan following on social media, it can be beneficial for brands to reach new customers. Chhabria responded to this and mentioned that “Absolutely it helps to boost the brand visibility and be able to communicate their brand message to a larger set of customers.”

    The association of a celebrity with the brand can add a lot of value in the customer’s mind, as they tend to think that they are using a product/service that their favourite star is using. With celebrities vouching, the brand can increase awareness, trust, and familiarity which can be an important variable at the time of the purchase-making process.

    “Undoubtedly, it adds a lot of value to the brand given that the brand value, ethos, and identity are aligned in harmony with the ambassador. If proper groundwork is done before the association is finalized, it can be beneficial to the brand. The consumers want the brand to be involved with the persona that the investor cum ambassador brings to the table. It brings a level of trust among customers and these collaborations; increase the trust and reliability in the brand’s products which breaks them through the clutter of traditional competition. If both the parties are synced mutually, it can create a deeper partnership in which the growth is well charted,” Sethi highlighted.

    Impact on ROI

    The Investment creates a lot of opportunity for the brands, as it gives the power to leverage their brands in different units and create a strong brand vision across all the markets. But getting funded by celebrities definitely creates a positive impact on ROI. Chhabria said, “It doesn’t have a direct correlation with the revenue all the time but it helps to imprint the brand message and tonality to the larger subset. The association also helps in educating about new products/categories. If the budget permits, TVH and OOH can further boost the brand’s image.”

    Dhingra also agrees with the above, “Revenue is a byproduct of intent and that’s a by-product of awareness. Celebrities help in getting the awareness through their status that help in getting the service to a larger audience. But, the brand has to suit its personality judiciously. If the other brands in the same category are using the same celebrity for their promotion, then it won’t add some value in the mind of the customers.”

    “Celebrity brand ambassadors can turn out to be a strong influence among the customers. Choosing a credible celebrity can help in increasing the sale, and revenue of the brand. If used effectively, celebrities can become one of the most valuable and profitable parts of the brands considering a loyal fan base of their own,” Aneja mentioned.

    “It’s a part of the entire business-building exercise. There are many use cases in which the brand ambassador has changed the growth trajectory of the brand significantly. Although, the direct revenue and growth can’t be an immediate event. The overall benefits and long-term revenue generation can lead to differentiators and game-changers. There is a change of direct revenue generation, sometimes immediate and sometimes not immediate,” Sethi highlighted.