It started from the bottom now that he’s in the boardroom: Drake is throwing money at companies like never before. What is your strategy?

For Drake, it has been a very good year.

As a musician, possibly. As an entrepreneur and investor, indisputably.

The Toronto-born hip-hop legend arrived in 2021 with an estimated fortune of around $ 180 million (US), and proceeded to generate an impressive amount of ink in the business press with a series of eclectic investments throughout. , from Dave’s Hot Chicken restaurant. chain to Toronto-based roboadvisor Wealthsimple to Brooklyn-based Players’ Lounge online esports betting platform.

He even opened a nightclub, History, in Toronto’s Beach district in November.

Compared to hip-hop heavyweights Ye (Kanye West) and Jay-Z, he has a long way to go, both of whom already boast a net worth of over a billion dollars, but at 35, you are on your way to becoming one of the Canadians. best-known and most enigmatic business titans.

But how good of an investor is he really? And what drives your decisions? The famous distant rapper will not tell. However, a close look at his portfolio offers some clues.

His latest bets have all the hallmarks of a hip-hop star’s investment approach: many are consumer-oriented brands, often in areas that are popular and fast-growing: hot chicken chains, legalized marijuana, investing in line-based applications, e-sports, games. , meat of vegetable origin. These are the business trends that defined last year, and Drake is betting on all of them.

It’s not the way most portfolio managers invest, but research shows that betting on companies that are growing rapidly in value, sometimes called impulse investing, is one of the most successful investment strategies out there.

The fact is that when a dynamic investment approach is applied correctly to publicly traded companies, it tends to perform better. According to Greenwich, Connecticut, based at AQR Capital Management, has outperformed the market for most of the history of the US stock market.

And certainly, Drake seems to favor rising companies.

According to Crunchbase, an online database of investors and companies, Drake’s most recent investment was in StatusPro, a California-based sports technology company, in November. He is also a principal investor in Los Angeles-based 100 Thieves, a brand focused on esports and games.

Drake invests in Overtime, an online sports network, as well as NTWRK, a “live video trading platform” for millennials and Generation Z.

Then there’s his minority stake in Los Angeles-based Dave’s Hot Chicken, a stake in a venture capital fund that he invested in Wealthsimple, and an investment in Daring Foods, a plant-based chicken company also based in Los Angeles. .

Last October, Daring Foods raised $ 65 million in a Series C funding round and announced that it would launch its products at 3,000 Walmart locations in the US.

Dave’s Hot Chicken expects to double its sales locations to 43 by the end of 2021 from August 20. (Drake threw a party thrown by Dave’s to celebrate his Billboard Artist of the Decade award earlier this year.)

And Wealthsimple, one of Canada’s fintech success stories, now has an after-money valuation of $ 5 billion.

In October, Drake also partnered with Toronto-based Bullrider. That offers some clues as to how you decide which companies will be supported and which will not.

As with many of his investments, Drake’s decision to invest money in Bullrider was likely based on both a personal connection and an analysis of the company’s finances.

According to CEO Maxim Zavet, Drake first became interested in the company because Noah “40” Shebib, Drake’s longtime friend and producer, uses cannabis to treat multiple sclerosis and happens to be one of Bullrider’s main partners.

Zavet says that close relationship convinced Drake to go after a partnership between Drake and Canopy Growth ended in March.

“This is a much more authentic way for Drake to be part of a cannabis brand because 40 is really the expert among his bunch when it comes to cannabis,” says Zavet, adding that Drake “really trusts” the company.

Zavet declined to reveal Drake’s involvement, but described it as “significant.”

Jason Pereira, senior financial planner and portfolio manager at Woodgate Financial, says Drake may also have had a personal connection to his Wealthsimple gamble.

His funding for the Michael Katchen-founded robo-investing success story was part of a $ 750 million round that included famous names like NBA centers (and Toronto teammates) Kelly Olynyk and Dwight Powell, as well as the star. NHL Patrick Marleau and actors Ryan Reynolds. and Michael J. Fox.

“I’m sure Drake knew someone associated with them, or someone of them approached Drake about it,” says Pereira. “But he ended up giving money to professionals who invested it on his behalf.”

Generally, Drake gravitates toward angel investing, venture capital investing, and private equity deals. Pereira says that going this route allows Drake to bet big on companies that could become financial giants and reap the rewards, but it can be a hugely risky way to invest.

“These represent the possibility of being much more profitable,” says Pereira. “But they also represent the possibility of losing a lot more money.”

Venture capital or angel investing also tend to occur in more flashy and speculative market areas, such as esports or technology.

Drake’s decision to invest in a company like 100 Thieves may also stem from a personal admiration for the vision of the founders.

According to Forbes, Drake was drawn to the esports and lifestyle company because of how it started out, as a pipe dream of both retail and esports, rather than an esports team that pivoted when it became popular.

Drake is no stranger to this mindset – his October Very Own brand started out as the name of the label on which Drake released his second official mixtape, “Comeback Season,” but is now a multifaceted business focused on lifestyle. and fashion.

Ultimately, Drake’s investment strategies are aided by a factor that most retail (and business) investors simply don’t: fame.

Leveraging his own personal brand to generate significant cash flow is a strategy Drake has used since his inception with OVO Sound and DreamCrew.

Its ease in doing so is remarkable, but it is not unique.

Who do you think is the guy that Drake is smart enough to emulate? Jay-Z, Dr. Dre, ”says Robert Luft, portfolio manager for Industrial Alliance Securities.

These hip-hop moguls pioneered someone like Drake to “diversify their sources of income,” says Luft. “And create business careers as well.”

JOIN THE CONVERSATION

The conversations are the opinions of our readers and are subject to the Code of conduct. The Star does not endorse these views.



Reference-www.thestar.com

Leave a Comment