With the continuing trend of celebrities shifting from icons to investors, well-known personalities from all sectors of the entertainment industry are entering the startup world. However, taking on this ecosystem can be overwhelming and time-consuming, without the proper support, expertise, or education. But thanks to Erica Duignan-Minnihan, Executive Director of STAR Angel Network, an angel network created specifically for professional athletes and celebrities, these household names can diversify their investment portfolios within a formal structure, while also learning the lay of the startup land.
Founded by Duignan-Minnihan and the STAR team in partnership with NBA player Jared Jeffries, the network is an offshoot of the STAR Executive MBA Program, an education program for professional athletes and celebrities, run in conjunction with George Washington University.
“We noticed that a lot of students in the program were interested in entrepreneurship, and were already making some sort of private equity investments on their own, but that they weren’t doing it in a very disciplined fashion. We realized there could be a lot of benefits for them from forming an official angel network with real due diligence and structure, allowing them to syndicate deals amongst themselves,” said Duignan-Minnihan.
The network—founded in April of 2012—provides the opportunity for athletes and celebrities to learn more about entrepreneurship, while investing in and supporting a wide range of companies with a high return potential, both through financial capital and by leveraging their media influence, fan bases and contacts within the network.
“This a great opportunity for these guys to use all the influence, connections, and the media attention they have access to, to really help drive business development opportunities for STAR portfolio companies.”
Currently, the network has 65 investors—all accredited, according to the SEC—with 75% of the membership comprised of current and retired professional athletes and celebrities.
The other 25% consists of select high-net-worth individuals with expertise in various areas of business, such as real estate, technology, education, and private equity.
“They help to serve as mentors and real-world models for these athletes who are interested in making a name for themselves in the business world once they retire.”
The network, which is sector agnostic and open to startups across the US, focuses on companies that are capital-light, highly scalable, and tech-enabled for distribution purposes, with some intellectual property and competitive advantage. Preferred companies are ones that are targeting billion-dollar markets, that are seeking between $1-2 million and have demonstrated proof of concept.
There are five companies currently in the portfolio: BuzzTable, a mobile waitlist app for restaurants, Zeel, an app that allows users to book same-day, in-home massages, Lisnr, an audio-based technology app, ConnXus, a supplier diversity database, and Bespoke Post, which delivers “boxes of awesome” to a primarily male audience monthly, filled with a curated array of products.
And when choosing startups for the network’s portfolio, finding entrepreneurs who have refined their business model to clearly show how they’re creating value for their consumers is key.
“Having a really great management team is probably 99% of what we’re looking for—people who are trustworthy, driven, and have a really great vision. It’s about believing in their capabilities and their competencies to execute that vision, and to also adapt as there are changes in the market. That’s what inspires our confidence.”
Another large component of putting a deal together revolves around figuring out how the network can help the company, such as when they put influential music executive and STAR founding member Monique Idlett-Mosely on the board of Cincinnati-based Lisnr, a mobile app that unlocks exclusive content for music fans.
“If we feel like we’re going to be able to take this company from 0 to 100 relatively quickly just by using some of our introductions and relationships, it becomes a lot more attractive to us.”
Of the hundreds of companies viewed each quarter, 6-10 startups are invited to present at the two screening meetings that take place in the first two months of each investment cycle. There, Duignan-Minnihan is joined by the core managers of STAR Angel Network, as well as any members who are interested in attending the sessions. Invitations are also extended to select tech or angel investors who can help with investment evaluations.
Previous screening meetings have been held at Loeb & Loeb LLP, but recently, the network formed a partnership with Roc Nation, which has started to host screening meetings with entrepreneurs at their headquarters in Times Square.
“They’re very interested in learning more about early-stage technology companies and supporting some of these amazing young CEOs who are developing technology, whether for the music industry or other industries.”
Three or four of those companies are then selected to present to the general membership at the quarterly investor conferences, where one or two of the companies will be added to the network’s portfolio. Clear and concise pitches are the most successful.
“You need to be able to explain your product in a way that’s very obvious. Sometimes, people will launch into a pitch without even explaining what their product or service is. You really have to address why the market needs this product, what’s the pain point that you’re solving, and then you need to be very clear about your system for making money. You need to be able to tell me, ‘We put X dollars in and get Y dollars out.’”
The next quarterly conference will be held in Miami on August 17th, where the general membership will listen to pitches and select which companies they want to get involved with and invest in. Generally, 50% of members will be in attendance.
“It depends on the quarter, because we’ll have members who are in-season as far as their careers as professional athletes go, whether it’s football season or basketball season, so they can’t make it.”
Investments are made as a group, though members opt in or opt-out on each individual deal, with a typical investment of $25-$50K in any of the startups. In any particular investment round, the collective network will invest upwards of $200K.
While Duignan-Minnihan doesn’t analyze companies based on where they are headquartered, she considers the New York startup community to be a fantastic place to find great companies, and does notice one difference between West Coast and New York-based startups.
“New Yorkers tend to be a lot more disciplined about insisting on valuation that will support the creation of an attractive and successful angel investment industry and keep capital flowing.”
The network is currently focused on growing its membership, as well as doing as much as they can to support the growth of their portfolio companies, including putting STAR members on the boards of their investments, and making valuable introductions to prospective clients or partners.
“Once someone has taken the responsibility of actually joining the board, which is something that a lot of these investors are interested in doing and getting that experience, I’ve got a partner who’s really responsible for making sure that we activate the network and create that value for the company.”
And as the network continues to expand, Duignan-Minnihan is excited to develop STAR Angel Network into a force to be reckoned with in the investment world.
“My ultimate goal is to really change the culture around investing in the athlete community, to make sure that people have access to all the education they want around early-stage investing and to give these guys a great opportunity to learn about entrepreneurship firsthand, participate in the process and, with a diligent approach, make some money along the way.”