Just last week, creators like Tanmay Bhat and Ranveer Allahbadia (@BeerBiceps) have announced angel investments in Qoohoo, a platform that helps creators monetise their followers, and Ready Set Jet, an American beauty brand looking to India for expansion, respectively.
Happy to announce our angel round of ~$800K @qoohooapp from some of the iconic investors & creators of the ecosyste… https://t.co/olYUtlvOZC
— Vimal Singh Rathore (@vimal8rathore) 1614623078000
Bhat is also an angel investor in an investment-tech startup Smallcase, which counts Sequoia Capital and Beenext among its leading investors.
Creators are keen to invest in D2C (direct-to-consumer) brands, fintech startups, and platforms that are building monetisation tools and avenues for the creator economy, experts told ET.
So far, creators earned a few lakhs per project from startups eager to use their distribution muscle to market their product. Seeing the growing interest in startups and
rapidly increasing valuation figures, many of them think it’s wiser to be a part of the brand’s journey as an investor instead.
In turn, startups see value in their vast distribution channel and their storytelling abilities to have a long-term association.
Already prevalent among top TikTokers in the US, the phenomenon has found many backers in the tight-knit startup ecosystem in India.
Gaurav Munjal, founder of the Unacademy Group, is one of them. “Founders look for the best angel investors to get on their cap-table. YouTubers or influencers, who are great in a particular domain, will be the go-to choice for founders building companies in those domains,” said Munjal, who also participated in the $800,000 angel round of Qoohoo along with Bhat.
Also YouTubers will make for the best Angel Investors in their specific domains https://t.co/vriucb1bz1
— Gaurav Munjal (@gauravmunjal) 1610097049000
It’s common among celebrities to come on board as investors of a product they believe in. Actor
Deepika Padukone did it with FMCG brand Epigamia in the recent past. “This will start to happen with YouTubers and influencers at a smaller scale now,” Munjal said.
Unlike celebrities that often end up investing in companies at a later stage, “creators keen to invest in the angel round are able to give a founder honesty and clarity from day zero,” said Vimal Singh Rathore, co-founder of Qoohoo.
A lot of founders also tend to give sweat equity shares to creators in exchange for their services. “VCs can have issues with that since they put in money for the same percentage of equity,” said Rathore.
But creators ET spoke with were keener on angel investing as it indicates they have skin in the game and helps founders trust them better.
It’s still early days, though, and most creators don’t have the investor acumen or the peer network required to understand and build a portfolio.
However, some of them are being guided by their business teams in this direction, said Lavin Mirchandani, founder of creator marketplace GetEvangelized, who is exploring a few investment deals for some of the creators his company represents.
Angel investing is also a long-term game and creators, who are used to getting paid upfront, will require a mindset change, Mirchandani said.
Further, creators eager to turn investors may have to build a portfolio of 10-15 companies in order to expect returns from some of them as many bets are likely to fail. This can potentially hamper their short-term brand deals in multiple categories, locking them out due to conflict of interest.
“Ranveer (Allahbadia), for instance, won’t do it for it poses a conflict for him as a creator in front of his audience,” said Viraj Sheth, co-founder of Monk Entertainment, a Mumbai-based talent management and influencer marketing firm that also represents Allahbadia (who’s also the company’s co-founder).
It doesn’t have to be as binary as that, though.
So, Allahbadia (who is now an angel investor in beauty brand Ready Set Jet) will continue to work with skincare brand WOW Skin Science, for instance, but may not associate with any makeup brands.
Creators will have to separate brand deals from investments, experts said.
“Don’t trade your reach for equity. Trade reach for cash and invest this cash in equity,” said Hugo Amsellem, a Paris-based social media marketer who writes about and invests in the creator economy and participated in the angel round of Qoohoo as well.
Meaning, take cash from established companies and invest it in early-stage startups.
“If you’re taking money from Kellogg’s on a brand deal and invest in a DTC cereal startup, you’re 100% not conflicted.”
Amsellem calls for creators to be educated on investing so they cannot be misguided into doing deals where only the company stands to gain from their reach.
Eventually, experts reckon everything that has happened in the startup world for the past 20 years will happen to the creator world in the next 10.
“So, successful creators will instinctively understand the power of scale (with media) and at the same time understand the power of equity (owning, being a part of the business),” Amsellem said.