Hey — It’s Nico.

This is Behind Tactics 🧠, the Failory newsletter where I share the strategies behind the best startups.

In this issue:

• Why banking startup Step secured funding from celebrities instead of just relying on VCs.

• How Charli D’Amelio has helped Step reach over 4M users in just a few years.

• How celeb investors help startups expand their audience and boost credibility.

• Some final tips to find celebrity investors for any startup.

Let’s get into it.

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The Strategy

Celebrity Investors

Step is a mobile banking service specifically designed for teenagers, offering them a platform to manage their finances in a secure and straightforward way. 

The app has a bunch of features, including a peer-to-peer payment system that lets users send money to friends, kind of like Venmo or Apple Pay.

But Step isn't just about banking; it’s also a financial education tool, offering resources for teens and their parents to learn about money management.

Since it launched in 2020, Step has seen rapid growth, quickly building a substantial user base. In just two months, the platform had over 500,000 users, mainly through organic growth and word-of-mouth.

Step encourages this by offering $3 for each friend referred, which many teens take advantage of by sharing links on social media like Instagram and Snapchat. This grassroots approach has been a major driver in building their user base.

However, the real engine behind Step’s quick growth is its strategy of leveraging celebrity investors instead of just relying on traditional venture capital.

By securing investments from well-known personalities like Charli D’Amelio and The Chainsmokers, Step has gained a lot of credibility and trust, which are very important in the banking world.

Fundraising Journey

So far, Step has raised over $490M in funding, with a notable chunk coming from celebrity investors.

• In 2020, they secured $50M in a Series B. The deal included celebrity investors like Charli D’Amelio, Justin Timberlake, and The Chainsmokers.

• In 2021, they secured $100M in a Series C. The deal included celebrity investors such as Jared Leto, Will Smith, and Stephen Curry.

The involvement of these celebrities has been a strategic move to amplify Step's visibility and appeal. Celebrity investors not only provide financial backing but also lend their influence and media reach to promote the brand. 

Charli D'Amelio, in particular, has been a huge part of this strategy. With her massive following on TikTok and other social media platforms, her endorsement has been key in boosting awareness and attracting new users.

D'Amelio has created promotional content for Step, sharing her experiences with the app and encouraging her followers to join, effectively turning her massive fanbase into potential users.

@charlidamelio

link to sign up for @step in my bio💗 #steppartner

Charli D'Amelio's role in promoting Step has been particularly impactful because her audience is primarily teenagers, which is exactly Step’s target market.

Her involvement has not only brought significant PR but also helped position Step as a trusted and trendy financial tool among young people. Her endorsement has been a real game-changer for Step, providing authentic and relatable promotion that resonates well with the app's users.

Should I?

Why This Works

• Amplifies brand awareness: Celebrity investors can significantly amplify a brand's visibility. This is especially effective for startups or lesser-known brands looking to enter competitive markets. Take Charli D'Amelio's investment in Step as an example. Her endorsement instantly introduced the app to millions of her followers, many of whom might not have heard of it otherwise. This kind of exposure can be more powerful and cost-effective than traditional ads, giving startups a direct line to a large and engaged audience.

• Leads to free PR: One of the best perks of having celebrity investors is the free promotion that comes with it. Celebrities usually share their investments on social media or in interviews, which can lead to a lot of buzz. And the best part? They're investing their own money, so it's like getting paid to get promoted. It's a win-win situation that can save a startup a lot on marketing costs.

• Builds trust and credibility: When a well-known celebrity backs a brand, it can significantly boost its credibility. This is especially true if the celebrity's image aligns well with the company's values and target market. It's a form of social proof—if a trusted figure like Justin Timberlake is involved, people are more likely to trust the product. This is particularly important in sectors where people are cautious, like finance and banking.

• Provides strategic insights: Celebrities don't just bring fame; they often have a deep understanding of market trends and consumer behavior. Plus, their connections can open doors to new partnerships and opportunities that might otherwise be hard to come by. For instance, Step likely gained valuable insights into reaching younger audiences thanks to Charli D’Amelio's involvement. This kind of strategic input can help fine-tune marketing strategies and product offerings to better resonate with the target audience.

How to Apply It

• Identify aligned celebrities: Start by identifying celebrities who are genuinely interested in your industry or product. This alignment is crucial because it increases the likelihood that they will invest their own money and actively promote your brand. Look for public figures who are already involved with similar products or causes. For instance, if you're in the health and wellness space, a celebrity known for advocating healthy lifestyles could be a perfect fit.

• Offer unique investment terms: To draw in celebrity investors, consider offering special investment terms that appeal to their interests and status. This might include giving them equity in your company, special roles in product development, or even some creative control over marketing campaigns. You could also offer them titles like brand ambassador or creative director, which not only leverage their influence but also give them a deeper connection to the brand.

• Leverage the celebrity’s audience: Work with your celebrity investors to produce promotional content that showcases both the product and their involvement. This could range from behind-the-scenes videos and interviews to special events. The aim is to create content that's authentic and engaging, resonating with both the celebrity’s fan base and your target audience.

• Leverage their influence for strategic partnerships: Celebrity investors aren't just about the initial buzz; they can also help you forge valuable strategic partnerships. Once you have a celebrity on board, leverage their networks to connect with other potential investors, brands, or media outlets.

Yes, But

• Finding celebrity investors is tough: Getting celebrity investors on board is not a straightforward process. It often requires a lot of networking, a compelling pitch, and, sometimes, connections within the entertainment industry. Celebrities are often choosy and invest in projects they're genuinely passionate about, which might not always line up with what your startup offers. This challenge is even bigger for smaller startups because they might not have the visibility or resources to compete with larger companies for celebrity attention and investment.

• Mismatch between celebrity audience and target market: Even if a startup successfully secures a celebrity investor, there's no guarantee that the celebrity's audience will align with the startup's target market. A mismatch can result in ineffective marketing and wasted resources. For example, a tech startup targeting professionals might not benefit much from a celebrity whose following consists primarily of teenagers. 

• Limited control over public image: When celebrities invest in a company, their personal actions and public statements can impact the brand, often beyond the company's control. Scandals or controversial behavior by the celebrity can tarnish the brand's image, leading to negative media coverage and customer backlash. This lack of control can be especially problematic in industries where trust and credibility are essential.

Keep Learning

Others Playing It

Cultured Meat and DiCaprio:

Aleph Farms and Mosa Meat are pioneering startups in the cultured meat industry, aiming to produce real meat grown in labs. This innovative approach offers a more sustainable and ethical alternative to traditional livestock farming, addressing environmental and animal welfare concerns.

Leonardo DiCaprio, a well-known environmentalist, has invested in both companies, making him an ideal fit for promoting their mission. DiCaprio's involvement not only brings attention to the environmental benefits of cultured meat but also aligns with his advocacy for sustainable practices. 

Gopuff and Selena Gomez:

Gopuff, an on-demand grocery delivery service, has secured investment from Selena Gomez, a popular singer and actress. Gopuff offers convenience by delivering groceries and household essentials in minutes, catering to busy lifestyles. Selena Gomez's involvement brings a fresh and relatable face to the brand, appealing to a younger demographic.

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That’s all for this edition.

Cheers,

Nico