Brand ambassador or brand shareholder?
A growing number of celebrities are now taking the second, potentially more lucrative route, applying their wealth, fame, credibility and consumer knowledge to a host of fashion companies.
According to talent agents and investment specialists, it’s no coincidence that in recent months Oprah Winfrey and Reese Witherspoon have invested in Spanx; Priyanka Chopra and Nick Jonas at ski wear maker Perfect Moment; Beyonce, Jessica Alba and Rihanna in French accessories firm Destree; Mila Kunis, Cameron Diaz and Gabrielle Union in Autumn Adeigbo, and Mark Wahlberg in Italian sneaker brand P448, to name just a few such transactions.
“We’re seeing interest coming from both sides,” says Michael Blank, head of consumer investment at Creative Artists Agency, one of Hollywood’s major talent agencies that is not only finding new roles for their clients, but also early stage investments in consumer brands. , as a way to diversify their portfolios.
“There is an increase in the ‘equity’ mentality in all segments of the talent ecosystem,” admits Sam Wick, partner and head of UTA Ventures, the division of United Talent Agency that invests in businesses across media, consumer products and technology.
“Talents are increasingly interested in investing in themselves, both in terms of time and capital, even for brands that don’t carry their name. Opportunities for increased financial returns are a key driver of this change, along with pride of ownership and heritage,” says Wick.
Fashion brands looking to jump-start growth have had access to “an abundance of available capital” in recent years, but have learned that not all capital is created equal, according to Blank.
“Many founders are focused on bringing in investors who can provide additional value to the business,” he explains. “This idea has been further accelerated by Apple’s privacy and tracking changes and the impact it has had on the cost of mobile advertising and rising acquisition costs. These changes made consumer brands and startups see the value that celebrities with large social audiences can bring, in addition to the earned media that comes from their association as investors.”
What made celebrities wake up to the potential of owning brands, versus just facing them?
Some point to George Clooney, who became the world’s highest-paid actor in 2017 after he and friend Rande Gerber sold their premium tequila brand Casamigos to distribution giant Diageo for a billion dollars.
“The number one thing that consumer brands need is exposure, and celebrities can use their image and their credibility to help companies grow faster,” says Ariel Ohana, a Los Angeles-based principal at the firm boutique investments Ohana & Co. investor, you have to have very strong opinions about what the consumer wants, and many celebrities think they actually understand what the consumer wants, because in many cases, they also shape those desires and aspirations.”
Wayne Kulkin, founder and CEO of Italian sneaker maker P448, couldn’t agree more. “They are very shrewd people; they are extremely trend-aware, more so than most of us,” he says. “They understand the power of their brand and want to be involved…. Also, they feel the same things that we as consumers do, and that’s invaluable.”
He notes that many celebrities face diminishing returns from their mainstream music or acting businesses after streaming services have changed the economics of the fame game.
Ohana said celebrities are gradually being built to become equity players and not just guns for hire.
For decades, endorsement deals for cash were the norm and big windfalls for Charlize Theron at Dior, or Michael Jordan when he first became a Nike ambassador. Tom Brady helped break the mold when he signed with Under Armor in 2010, receiving stock options as part of his endorsement compensation. “An extra sweetener,” Ohana calls it.
Now celebrities have become such professional investors that some even have their own venture funds, including Serena Williams and Jay-Z, notes Ohana. The former has invested in dozens of companies, including dietary supplement maker Wile, recipe marketplace Foody and fashion supply chain software firm Calico; the latter, via Marcy Venture Partners, in d-to-c brand Andie Swim, maker of massage guns Therobody, and underwear firm Savage x Fenty.
Earlier this month, Kim Kardashian launched a private equity fund called Skky Partners, with Carlyle Group executive Jay Sammons as co-founder.
In most cases, celebrities invest in consumer brands that reflect their lifestyle, image and expertise, with Ohana citing as other examples basketball player Tony Parker’s investment in sports e-tailer Colizey and Andy Murray receiving part of the Castore activewear brand.
“You can see there’s overlap in these, where celebrities have credibility, or understand what the consumer wants,” he says. “If you understand the space you’re investing in and you’re able to add value to the business you’re investing in, then you usually have a recipe for good investments.”
Fitness addict Wahlberg, who has more than 19 million followers on Instagram, flaunts not only his biceps and six-pack abs on the platform, but also his clothing brand Municipal, his fast food chain Wahlburgers and now shoes P448.
Wahlberg posted his Super Bowl outfit last February, black jeans jazzed up with a shocking pink hoodie and matching sneakers, and garnered 5.6 million likes.
“He only invests in things that he really believes in,” Kulkin says, noting that Wahlberg, an athletic head, was also an early investor in resale site StockX. “Controlling your story is another reason for a celebrity to invest in brands.”
Having a celebrity investor certainly “brings extra heat,” Kulkin says, describing the chaotic scenes at Le Bon Marché in Paris last June, when 1,500 people showed up for a personal appearance by Wahlberg at the P448 pop-up. “It became almost like a rock concert,” he marvels.
Of course, Los Angeles is a hotbed for fashion investment.
“You have an environment where entrepreneurs, marketers are all meeting with influencers, ambassadors, talent that are essentially shaping the aspirations of the new consumer,” Ohana says.
In 2020, CAA went as far as partnering with venture capital firm NEA to form Connect Ventures, an investment partnership that has made a number of investments in early-stage consumer businesses in the content and media space, fashion, health and well-being, etc. – trade, consumer products, Web 3 and NFTs.
“As CAA clients continue to become more active, early-stage investors and build their personal portfolios, we have decided to separate co-investment opportunities from Connect Ventures investments whenever possible,” explains Blank. “These clients have actively secured investment opportunities on their own, or through the teams they’ve built for their investment pursuits, and Connect Ventures is just one avenue of 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, player Tyler “Ninja” Blevins and NFL player, Christian McCaffrey – co-invested alongside Connect Ventures in Pair Eyewear. , a d-to-c brand.
Do celebrities get any special consideration in the deal?
“When Connect Ventures shares co-investment opportunities, they are direct investments – not equity or partnership deals – offered on the same terms as everyone else in the round,” says CAA’s Blank. “There is no service obligation for the talent and this is equally true for the company. That said, investors – talent and otherwise – are deeply interested in the company’s success and will often find ways to support growth initiatives.”
UTA’s Wick says deal structures are varied and constantly evolving, with a number of factors affecting terms.
“Promotional obligations” are the main focus. “This can vary widely, but possible factors can include exclusivity, name and likeness, publicity, social media and in-store appearances,” he explains. “Additionally, there is the opportunity for performance-based strikers associated with the aforementioned promotion. Similarly, these terms can generally vary based on perceived relevance or originality in the category, social reach, and fame.
Pierre Mallevays, co-head of merchant banking at Stanhope Capital in London, points to the rise of ethical investment in “intentional brands” that allow wealthy celebrities to express their beliefs and shine a light on the causes they support. .
“The two names that stand out in my opinion are Leonardo DiCaprio, a pioneer in supporting environmental projects, and Gwyneth Paltrow, seen by many as the high priestess of healthy living,” he says.
CAA’s Blank says some clients have a particular focus on specific categories or causes such as sustainability, environmentally positive companies, 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’d like to see,” he says.
Kulkin, who is passionate about sustainability, using lionfish skins as sneaker linings in P448 styles as a way to help reduce the damage caused by an invasive species, says many celebrities share this mission and may help to strengthen such causes.
“They can provide critical mass for a lot of these things that need to be done quickly,” he says. “I don’t think they know the power they have. Imagine how much good someone could do with it?”