Counting the rapper Nas among your investors undoubtedly carries cool points for any startup. But is there much value beyond dropping a famous name? Nas, and his manager Aymen Anthony Saleh, are working hard to prove there is.
Over the past two years, Saleh and Nas have invested their own capital into 40 startups, including the Fancy, Coinbase, Rap Genius, Prism Skylabs, Zest Finance, Stance, mParticle, Proven, Earbits, Trendabl, Crowdtilt, 21E6, Balanced, MeCommerce, DeviantArt, 500 Startups, Push IO, Swarm Mobile, Glio, Boosted Boards, MadeFire, Fashion GPS, Washio, SellSimple, Hotelzilla, Signal Ventures, Clean Plates, BOXC, MediaSpike, CapLinked, and SendHub.
They’ve made a healthy commitment — more than 50 percent of their overall portfolio is now dedicated to startup investing. (For perspective, most institutional firms only allocate around five or ten percent of their overall portfolios to the risk-prone venture capital asset class.)
They’re not slowing down, either. Saleh says he and Nas plan to continue at their rapid pace, and if all goes well, they may follow in the footsteps of Lady Gaga’s former manager, Troy Carter, who is raising a $75 million fund from institutional investors to back startups.
Celebrity investors often come with a “buyer beware” warning, which Saleh and and Nas plan to circumvent by learning from the best investors in the Valley, including Andreessen Horowitz, and delivering on the promises they make to founders.
With celebs like Justin Beiber, Ashton Kutcher, Adrian Grenier, Oprah, Madonna, and Ellen Degeneres invested in startups, the obvious question is always, “why?” Traditional VCs dismiss celebrities as “dumb money.” When celebrities chase frothy rounds like Viddy’s $30 million Series B at a $300 million valuation, it’s not hard to see why. (Jay-Z, Shakira, Will Smith, reality star Rob Durdek, and soccer star Gerard Pique are among those invested in the once-hot “Instagram for video” company.) Even Lindsey Lohan is getting in on the startup action, working as an “advisor” to her brother’s karaoke startup, Just Sing It.
Nas’ first foray into the startup world was not a big success. He co-founded a men’s subscription commerce site called 12Society, which had its heart in the right place, but not its business model. As Nas described it in a TechCrunch op-ed, 12Society was meant to take advantage of the new direct line between artists and fans created by new Web tools. Through its monthly box, Nas and his celebrity co-founders (Nick Cannon, Michael Strahan, Blake Griffin, Kevin Love, and Tim Lincecum) would share their taste with fans through curated goods. But 12Society wasn’t able to score as many free goods for its boxes in exchange for the celebrity endorsement as it had hoped. A year after launching, 12Society sold to Quarterly in a 90 percent stock deal and the brand shut down.
One argument about celebrity investors is that the successful ones have “smart money” friends. The portfolio of Ashton Kutcher’s fund, A-Grade Investments, for example, includes some big hits like Airbnb and Skype (as well as once-hot deals that are now big question marks, like Path, Foursquare and Fab). Getting into hot deals, for better or for worse, has a lot to do with Kutcher’s friends: alongside his fund’s co-managers, supermarket magnate Ron Burkle, and Madonna’s manager Guy Oseary, Kutcher counts Marc Andreessen, Paul Graham, and Ron Conway among his advisors. They’re some of the most well-connected people in the Valley.
Saleh and Nas are taking a similar tactic.
When they invested in Rap Genius’s $15 million round of funding, they met the team at Andreessen Horowitz, who led the round. Since then, Andreessen Horowitz has passed Saleh and Nas a number of deals, including Crowdtilt, Coinbase, and Prism Skylabs. The experienced investors at Andreessen Horowitz taught Saleh and Nas how to evaluate a team and its startup idea; and Partner Ben Horowitz is “like family” to Nas and Saleh, according to Saleh. The duo has also invested alongside Great Oaks Capital for some international deals and Nihal Mehta of Eniac Ventures. Saleh and Nas have also backed 500 Startups’ fund.
Like any investor wanting in on the best deals, Nas and Saleh are all about the value-add. They’re happy to give founders product feedback (“A lot of these entrepreneurs operate in this bubble and have misconceptions about what they’re doing,” Saleh says), while also adding Nas’ star power where it makes sense, like with Rap Genius and Crowdtilt.
Saleh says he has already built up a reputation in the startup world, which runs on relationships just like the entertainment world he’s navigated for the past eight years. Being a person of your word carries a lot of weight in the tech industry, he says. “When you start doing business with people in tech and you tell them you can deliver on certain things, and you actually deliver, then your relationship starts growing as someone who can be relied upon. It’s as simple as that,” Saleh says. “There is no secret formula to it.”
Saleh says he is attracted to the tech world because entrepreneurs are an inspiration. “The rush of seeing these guys believing they can change the world is so inspiring, it’s insane,” he says. “A lot of these entrepreneurs believe in their heart that they can change the world, to the point where you want to believe them and be part of their journey.”
They don’t have a specific criteria for deals, instead making investment decisions based on instinct. “We’re not a VC firm, we don’t have a department that breaks down your technology,” Saleh says. “We’re all gut,” he says, quickly adding, “we also invest alongside a lot of folks that know what the hell they’re doing.”
Committing such a big chunk of their overall investment portfolio to startups is a major risk, but Saleh insists he and Nas are in it for the long haul. They’ve already seen a few early exits, four of which are in the process of closing now, he says. “It is risky, but playing the game with a lot on the line is definitely what we feel like we’re best at.”