B-town celebs help startups shine, but what happens when stardom fades?

Having a celebrity on board can help an early-age start-up scale to new heights, but it can boomerang as well

Does having a big name attached to your start-up ensure success? Or is it a symbiotic brand-building relationship? From early investors like Salman Khan (Yatra.com) to later ones -- Deepika Padukone (Epigamia), Bollywood celebrities are increasingly investing in Indian start-ups. But making big bucks might not be their main objective. So why invest? 

Endorsements not enough 

Advertisements, be in one-time or long-term contractual ones, have traditionally been adopted by big brands like Aishwarya Rai Bachchan endorsing L'oreal or Shah Rukh Khan pitching for Lux skin care and hygiene products. However, incubating start-ups, which have little room to play with, have largely preferred forming strategic partnerships with Bollywood celebrities through various routes like selling a certain percentage of the stake in the firm, offering royalty deals and pushing venture debt. For instance, Karishma Kapoor has acquired 26 per cent in BabyOye, a firm selling baby products. Most recently, Deepika made an undisclosed investment for some equity in Drum Foods, the maker of yoghurt brand Epigamia. From currently selling through 10,000 distribution platforms, the start-up aims to expand it to 50,000 by 2021. "Deepika's involvement will accelerate the pace of reach of our products,” said co-founder Rohan Mirchandani. 

By staying invested in the company, the celebrities are committed to scaling it to a profit-attaining level and endorsing it without any other monetary implication. 

"Endorsers such as Deepika have been structuring endorsement deals with an equity element which, in turn, helps them maintain a long-term association with the brand and share the upside from the performance of the company," said by Varun Gupta, Asia Pacific leader, Valuation Services and author of a 2018 report titled Celebrity Brand Valuation.

"I am thrilled to join the Epigamia family. Not only do I love the products but also connect very strongly with the brand philosophy," Deepika said.

According to a 2018 celebrity brand valuation report by US-based consultancy firm Duff and Phelps, Deepika, who has endorsed over 20 brands in 2018, has a brand value of Rs 720 crore.  

On a celebrity ride

Around 32 Bollywood celebrities have reportedly invested in 67 start-ups. These include Arjun Kapoor's investment in food delivery company FoodCloud.In, Suniel Shetty's in online fitness community SQUATS, Farhan Akhtar's in film discovery app Flickbay, Amitabh Bachchan's in Justdial and cloud service platform Ziddu, Jacqueline Fernandez's in juice maker Rakyan Beverages, Aamir Khan's in Furlenco, and Alia Bhatt's in fashion-tech start-up StyleCracker. 

Celebrities often endorse products that compliments and help in building their own brand image as well. For instance, fitness enthusiast Hrithik Roshan's signed up an endorsement deal with health and wellness company CureFit in exchange for an equity stake. 

Similarly, Mumbai-based fitness start-up SARVA raised around $7 million from Malaika Arora, Jennifer Lopez, US baseball player Alex Rodriquez, and fitness brand Zumba earlier this month. 

Anirban Das Blah, founder of celebrity management firm Kwan Entertainment, said: “Celebrities prefer low-risk with mid-sized rewards. They have realised the need for building a business that goes beyond acting.” 

Falling star 

However, not all start-ups with celebrities on board sail through. Despite Dino Morea's investment in Coolmaal.com, a merchandise-promoting company, the firm incurred losses and shut down. Similarly, Ajay Devgn's involvement in online booking platform ticketplease.com could not help the firm from sinking. 

"Being associated with a celebrity has its risks too. Negative publicity for the celebrity can impact the brand as well," said Aviral Jan, director at consultancy firm Duff & Phelps India. 

In 2016, when Aamir's comments on intolerance created controversy, Snapdeal had to drop the actor as its brand ambassador. 

But what if the start-ups only shine as long the stars align with them?  Sandeep Goyal, an advertising and media veteran, says: "Sometimes the star is remembered, the brand is not."