Brand ambassador or brand shareholder?
More and more celebrities are now choosing the latter, potentially more lucrative route, making their wealth, fame, credibility and consumer insights available to a variety of fashion companies.
According to talent agents and investment specialists, it’s no coincidence that Oprah Winfrey and Reese Witherspoon have invested in Spanx over the past few months; Priyanka Chopra and Nick Jonas at skiwear maker Perfect Moment; Beyoncé, Jessica Alba and Rihanna at French accessories company Destree; Mila Kunis, Cameron Diaz and Gabrielle Union in Autumn Adeigbo and Mark Wahlberg in Italian sneaker brand P448 to name a few such transactions.
“We’re seeing interest from both sides,” says Michael Blank, head of consumer investments at Creative Artists Agency, one of the big Hollywood talent agencies that not only finds new roles for its clients but also makes early-stage investments in consumer brands to add to their portfolios diversify.
“There is an increasing ‘fairness’ mentality in all segments of the talent ecosystem,” agrees Sam Wick, partner and head of UTA Ventures, the division of United Talent Agency, which invests in media, consumer goods and technology companies. to.
“Increasingly, talent is keen to invest time and capital in themselves, even in brands that don’t bear their name. Opportunities for greater financial returns, along with pride in ownership and legacy, are a key driver of this shift,” says Wick.
Fashion brands looking to spur growth have had access to “a wealth of available capital” in recent years, but have learned that not all capital is created equal, according to Blank.
“Many founders focus on attracting investors who can add value to the company,” he explains. “This idea has been further accelerated by Apple’s privacy and tracking changes and the impact that has impacted mobile advertising costs and rising acquisition costs. These changes have led consumer brands and startups to recognize the value that celebrities with large social audiences can potentially bring, in addition to the earned media that comes from their association as investors.”
What made celebrities see the potential of brands instead of simply showcasing them?
Some point to George Clooney, who became the world’s highest-paid actor in 2017 after he and pal Rande Gerber sold their premium tequila brand Casamigos to distribution giant Diageo for a cool $1 billion.
“The most important thing consumer brands need is exposure, and celebrities can use their image and credibility to help companies grow faster,” says Ariel Ohana, a Los Angeles-based director of boutique investment firm Ohana & Co. ” As an investor, you have to have very strong opinions about what the consumer wants, and many celebrities feel like they actually understand what the consumer wants because in many cases they are shaping those wants and aspirations as well.”
Wayne Kulkin, founder and CEO of Italian sneaker manufacturer P448, agrees. “They are very smart people; They are very aware of trends, more so than most of us,” he says. “They understand the power of their own brand and want to be part of it…. Also, they feel the same things we do as consumers, and that’s invaluable.”
He notes that many celebrities are facing falling earnings from their core music or acting businesses after streaming services transformed the economy of the fame game.
Ohana said celebrities have gradually evolved into equity players and not just rental guns.
For several decades, endorsement deals for cash were the norm and huge wins for the likes of Charlize Theron at Dior or Michael Jordan when he first became an ambassador at Nike. Tom Brady helped break new ground when he signed with Under Armor in 2010 by purchasing stock options as part of his endorsement compensation. “An added sweetener,” Ohana calls it.
Serena Williams
Courtesy/Serena Williams Jewelry
Now celebrities have become such professional investors that some even have their own venture funds, including Serena Williams and Jay-Z, Ohana notes. The former has invested in dozens of companies, including dietary supplement maker Wile, recipe marketplace Foody, and fashion supply chain software company Calico; The latter through Marcy Venture Partners on d-to-c brand Andie Swim, massage gun maker Therobody and lingerie company Savage x Fenty.
Earlier this month, Kim Kardashian launched a private equity fund called Skky Partners with Carlyle Group chief executive Jay Sammons as a co-founder.
More often than not, celebrities invest in consumer brands that reflect their lifestyle, image and expertise, with Ohana adding basketball player Tony Parker’s investment in sports e-tailer Colizey and Andy Murray’s stake in the activewear brand to other examples Castore leading.
“You can see that there’s overlap where celebrities have credibility or understand what the consumer wants,” he says. “If you understand the area you’re investing in and are able to add value to the business you’re investing in, then you usually have a recipe for good investing.”
Fitness addict Wahlberg, who has more than 19 million followers on Instagram, not only flaunts his biceps and six-pack abs on the platform, but also his clothing brand Municipal, his fast-food chain Wahlburgers and now P448 shoes.
Wahlberg posted his outfit for last February’s Super Bowl, black jeans livened up with a shocking pink hoodie and matching sneakers, and garnered 5.6 million likes.
Mark Wahlberg attends a P448 event at Le Bon Marche in Paris.
Getty Images for P448
“He only invests in things that he really believes in,” says Kulkin, noting that Wahlberg, a sneaker fanatic, was also an early investor in resale site StockX. “Controlling their own narrative is another reason why celebrities invest in brands.”
Having a celebrity investor “certainly adds heat,” says Kulkin, describing chaotic scenes at Le Bon Marché in Paris last June, when 1,500 people showed up for a personal appearance by Wahlberg at pop-up P448. “It was almost like a rock concert,” he marvels.
Of course Los Angeles is a stronghold for fashion investments.
“You have an environment where entrepreneurs and dealmakers meet with the influencers, the ambassadors, and the talent who are fundamentally shaping the new consumer’s aspirations,” says Ohana.
In 2020, CAA even partnered with venture capital firm NEA to create Connect Ventures, an investment partnership that has made a number of investments in early-stage consumer companies in content and media, fashion, health and wellness, e.g. Commerce, Consumer Goods, Web 3 and NFTs.
“As CAA’s clients become more active early-stage investors and build their own personal portfolios, we aim to share co-investment opportunities from Connect Ventures’ investments whenever possible,” explains Blank. “These clients have been actively seeking investment opportunities themselves or through the teams they have built for their investment ventures, and Connect Ventures is just one way of the deal flow for them.”
Recently, a number of talents — including NBA player D’Angelo Russell, influencer Olivia Culpo, actor Sterling K. Brown, YouTuber Lachlan Ross Power, gamer Tyler “Ninja” Blevins, and NFL player Christian McCaffrey — have teamed up with Connect Ventures in pair Eyewear invests , a brand from d-to-c.
Are celebrities given special consideration in deals?
“When Connect Ventures shares co-investment opportunities, they are direct investments — not weld capital or partnership deals — offered on the same terms as everyone else in the round,” says CAA’s Blank. “There are no performance obligations for the talents, this also applies to the company. That being said, investors – talent and others – are very interested in the company’s success and will often find ways to support growth initiatives.”
According to UTA’s Wick, contract structures are diverse and constantly evolving, with a number of factors affecting terms.
“Funding obligations” are a focus. “This can vary widely, but potential factors include exclusivity, name and likeness, advertising, social media and in-store appearances,” he explains. “In addition, there is the potential for performance-oriented kickers that bind the aforementioned promotion. Likewise, these terms generally may vary in category, social reach, and fame based on perceived connection or authenticity.”
Pierre Mallevays, co-head of merchant banking at Stanhope Capital in London, points to the rise of ethical investing in “targeted brands” that allow well-funded celebrities to voice their beliefs and shine a spotlight on the causes they support to move.
“The two names that I think stand out are Leonardo DiCaprio, a pioneer in supporting environmental projects, and Gwyneth Paltrow, considered by many to be the priestess of healthy living,” he says.
According to CAA’s Blank, some clients have a particular focus on specific categories or causes such as sustainability, green businesses, women’s empowerment, plant-based foods/food technology, parenting and childcare, to name a few. “Investing in early-stage companies allows all investors, not just talent, to support the future they would like to see,” he says.
Kulkin, who is passionate about sustainability and uses lionfish skins as sneaker trim on P448’s styles to reduce the damage caused by an invasive species, says many celebrities share this mission and could help end such causes strengthen.
“They can add critical mass to a lot of these things that need to be done quickly,” he says. “I don’t think they know the power they have. Can you imagine how much good someone can do with it?”
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