A-List Angels

On a warm October night at trendy Boston eatery Deuxave, Ashton Kutcher lowers the brim of his Los Angeles Dodgers cap and tucks himself behind a pillar the size of a refrigerator. The Dude, Where’s My Car? star is in town for the Forbes Under 30 Summit, along with 6,000 young entrepreneurs. I’ve just profiled him in a cover story for the aforementioned magazine; as we exchange greetings, his eyes dart around the room, suggesting a desire to at least briefly avoid detection—not by autograph seekers but by the stream of startup founders hounding him for investment.1

Kutcher and his business partner, U2 and Madonna manager Guy Oseary, launched a $30 million fund called A-Grade in 2010 and grew it to $250 million in just a few years by investing in Uber, Shazam, Airbnb, Pinterest, and more. “Once you learn how to identify a snow leopard,” Kutcher tells me, “it’s pretty easy to see a snow leopard coming along.”2

This is just one chapter in the story of Hollywood and Silicon Valley’s lucrative collision. Look out across the entertainment landscape, and you’ll find that the world’s top actors, artists, and athletes now own slices of the country’s hottest tech companies: Beyoncé (Uber), Kevin Durant (Postmates), Serena Williams (Coinbase), Jared Leto (Robinhood), and Jennifer Lopez (Acorns), just to name a few. Many of those early investments ballooned in value as startups turned into billion-dollar companies on paper or with the help of public markets. U.S. venture capital firms, or VCs (a term also used to describe individual venture capitalists), are now pouring some $100 billion into startups annually in hopes of finding the next billion-dollar startup.

Mammoth institutions have historically been the only ones with easy access to such companies, apart from a handful of high-net-worth individual investors—or angels, in venture-world parlance. Now a group of A-listers has found a way to join professionals in the bonanza, often at discounted rates and sometimes even for free, parlaying evanescent fame into long-term fortunes. It’s the culmination of a decades-long shift in which entertainers have gone from wage laborers—often exploited by wealthy bosses—to owners of diversified investment portfolios and a chance to control their own financial futures.

For the purposes of this book, we’ll focus on several individuals in the vanguard of this trend. Foremost among the A-List Angels is Kutcher, an Iowa-born college dropout turned Hollywood superstar with a penchant for making savvy startup investments. NBA Hall of Famer Shaquille O’Neal is the lone member of the group with an MBA, having received that degree after blazing a trail by investing in Google back in 1999, before it went public. Then there’s Nas, the hip-hop legend who made his first big splash by championing and investing in lyrics site Rap Genius (now Genius) before adding stakes in others, including Dropbox and Ring; like Shaq, he cashed in on the latter when Amazon bought it for $1 billion in 2018.

These forerunners opened the doors for a diverse range of investors in the entertainment world, many of whom also shared their stories for this book. DJ and producer Steve Aoki told me about accumulating stakes in startups from Airbnb to SpaceX; NFL legend Tony Gonzalez recounted earning as much from selling his fitness app to Fitbit as he did during his peak playing years; Sophia Bush detailed how she turned her career as a television star into a chance to invest early in companies like Uber.

Less famous but equally influential are three operators who helped bring about the A-List Angel phenomenon behind the scenes. Guy Oseary grew up in Israel and moved to Los Angeles as a youngster, catching on as the manager of Madonna and U2 before teaming with Kutcher to start A-Grade. Troy Carter spent several years managing Lady Gaga before turning his focus to companies like Spotify. Rounding out the crew is Ben Horowitz, the hip-hop aficionado and cofounder of venture firm Andreessen Horowitz, which Nas and other entertainers have followed into countless major investments—among the Silicon Valley elite, nobody has done a better job at securing mutually beneficial relationships with A-List Angels.

In about a decade, these investors have racked up a tremendous track record, graduating from early roles as angels or entrepreneurs to, in many cases, running funds of their own. They’ve often shared the best investment opportunities with one another, helping scores of startups grow into multibillion-dollar behemoths while generating an unprecedented sort of wealth for the creative class. Not bad for a group with only a couple of college graduates among them.

“A big part of entrepreneurship is being willing to do every job in the company,” says Carter. “I do think there’s a level of hustle, whether you’re [someone] like myself and Guy who were party promoters, just where you’re willing to get your hands dirty…being able to bring that level of grit to the table for entrepreneurs, I think they respect it.”3

Carter and his compatriots showed how a group of imaginative outsiders could cash in on the greatest wealth-creation engine of the twenty-first century: the venture capital–fueled tech boom that followed the Great Recession. Yet the historical links between technology, artistry, and fame date back to the Industrial Revolution, when advances in printing helped pave the way for British poet Lord Byron to widely distribute his work and become arguably the first modern celebrity.

Later, before the turn of the twentieth century, Thomas Edison’s inventions paved the way for modern movie stars and an even wider means of disseminating content. From the early days of Hollywood’s studio system, actors’ pay was relatively low. Midcentury superstar James Cagney once got a raise by threatening to leave Warner Brothers for medical school. Aside from rare exceptions like Babe Ruth, pro athletes had to work odd jobs in the off-season to make ends meet. And musicians had it perhaps worst of all, with some of the greatest groups signing away their copyrights for almost nothing. For athletes, actors, and artists, careers were often short—and, once these public figures were past their prime, their moneymaking opportunities declined sharply.

“We get old, and then we’re like everybody else,” Nas tells me. “We came here to give art. It’s fun to get the perks that come with it, and we have a great time. But at the end of the day, look what happened with Elvis.”4

Indeed, as with countless stars before him, the King’s coffers were rapidly dwindling when he passed away in 1977. Compensation began to change for the better across the board in the 1980s, when two Michaels—Jordan and Jackson—started branching out beyond basketball and music, negotiating multimillion-dollar deals with Nike and Pepsi, respectively. Jordan’s sneaker royalties offered a new playbook for monetizing fame that hip-hop stars soon adopted, paving the way for the branding boom of the 1990s. Soon, rappers turned moguls from Diddy to Jay-Z were making far more on their onetime side hustles (clothing lines, liquor deals, sneakers) than from the sale of recorded music.

The first tech bubble offered a hint of something more significant: a chance to convert fame and creative chops into stakes in uncorrelated companies, as William Shatner did by accepting equity instead of cash for shilling Priceline.com in the late 1990s. But that trend disappeared in the wake of the turn-of-the-millennium dot-com bust. A few Hollywood investors who’d been dabbling in Silicon Valley got wiped out back then, among them Oseary. “I lost everything I ever made,” he says.5

Even as a new wave of startups emerged and social media erupted in earnest, Hollywood remained skeptical, missing myriad chances to invest; some of those who jumped back in after the dot-com bust got smacked down again during the Great Recession. Yet most tech-world operators had always functioned with a long-term outlook, taking small salaries with large equity guarantees. They dreamed of getting rich in the event that their startups got sold or went public, even if macroeconomic conditions looked dire in the short term. Entertainers still wanted to get paid large sums of cash up front, even if it meant forgoing a shot at a bigger payday down the line.

“How they got paid was very different than how we wanted to pay,” says Heidi Roizen, an industry veteran who worked as an Apple executive before moving on to venture firm Draper Fisher Jurvetson (DFJ), an early investor in Twitter, Tumblr, and SpaceX.6

The struggle between those who created content and those who built the platforms upon which it would be displayed reached an inflection point at the turn of the millennium, when musicians noticed that their work was being distributed for free via services like Sean Parker’s Napster and Travis Kalanick’s Scour. Even though those companies eventually pivoted beyond recognition—or got sued out of existence—their founders resurfaced just a few years later at two of the most influential startups of all time: Facebook (Parker) and Uber (Kalanick). As Hollywood types started sniffing around startups again with the idea of buying in, both sides had to overcome their previous prejudices.

“When I first started investing, it was a big gap, which we turned into a drawbridge between Silicon Valley and Hollywood,” says Carter. “The Valley had the stereotype of L.A. as antiquated, litigious dinosaurs who would never change. L.A. had this perception of the Valley as pirates [who] didn’t respect content.”7

Hollywood and Silicon Valley ultimately had more in common than they realized. Successful players in either world generally had to follow a similar path: come up with a deeply compelling idea, then sacrifice everything—time, money, sleep, relationships—to see it to completion. In a way, U2 began as a startup just as Facebook did. It’s only fitting that Bono invested in the social network before it went public.

As creators grew their audiences through Facebook and Twitter, simultaneously boosting the fortunes of the services themselves, a debate sprung up over the merits of content versus platform. “A bunch of these early tech products grew and got very large just because they were great technology,” says Josh Elman, an early employee at both Twitter and Facebook who later became a venture capitalist. “How much is it that coolness and the trendsetting…versus just great technology?”8

The past decade has seen Hollywood become instrumental in Silicon Valley startups, and vice versa—from actress Jessica Alba’s consumer goods outfit the Honest Company to indie musician Jack Conte’s Patreon, a service that allows creators to release content directly to a community of paid subscribers, each boosted by well over $100 million in funding from the venture capital world. Still, starting tech companies of their own didn’t change how these individuals thought about the value of creativity.

“Unequivocally, the internet is an empty shell without the people that fill it with all the things that we love to read and watch and listen to,” says Conte. “We actually say at Patreon, internally and externally, ‘We are nothing without our creators.’”9

Companies from Patreon to Airbnb wouldn’t exist—at least not in their current incarnation and scale—without the help of venture capital firms. Like baseball teams or record labels, these giants roll the dice on dozens or even hundreds of prospects in an effort to find those rare few capable of capturing the world’s imagination.

These firms’ rainmakers, usually called general partners, invest money for wealthy individuals known as limited partners and take a management fee of about 2 percent, as well as a piece of profits in the neighborhood of 20 percent (the hedge fund business is structured similarly). It’s a steep price, but buying into a fund allows investors to take advantage of savvy general partners’ expertise and breadth of opportunity (also known as deal flow), resulting in a chance to pour cash into many different startups rather than putting all their eggs into one risky basket.

Entrepreneurs take money from these firms for a simple reason: starting a business is usually a cash-intensive affair, and most people who come up with a great idea often don’t have the resources for bootstrapping (startup lingo for self-funding). Founders eventually need to quit their day jobs, hire staff, rent office space, and often manufacture physical objects, among other things. Typically, they begin by raising a round of investment from risk-tolerant angels (who must certify themselves “accredited investors,” meaning they have annual income in excess of $200,000 or assets of more than $1 million).

Generally, high-rolling angels willing to invest in fledgling companies—often without any revenue, let alone profit—aren’t easy to find. That’s where venture capital firms tend to come in. Either way, getting checks isn’t easy: about 97 percent of startups never get funded.10 The small fraction of startups that do obtain some form of early investment, generally termed a seed round, proceed to a more formal funding event called a Series A; subsequent rounds are labeled Series B, Series C, and so on. Along the way, startups tend to shift their focus from acquiring users toward becoming profitable with the aim of getting bought out by another company or going public.

The top Silicon Valley venture capital firms get first dibs and invest only in a small subset of this group (regular investors can’t get in until companies go public, generally after many years of growth, at which point the biggest returns have already been gobbled up by VCs). Whereas a baseball player who only reaches base two times out of ten won’t stick in the majors, a hit rate of 20 percent is perfectly acceptable for VCs, and one grand slam can make up for dozens of strikeouts. Pouring resources into unprofitable companies that have a chance of becoming a billion-dollar “unicorn” (we now have “decacorn” and “centicorn” to signal greater orders of magnitude) comes with the territory. So does the possibility of losing everything. But the payoff can be enormous: take Sequoia Capital, which has invested tens of billions in companies from Apple to Zappos now worth north of $3.3 trillion combined.

“[That’s] the business model of Silicon Valley,” says DFJ’s Roizen. “You lose money for a long time, and then you make a shit ton of money.”11

For entertainers, the exchange of coolness, creativity (and, sometimes, cash) for equity proved to be a far wiser formula than shilling a product for a flat fee, creating lasting wealth in a way that the brand extensions of the 1990s and early 2000s couldn’t. Using fame to build a clothing line or eponymous sneaker is impressive. But leveraging it to get a piece of Uber and Airbnb—companies worth tens of billions of dollars—is something else, especially as such startups choose to delay IPOs longer and longer.

“Find a way to make yourself valuable from an equity perspective, and then the potential upside is on you,” says Kutcher. “I’d rather bet on me every time that I can give a brand lift than basically give the upside back to the company.”12

In other words: entertainers have a chance to profit much more by getting a piece of the companies they endorse than by accepting cash for their time. Under this arrangement, stars get an edge by accumulating stakes in the young companies disrupting the world economy, while startups gain new users and cachet by leveraging the social followings and Rolodexes of their famous investors. Big venture firms have vast amounts of cash to throw around and can’t concern themselves with five- and six-figure investments in early-stage startups. For founders, the alternative is often fundraising from smaller firms or from angels who don’t bring any significant connections to the table.

“Celebrities really have to put a lot of work in for a small check size,” says Michael Ma, Joe Montana’s partner on the seed-stage fund Liquid 2 Ventures, founded in 2015. “[Founders are] not taking advantage of the celebrity investor, but getting a really good deal there.”13

Hollywood and Silicon Valley have plenty of similarities, including a number of unfortunate ones. Both suffer from a lack of diversity, with women and minorities drastically underrepresented, especially in the executive ranks. The worlds of entertainment and tech have also shared widespread issues of sexual harassment and assault, as many observers learned in recent years. And yet the convergence has shaken things up to an extent, bringing a rainbow of investors and entrepreneurs into the startup universe—helping to put a dent in demographics that skew heavily toward white males.

Along the way, entertainers have earned a chance not only to profit from selling their work but, in some cases, to grab pieces of the platforms upon which their work is distributed. “The real story is what happened in this awkward transitional phase where all the artists believed that art was never going to be how you made money, ever again, and they freaked out,” says D. A. Wallach, the rocker turned Spotify artist-in-residence who first convinced Carter and others to invest in the streaming service. “And they all chased tech because they believed that it was where they could leverage the brand equity they had built in entertainment to make money.”14

Over the course of my decade-plus covering media and entertainment at Forbes—and chronicling the earning power of superstars as editor of our annual Celebrity 100 issue—I’ve been sitting front row with a notebook as the first crop of A-List Angels emerged. My efforts began with a 2012 cover story called “Justin Bieber, Venture Capitalist” after the singer’s manager, Hollywood power broker Scott “Scooter” Braun, helped him grab equity in Spotify and other startups. A couple years later, I wandered Rome with Katy Perry, who’d just landed a stake in Popchips; in 2016, I ubered around Los Angeles with Kutcher and Oseary, getting the full story of A-Grade for the first time.

In between, I’ve also reported on startup investments by the likes of Michael Jordan, Jennifer Lopez, Kevin Hart, Usher, and Mark Wahlberg. My first three books explored how Jay-Z, Diddy, Dr. Dre, and Michael Jackson monetized their fame. I’ve also got some Hollywood experience myself, having played the title role in the 1992 film Lorenzo’s Oil as a child (though it didn’t lead to any early investments in modern-day unicorns).

This book is based on my conversations with more than 100 people sitting at the intersection of entertainment and tech, including my interviews with A-List Angels like Kutcher, Shaq, and Nas over the years or specifically for this book—in many cases, both. The coming pages also feature extensive exchanges with behind-the-scenes players such as Oseary and Carter; investors at venture capital firms from Greylock to Lightspeed; and executives and founders at startups like Acorns, Genius, and Robinhood (if you need help keeping track of the maelstrom of people and company names, flip to the glossary on page 201).

For the average reader, discovering how rich and famous creators get richer and more famous might be enraging, as most deals described in the coming pages simply aren’t available to the typical person. Sure, you can avoid leaving equity on the table: for instance, if your employer matches 401(k) contributions of up to 3 percent of your paycheck and you’re not taking advantage, you are ignoring a fountain of free assets. But unless you’re someone like Shaq, nobody is going to tap you on the shoulder and ask you to invest in Google before it goes public, nor will entrepreneurs line up outside your home offering you free equity in their startups in exchange for a couple of promotional tweets.

The strategies used by these A-List Angels are instructive in other ways. Kutcher and Oseary generated an 8.5x return with their first fund by applying a certain investment philosophy: look for companies solving a real problem (Uber shaking up the plodding yellow cab industry and the very idea of even owning a car) and consider unglamorous sectors (human resources, not jet sharing). Kutcher is the rare example of a celebrity who generally does the legwork himself, rather than relying on trusted advisors (which he sometimes does, too). Both everyday humans and celebrities would be wise to start with a mix of low-fee index funds and professional advice before dabbling in anything more exotic.

“Eisenhower said the greatest leaders are the ones smart enough to hire people smarter than them,” says Shaq. “I got a lot of people who really know what they’re looking at.”15

As the relationship between Hollywood and Silicon Valley has evolved, so has the role of creators involved in startups. Stars often got what they paid for when accepting free equity, as they learned with failed companies like Viddy (an Instagram knockoff) and BlackJet (Uber for private jets). Entrepreneurs also learned that celebrities with skin in the game—especially the sort that was purchased, even at a discount, but not given—tend to make better partners. What began as a cheap and sexy way to attract an audience is now, in many cases, less about gaining users and more about making connections between little-known companies and huge corporations—or other celebrity investors. Joe Montana knows that as well as anyone.

“I meet with our companies in the beginning, but, realistically, my role is more as they get down the line, as they get a little bit older,” he says. “They’re looking for intros to some of the larger organizations like Visa, American Express. That’s where my contacts come in, enable me to put them in touch with the Whole Foods guy or whatever it might be. Even if I don’t have a contact, a lot of times I can get a callback.”16

At its heart, this is a story about a group of historically underpaid workers who finally grabbed their rightful piece of the means of production. It’s also an inspiring tale of a class of laborers—once known for accumulating cash quickly and frittering it away, or getting swindled out of assets by unscrupulous handlers—finding a way to turn short-term earnings into something that can last.

“Wealth is passed down from generation to generation,” Chris Rock once noted. “You can’t get rid of wealth. Rich is some shit you can lose with a crazy summer and a drug habit.”17

The A-List Angels’ efforts are fueling a shift in generational wealth that’s already changing the complexion of the upper echelons of American society. Jay-Z is a billionaire; Dr. Dre and Diddy are knocking on the door. As Beyoncé, a centimillionaire many times over in her own right, noted on the song “Boss”: “My great-great-grandchildren already rich / That’s a lot of brown children on your Forbes list.”

This is the story of the group behind that transformation.