Celebrity capital at work: How star investors shape startups’ fate

Startup founders are no longer pitching only to Silicon Valley and Sand Hill Road. From tennis legend Serena Williams to actor-entrepreneur Ashton Kutcher, celebrities are cutting early-stage cheques and broadcasting those bets to millions of followers. Does that spotlight translate into real performance gains for the startups they are backing? Recent management research says yes, but with caveats. Below, we walk through the evidence, draw on three seminal studies, and offer insights and practical implications for startup founders and celebrity investors.

Why celebrity money is different

It is widely known that business angels traditionally sell two key assets to their backed startups: capital and expertise. A celebrity angel adds a third asset: attention. Drawing on signalling theory, Hunter et al. (2009) argue that “celebrity capital” is a transferable resource: fans, media, and partners infer quality from the star’s reputation, giving the venture instant visibility and legitimacy. Unlike status, which is typically earned inside the investment arena, celebrity is built elsewhere (e.g., sport, film, music), which makes its cognitive frame more emotional and consumer oriented.

Evidence from TV shows

Using 2,900 Dragons’ Den/Shark Tank pitches across four countries, Blaseg & Hornuf (2024) show that moving one standard deviation up the “being-known” scale (measured with Google-Trends hits) cuts the predicted probability of failure from roughly 20% to 12%, that is a 7.9 percentage point survival boost. The same step increases web traffic by 48 percentage points (see Figure 2) and Amazon sales ranks by 58 percentage points (see Figure 3). 

Figure 1. The effect of being a known business angel on startup failure

Figure 2. The effect of being a known business angel on startup web traffic

Figure 3. The effect of being a known business angel on startup sales

Why it works

First and foremost, it is the effect of signal clarity that TV audiences instantly recognise the star, and thus there is reduced effort to judge quality. Second, it is the audience reach, as millions of followers see the product demo, which leads to some converting into customers. Third, it is all about having skin in the game, that is when celebrity investors commit their capital to such an investment, their personal brand is at risk, making the endorsement costly to fake. Crucially, the uplift is strongest when a persona fits a product (e.g., an NBA player backing a sports-tech app). When congruence is low, the advantage shrinks and can even backfire.

Beyond angels: framing effects after the IPO

While Blaseg and Hornuf study private-market outcomes, the study by Hubbard et al. (2018) focuses on 300 dot-com firms that had recently gone public. They separate status (“elite but sober”) from celebrity (“hot hands”). Under uncertainty (e.g., IPO underpricing), potential partners interpret the two frames differently. First, status makes firms look like safe bets, so underpricing signals hidden problems and reduces alliance formation. Second, celebrity makes them look like hot hands, so the same underpricing suggests upside potential and increases alliances (roughly an increase of 26%).

What is the key takeaway from this? Fame not only signals quality; it changes how others read all subsequent signals. Table 1 provides a snapshot of the key findings of the three studies discussed in our article.

Table 1. Snapshot of key academic findings

What strategy should startup founders follow?

Startup founders should choose a celebrity backer whose public story naturally aligns with their brand, as the right fit boosts credibility, while a mismatch can appear gimmicky. Once the deal is set, they must be ready to ride the spotlight: having landing pages, promo codes, and PR angles in place before the announcement is crucial, as the traffic rush can decline rapidly post-investment. It is important to consider that fame has two sides, so startup founders should protect themselves with morals clauses and a diversified cap table in case the star investor’s image is compromised. Finally, startup founders who flash with substance should let the celebrity draw attention, but rely on seasoned operators or traditional VCs for the day-to-day expertise that keeps the business on track.

What should celebrity angel investors do?

From their side, celebrity angel investors should stick to deals that fit their public persona. The closer the match, the bigger the lift and the smaller the chance of backlash. They need to put their fame to work by doing more than writing a cheque. For example, post-investment, they should appear at launches and even demo the product, so their capital becomes an active form of promotion. Finally, remember that reputation flows both ways. A founder’s misstep can splash back on the celebrity investor, so it’s better to do their homework before they lend them their halo.

Looking forward

Celebrity cheques account for over US $12.8 billion in the past decade, yet rigorous scholarship is still nascent. We still have little knowledge in the area, and many questions naturally arise. How does celebrity capital interact with professional VC follow-on funding? Can negative press around the star erase earlier gains, or do early impressions stick? Does celebrity help B2B ventures, or is the effect confined to consumer markets? With star-led funds (e.g., Serena Ventures, Rosberg Green Tech) expanding, we anticipate gaining more valuable insights in the coming years about this fascinating area. One thing is certain: celebrity investors can do more than just attract headlines. They can significantly improve startup survival, growth, and partnership opportunities, provided their brand aligns with the business and founders make the most of the attention window wisely.

References

• Blaseg, D., & Hornuf, L. (2024). Playing the Business Angel: The Impact of Well-Known Business Angels on Venture Performance. Entrepreneurship Theory & Practice, 48(1), 171-204.

• Hubbard, T., Pollock, T., Pfarrer, M., & Rindova, V. (2018). Safe Bets or Hot Hands? How Status and Celebrity Influence Strategic Alliance Formations by Newly Public Firms. Academy of Management Journal, 61(5), 1976-1999.

• Hunter, E.J., Burgers, J.H., & Davidsson, P. (2009). Celebrity Capital as a Strategic Asset: Implications for New Venture Strategies. In Advances in Entrepreneurship (Vol. 11, pp. 137-160).