Newspaper article International New York Times

For Endorsing Start-Ups, Stars Seek Piece of the Pie ; Celebrities Are Trading Their Promotional Power for Taste of Silicon Valley

Newspaper article International New York Times

For Endorsing Start-Ups, Stars Seek Piece of the Pie ; Celebrities Are Trading Their Promotional Power for Taste of Silicon Valley

Article excerpt

In exchange for a small percentage of emerging companies, stars agree to provide publicity, feedback and connections.

Since at least Sarah Bernhardt's time, celebrities have looked for ways to parlay their name recognition into extra cash. Back in the 19th century, Bernhardt -- the most celebrated actress of her day -- endorsed a popular brand of soap. "I have used Pears' Soap and find there's nothing in the world so pleasing and satisfying," she enthused in one ad.

Today, celebrity endorsements are everywhere. It's no surprise to see people like Matthew McConaughey, Jennifer Aniston and Halle Berry lending their star power to ads for cars, bottled water, makeup and a host of other products.

Now some celebrities -- both established and up-and-coming -- are lavishing their promotional love on start-ups rather than big brands. Often, those deals involve equity. In exchange for a small percentage of a company, a celebrity investor agrees to provide publicity, feedback and valuable connections. Celebrities who have taken this route include Ashton Kutcher, Tyra Banks, Bono and Drew Barrymore.

With equity, of course, there is a risk of losing money. But if a celebrity picks a company that turns out to be a hit, it's a gift that keeps on giving, unlike most endorsement deals. And investing in a start-up generally requires less legwork than other celebrity pet projects like, say, starting a clothing line or opening a restaurant.

The new trend could also be a matter of celebrities' seeing start- ups stealing the Hollywood spotlight.

"When you look at Hollywood stars, they make a certain amount of millions, and they're used to being the 'it' kids," said Anjula Acharia-Bath, who helps stars make start-up investments. "Now you see that the 'it' kids are these people who are building these start- ups and walking away with billions of dollars."

Timothy Karunaratne, who pairs emerging companies with influential investors, put it this way: "I think it's a fair statement to say most people would rather be Mark Zuckerberg than Will Smith. I think that's a fair statement, and that's pretty fascinating."

Ms. Acharia-Bath and Mr. Karunaratne are part of an informal network that has sprung up to bridge the financing gap between Hollywood and Silicon Valley.

Mr. Karunaratne, in addition to serving as chief executive of Parkt, an urban parking start-up, is a founder of the Startup Agency. Housed in a business incubator and accelerator in a 10th- floor penthouse on Sunset Boulevard in West Hollywood, the agency's open office is divided by what appears to be the side of an airplane that's been dipped in chrome. In an earlier era, Hugh Hefner crashed here after late nights downstairs at his Playboy Club.

Mr. Karunaratne and his co-founder, Jonathan Gonen, recently united Gyft, a website that sells gift cards, with Mr. …

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