Serena Williams and her daughter Alexis Olympia. (Photo courtesy of Michael Bradley/AFP) (Photo courtesy of Michael) … [+]
The number of celebrity VCs and VCs with celebrity pedigrees seems to be increasing day by day.
Previously, I wrote about the exemplary VC track record of Andre Iguodala, who led a distinguished life in basketball.
Now we hear about Serena Williams' amazing achievements. After having her best career in tennis, Williams was able to build a very successful track record with her VC. She started investing in her companies to support deserving entrepreneurs and was able to invest in 14 out of 85 unicorn companies. On top of that, 79% of the entrepreneurs she invested in were “underrepresented,” meaning they were Black, women, and Latinx. This is really impressive.
Joshua Kushner, the brother of President Trump's son-in-law Jared, was not a celebrity. But Kushner, one man's son and another's brother, has amassed an impressive track record in VC since he was 25 years old. In addition to graduating from Harvard University, Kushner was able to receive funding from Princeton University and Yale University. A Princeton University executive took a leadership role, and a Yale University executive traveled to New York to meet him as he launched a VC fund. With this head start, Mr. Kushner was introduced to entrepreneurs such as the founder of Instagram, and quickly rose to the upper echelons of VC.
The track record of these celebrity VCs is unique because VC is a difficult field to succeed in. Estimates suggest that the top 20 VC funds (about 3%) generate about 95% of the industry's revenue. Top 20 VCs need home runs, but home runs are rare. According to Marc Andreessen, about 15 unicorns a year generate the lion's share of profits for VCs.
This means these celebrity VCs are investing in multiple unicorns. The key question is whether they invested at such high valuations after the venture's unicorn potential was proven. Or did you invest at a very attractive valuation before the venture's unicorn potential was proven?
4 Lessons for the Bottom 98% of Entrepreneurs and Aspiring VCs
Here are four lessons from celebrity VCs for entrepreneurs aiming to become unicorns.
1. Get to Aha!
VCs will invest following Aha! This means entrepreneurs need to get there. And do it with skill and financial smart strategies.
2. Look for connections to the VC hierarchy.
Since the success rate of VC is limited, entrepreneurs can benefit by leveraging the advantages of traditional VC and raising funds from top 20 VCs. Conversely, if you are looking to retain more control over your venture while enjoying the benefits of venture capital, working with a celebrity venture capitalist may prove advantageous.
3. Attractive Valuation: Willingness to Pay.
The top 20 VCs are more popular with entrepreneurs and have higher ratings than lower VCs. Do celebrity VCs buy at higher valuations, which offer entrepreneurs the benefits of reduced dilution and increased visibility while being less demanding than traditional VCs?
4. Leverage celebrity influence: Invest in the VC hype.
Credibility is key for new ventures to gain an edge. Obtaining VC from the top 20 VCs appears to increase a venture's credibility. Will getting VC from the right celebrity VC increase the credibility of a venture? Bill Gates is said to have said that if he had a dollar, he would use it to promote his business. Masu. VCs have very successful publicity machines that generate appropriate hype for their ventures, especially the winners. The right kind of promotion can hype a company's value and create a faster and more profitable exit for both the VC and any other companies that invest in the venture. Invest in the hype.
My take: Celebrity-VC is a hot trend. Let's jump on the bandwagon. But don't let them lose control. For journalists, details about stages and ratings are useful for readers.
