Three years after launching her clothing brand Ed-a-Mamma, Alia Bhatt, one of Bollywood's most sought-after young actresses, is reportedly cashing out. Indian newspapers report that her company will be acquired by the retail arm of one of India's largest conglomerates, Reliance Industries, for 3bn rupees ($36m; £28m).
If the deal goes through, it would give a “fillip” to the now established trend of Indian movie stars putting money into start-ups and owning consumer-facing brands, says Bhaskar Majumdar, an early-stage investor.
Bhatt is just one among a host of Bollywood stars who have been actively investing in start-ups recently. Her contemporary Deepika Padukone launched her own skincare brand, 82°E, last year, around the same time that her husband, actor Ranveer Singh, bought a stake in beauty brand Sugar Cosmetics.
The trend isn't new, say industry watchers. It began in the early 2010s when India's start-up scene started gaining traction. Salman Khan, one of Bollywood's most popular actors, was among the first to venture in, when he picked up a minority stake in the travel portal Yatra in 2012. But with India emerging as the world's third largest start-up ecosystem, this has gathered more steam.
In just 2022 alone, 14 Indian actors put money into 18 start-up ventures, most of them in the early or growth stages. A majority of the investments were in direct-to-consumer (D2C) brands, while the rest were in ed tech, e-commerce and food tech, among others.
“Celebrities today don't want to be seen as just movie stars but also as smart investors,” says Aviral Jain, managing director of the valuation advisory services practice of Kroll. “Alia Bhatt has shown how a celebrity can leverage her stardom and fan following to transform an eco-friendly, homegrown brand into a successful business.”
It's a significant shift from the way Indian actors approached money and investing in the past, when many would cheerfully admit to depending on family members to manage their finances. While some, like Shah Rukh Khan, did become successful businessmen, investing in sporting ventures and restaurants, stars such as Amitabh Bachchan and Jackie Shroff faced bankruptcy because they put most of their eggs in one basket – film production, which is a high-risk venture.
But today's stars are a savvier lot financially, and along with investments in traditional sectors such as public markets, real estate and infrastructure, they are allocating capital towards start-ups as a “diversification tool from an investment portfolio standpoint”, says Navjot Kaur, associate director at Epiq Capital.
“Indian venture capital is attracting funds from domestic ultra-high net worth individuals (UHNIs) and many celebrities are a subset of that,” she adds.
Many stars have even set up family offices to manage their investments in a professional way, according to Mr Jain. Experts say partnerships between celebrities and brands can be of mutual benefit.
For start-ups, getting investments and promotions from a celebrity instantly lends them credibility and enables them to reach millions of consumers. These start-ups typically have limited resources, “so preserving cash by giving away equity is often a smarter approach,” says Shauraya Bhutani, partner at Breathe Capital.
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Start-ups also get to “leverage a celebrity's media presence to publicise the brand”, says Benaifer Malandkar, chief investment officer of Raay Global Investments. Plus, the association with a well-known celebrity brings instant recognition to a brand and makes it seem more trustworthy to consumers.
As it did for Blue Tribe Foods when cricketer Virat Kohli and his wife, actress Anushka Sharma, invested in the fledgling plant-based meat company.
“We wanted to make people aware of the problem with the current meat value chain, and also offer the alternative solution. Their endorsement has led to the category awareness going to masses of the country, rather than just giving the brand a push,” Sohil Wazir, the company's chief commercial officer, told the BBC.
Taking equity in a company rather than getting cash upfront means that stars get to participate in the upside if the company does well, and put their money into businesses that gel with their own personal ethos. Both Kohli and Sharma are vegetarians who often advocate for the rights of animals.
However, K Ganesh, a serial entrepreneur and promoter, says that relying solely on a celebrity's popularity may not be enough to grow a brand. He also warns that celebrities should be cautious about the start-ups they support, checking not just the “business risk”, but also the “reputation risk” associated with a company.
Governance scandals have rocked several high-profile Indian start-ups recently and many of them have also seen a markdown in valuations amid a funding winter.
According to a report by PwC, India's start-up ecosystem raised the lowest funding in four years during January-June 2023 at $3.8bn across 298 deals, down 36% from July-December 2022.
But rather than seeing this as a deterrent, it could instead be an excellent time to seize the opportunity, says Mitesh Shah, partner at Physis Capital, an angel fund.
“With attractive valuations, these start-ups have the potential to create substantial wealth for investors in the long term,” Mr Shah told the BBC.
In the West, celebrities such as Jay-Z who purchased a $2m stake in Uber and Ashton Kutcher – an active investor who bet on companies like Skype and is now a venture capitalist – have made handsome returns on their money.
In India too, “we can expect a few billion-dollar new-age consumer brands being built or backed by Indian celebrities in the next decade,” says Mr Bhutani.
To some degree, Bhatt and Katrina Kaif's early investments in the now publicly listed unicorn Nykaa demonstrate that success already.
— CutC by bbc.com
