We Think Celebrity Tech Investors Are Missing Out

This week, it was confirmed by Axios that Jay-Z is launching a new venture fund with Silicon Valley venture capitalist Larry Marcus. Jay-Z is joining a myriad of celebrities investing in technology as angel investors or through their own funds: from Joe Montana’s prolific Liquid2Ventures to Kevin Durant’s recently launched The Durant Company.

Most celebrity-backed funds tend to employ traditional investors or business executives to co-manage the fund’s investments. When Liquid2Ventures launched, it did so with Michael Ma and Mike Miller, two seasoned startup founders with respective exits. While the Durant Company was co-founded and is co-led by Kevin Durant’s manager, Rich Kleinman. While it makes perfect sense to partner with traditional investors, the strategies employed by these funds tend to be quite traditional as well, with the majority of their investments in companies based in Silicon Valley, New York, or Boston.

This aligns with national trends. Over 75% of venture capital in the US goes to Silicon Valley, New York, and Boston. However, the future of startups is beyond these coastal tech hubs. According to PitchBook, from 2010–2017, $144.3 billion was invested in Silicon Valley — almost three times as much as the next metropolitan area (New York-Newark-New Jersey, which received $54.5 billion during the same period). However, the biggest returns for investors were not in companies based in Silicon Valley or New York … the biggest returns came from companies based in Chicago. And according to the Kauffman Index, Silicon Valley falls short in two key aspects of entrepreneurial activity: startup activity (Miami-Fort Lauderdale-Pompano Beach leads the pack) and growth entrepreneurship (Washington-Arlington-Alexandria tops the list).

We think celebrity investors are missing an opportunity to use their star power to champion entrepreneurs across the country, not to mention the potential for higher returns. Most athletes and celebrities have connections to these communities across America: either they come from cities between the coasts, proudly wear team jerseys from those locales, or serve as proud ambassadors for local charities. We hope these new investors use their middle-of-the-country connections to find and invest in entrepreneurs in rising cities.