Do you mean brand shareholder or brand ambassador?
A growing number of celebrities are applying their wealth, fame, credibility and consumer insights to fashion companies in order to make more money.
According to talent agents and investment specialists, recent months have seen Oprah Winfrey and Reese Witherspoon invest in Spanx and other companies.
According to Michael Blank, head of consumer investments at Creative Artists Agency, one of the big Hollywood talent agencies that is finding new roles for their clients but also early-stage investments in consumer brands, interest is coming from both sides.
Sam Wick, partner and head of UTA Ventures, the division of United Talent Agency that invests in businesses across media, consumer products and technology, says there is a growth in equity mind-set.
Even for brands that don’t carry their names, talent are interested in investing in themselves, both in terms of their time and capital. A key driver of the shift is the opportunities for increased financial returns.
In the past few years, fashion brands have had access to an abundance of available capital, but have learned that not all capital is equal.
He says that many founders want to bring in investors that can provide more value to the business. The idea has been further accelerated by Apple’s privacy and tracking changes and the impact that has had on the cost of mobile advertising. Consumer brands and start-ups see the value that celebrities with large social audiences can potentially bring, in addition to the earned media that comes from their association as investors.
Why did celebrities wake up to the possibility of owning brands instead of just fronting them?
George Clooney became the world’s highest paid actor in 2017: after he and his business partner sold their premium tequila brand Casamigos to a distribution giant for $1 billion.
A Los Angeles-based principal in boutique investment firm Ohana & Co. says exposure is the number one thing consumer brands need to grow. “As an investor, you need to have strong opinions on what the consumer wants and many celebrities feel that they actually understand what the consumer wants.”
Wayne Kulkin is the founder and CEO of P448. He says that they are more aware of trends than most of us. They want to be involved in the brand. They feel the same things that we do.
Many celebrities face diminishing returns from their core businesses of music or acting in the wake of streaming services, which have changed the economics of the fame game
Ohana said celebrities have begun to become equity players and not only guns for hire.
For a long time, endorsement deals for cash were the norm, and huge windfalls for the likes of Michael Jordan when he first became an ambassador at Nike. Tom Brady was one of the first athletes to take stock options as part of his endorsement compensation. Ohana calls it an extra sugar.
Serena Williams and Jay-Z have their own venture funds. Wile, recipe marketplace Foody, and fashion supply-chain software firm Calico have all been invested in by the former.
Jay Sammons, a Carlyle Group executive, is one of the co-conspirators of KimKardashian’s new private equity fund.
In most cases, celebrities invest in consumer brands that reflect their lifestyle, image and expertise, with Ohana citing as other examples basketball player TonyParker’s investment in sports e-tailer Colizey, and Andy Murray taking a stake in activewear brand Castore.
He says that there is overlap in these, where celebrities have credibility or understand what consumers want. If you understand the space in which you are investing, you can add value to the business that you are investing in.
The fitness fanatic, who has more than 19 million followers on the social media platform, flaunts not only his rippling muscles, but also his clothing brand, his fast-food chain, and now also P448 footwear.
In February of last year, he posted his outfit for the Super Bowl, with black jeans and a pink hoodie, and he got over 5 million likes.
Kulkin says that he only invests in things that he really believes in. Celebrity investors invest in brands to control their own narrative.
When 1,500 people showed up for a personal appearance by MarkWahlberg at the P448 pop-up in Paris last June, it brought extra heat. He says it became like a rock concert.
Los Angeles is a great place to invest in fashion.
Ohana says that there is an environment where entrepreneurs, dealmakers and ambassadors meet with the new consumer.
CAA and NEA formed a partnership to invest in early-stage consumer businesses in the content and media space, fashion, health and wellbeing, e-commerce, consumer products, Web 3 and N.
As their clients become more active, early-stage investors, and build their own personal portfolios, we have set out to share co-investment opportunities from ConnectVentures. The clients have been actively looking for investment opportunities on their own, or through the teams that they have built for their investment endeavors, and Connect is just one avenue of deal flow for them.
A number of talents, including NBA player D’Angelo Russell, have recently co- invested with a venture capital firm.
Is there any special consideration given to celebrities in deals?
Co-investment opportunities are straight investments, not sweat equity or partnership deals, and offer the same terms as everyone else in the round. There aren’t any service obligations for the talent or the company. The success of the company is important to investors and they will often find ways to support growth initiatives.
A number of factors influence the terms of a deal.
There are promotional obligations that are important. Potential factors include name and likeness, publicity, social media and in-store appearances, he says. There is a chance for performance based kickers tied to the promotion. The terms can vary based on perceived connection or authenticity.
Pierre Mallevays, co-head of merchant banking at Stanhope Capital in London, points to the rise of ethical investment in “purposeful brands” that allow cash rich celebrities to express their beliefs and shine a light on the causes they support.
According to him, the two names that stand out in his opinion are Leonardo DiCaprio, a pioneer in supporting environmental projects, and Gwyneth Paltrow, seen by many as the priestess of healthy living.
Some clients have a particular focus on certain categories or causes such as sustainable companies, women’s empowerment, plant-based foods/food tech, parenthood and child care. He says investing in early-stage companies allows all investors to support the future they want.
Kulkin uses lionfish skins as sneaker trim on P448’s styles as a way to help diminish the damage caused by an Invasive Species.
He says that they can give a critical mass to many of the things that need to be done quickly. They don’t know the power they have. Imagine how good a person can be with it.