Jay Z the VC: Mr. Carter Is Launching Arrive Investments

Jay Z

This article was updated on March 6 to reflect recent developments in the story.

Rapper Jay Z once famously said “I’m not a businessman. I’m a business, man.” At one time, this was true. Shawn Carter’s personal brand as a rapper, endorser, and household name was more valuable than most other musicians or hip-hop artists in the ’00s. Yet while his albums still remain immensely popular and sell like hotcakes, Jay Z is no longer the most popular hip-hop artist alive. (Some would say that Kanye West, his former protégé, holds that title.)

Nonetheless, Jay Z made a series of smart decisions as a businessman. In 2008, Mr. Carter was given $150 million by entertainment company Live Nation to help finance his own entertainment venture, Roc Nation. Roc Nation is now a leading talent management agency and record company, among many other entertainment-related endeavors. In 2013, he became a part-owner of the now-Brooklyn Nets for $4.5 million, later selling his shares to avoid conflicts of interest after opening a sports agency. Later, he bought Tidal, a streaming music service that recently saw an investment from Sprint.

Yet while these are all smart business decisions from an entertainment superstar looking to grow his fortune, Jay Z is making the next big step in the investing world…by opening a venture capital firm.

Venture capital firms (or VCs) invest in startups and other private companies during in their infancy.

Private companies and startups are given a value (in the millions or billions) by banks and professionals knowledgeable on the subject. VCs then give money to those companies in exchange for a share based on those valuations. For instance, if I have a company that makes artisanal soap and we’re valued at $30 million, a VC can invest in us for, say, $3 million at a value of $30 million, or 10% of the company’s worth.

Jay Z’s establishment of a VC firm allows him to make “ground floor” investments like he did with Tidal.

VCs usually buy percentages of a company, not an entire company. With his VC fund, Arrive, Jay Z’s Roc Nation, Primary Venture Partners, and GlassBridge Asset Management will invest in numerous companies for several million dollars each. They will also “provide [companies] with brand services, business development, advisory and capital to drive growth in their organizations,” according to their press release. If those companies are successful, Arrive’s original investments would be worth exponentially more. If those companies aren’t successful, Jay Z and company would likely have some say to turn them around, or liquidate their assets if need be.

Roc Nation will also focus on social impact investing later this year.

Social impact investing involves making a profit and also changing the world in a positive way. For instance, $EQLT is an ETF that invests in companies that support LGBTQ rights in the workplace. No one knows what funds or companies Roc Nation will invest for this endeavor, but it’ll be interesting to see what causes the multi-million-dollar company will champion.

Many celebrities and entertainers establish venture capital firms to grow their wealth.

Snoop Dogg is part of Casa Verde, a VC firm with investments in medical cannabis and Reddit. Lincoln Park, the band you probably grew up listening to, also has a firm of their own. Nas, another popular rapper, spearheads QueensBridge Venture Partners, which has a stake in Robinhood.

How do you become a venture capitalist? It’s easy: make a whole lot of money. While there are startups that let everyday folks become quasi-venture capitalists by investing small amounts of money into companies, most venture capital comes from wealth, well-connected individuals. If you want to make clutch investments like Jay Z and other big-time moguls, you’re first step is to make some solid investments and save a whole lot of money. Being famous helps, too.