Are Celebrity Investors Worth the Hype?

In an age dominated by startups, how do you rise above the clutter and make your brand visible?Ditch the spokesmodel and get yourself a celebrity investor.

There's the teen sensation Justin Bieber, who recently announced a $1.1 million contribution to the selfie-sharing app Shots of Me. That's on top of the handful of gaming and mobile companies with whom he’s already invested.

DiCaprio has not only kicked in to a recent $28 million funding round to Instagram nemesis Mobli, but also serves as a fulltime advisor. And countless actors -- from Robert De Niro, who co-founded Nobu Restaurants, to Bill Murray, who co-owns Charleston, S.C., eatery Rutledge Cab Co. -- have backed hospitality ventures.

And then, of course, there's Ashton Kutcher, who -- famously, at this point -- supported Skype in its early days, as well as invested in rising social lodging star Airbnb.
A-list backers can surely bring notoriety to a fledgling brand and they typically only make money off their contributions if a startup finds financial success, gets acquired or goes public. But, there's still a lot at stake for young-company founders. In addition to catering to the vagaries of celebrity, giving up future earnings may not be for everyone. So the question is, are celeb backers worth their price?

Consider Justin Timberlake's investment stake in Myspace. In 2011, the social networking site that spent time at the top of the social-media pyramid before getting pummeled by Facebook, sold for $35 million to Specific Media. Just six years earlier, media tycoon Rupert Murdoch bought the site for $580 million.

Pop stars aren’t the only ones joining the ranks of the star-studded investor elite. Athletes like Peyton Manning have found entrepreneurship a lucrative avenue, as well. The quarterback for the Denver Broncos entered the pizza business last year, snatching up 21 Papa John’s stores in the Denver area. Many of the outposts have reportedly seen spikes in daily sales that have as much as doubled the revenue from the pre-Manning days. (Of course, incentives to football fans and pizza lovers alike—such as 50 percent-off Mondays when the Broncos win—have done nothing to temper that success.)

Despite the obvious marketing boon, some stars may bring harm to a brand's image. Examples of media belly flops include: Lance Armstrong, who lost Nike, Anheuser-Busch after a doping scandal. There's also Tiger Woods who shed various sponsors including Gillette, AT&T and Gatorade, after a car crash brought his unseemly personal life into the open. U2 frontman Bono was named “the worst investor in America” by financial site 24/7 Wall Street a few years back after his investment in a private equity firm Elevation Partners lost him millions when the smartphone company Palm failed to live up to the success of competitors like Apple.

Jones, for one, believes a startup’s success is entirely dependent upon the execution and how it incorporates a famous face

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