In Silicon Valley, top-tier venture capital firms fight with one another to land investment opportunities in hot startups.
But for startups without a line of suitors trailing out the door, securing funding can be a little trickier. That's where people like Kobe Bryant come in.
In today's Wall Street Journal, the ex-NBA star and Los Angeles-area investor Jeff Stibel announced that they are putting together a $100 million fund to invest in media and tech companies. It's the latest "dumb money" initiative from wealthy celebrities who want to hitch their wallets to the rocket-ship trajectory of Silicon Valley.
Over the last few years, virtually every part of the American economy has tried to capture a little bit of Silicon Valley's sheen. Among America's celebrity class, the trend is no different. Earlier this year, Kevin Durant said that he had invested in the food delivery startup Postmates. In 2014, Carmelo Anthony launched his own venture capital firm, Melo7 Tech Partners, and backed companies like the "smart kitchen" startup The Orange Chef.
But there's a reason people like Anthony, Durant and Bryant are commonly referred to as "dumb money" among people in the tech industry.
If a startup can take money from an investor that can help the company achieve it's goals, then that's what the startup will do. This is why car tech startups frequently take money from carmakers, or why VC firms like Andreessen Horowitz work so hard to position themselves as quasi-talent agencies.
Dumb money investors are the people that an entrepreneur goes to when they can't find funding from anyone else.
In the case of people like Kobe Bryant, who has invested in areas like mobile gaming and juice-making, it's an easy way for the startup to get free press. More frequently, dumb money refers to investors from abroad (think of the Saudis that recently poured more than $3 billion into Uber) who aren't able to secure as favorable deal terms as earlier investors.
While the phrase "dumb money" correctly reads as something of a knock on the reputation of the investor, the name has more to do with how these investments tend to work out.
Carmelo Anthony's The Orange Chef investment, for example, probably didn't make him much money. According to Fortune, recipe recommendation service Yummly "[salvaged] the assets" of The Orange Chef in an acquisition this past December.And Postmates, which brought Kevin Durant onboard as an investor earlier this year, has been putting together new funding over the past few months. Bloomberg reported in April that the company wants to "avoid setting too high of a valuation target," because of newly "heightened scrutiny from investors."