Brand ambassador or brand shareholder?

A growing number of Celebrities are now opting for the latter, potentially more lucrative path, applying their wealth, fame, credibility and consumer knowledge to a host of fashion businesses.

According to talent agents and Investment experts, it’s no coincidence that recent months have seen Oprah Winfrey and Reese Witherspoon invest in Spanx; Priyanka Chopra and Nick Jonas at skiwear maker Perfect Moment; Beyoncé, Jessica Alba and Rihanna at French accessories company Destrée; Mila Kunis, Cameron Diaz and Gabrielle Union in Autumn Adeigbo, and Mark Wahlberg in Italian sneaker brand P448, to name but a few.

“We’re seeing interest from both sides,” says Michael Blank, head of consumer investment at Creative Artists Agency, one of Hollywood’s top talent agencies that not only finds new roles for its clients, but also investments to an early stage in mainstream brands. , as a way to diversify their portfolios.

“There’s a growth in the ‘equity’ mindset across all segments of the talent ecosystem,” agrees 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 time and capital, even for brands that don’t bear their name. Opportunities for increased financial returns are a key driver of this change, along with pride in 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 equal, according to Blank.

“Many founders are focused on bringing in investors who can bring additional value to the company,” he explains. “This idea has been further accelerated by Apple’s privacy and tracking changes and the impact this has had on the cost of mobile advertising and increased acquisition costs. These changes have allowed mainstream brands and start-ups to see the value that celebrities with large social followings can potentially bring, in addition to the earned media that comes from their association as investors.

What made celebrities realize the potential of owning brands, rather than just representing them?

Some are pointing to George Clooney, who became the world’s highest-paid actor in 2017 after he and his pal Rande Gerber sold their premium tequila brand Casamigos to retail giant Diageo for a whopping $1 billion. dollars.

“The number one thing mainstream brands need is exposure, and celebrities can leverage their image and credibility to help companies grow faster,” says Ariel Ohana, company director of investment boutique Ohana & Co, based in Los Angeles. As an investor, you must have very strong opinions about what the consumer wants and many celebrities feel that 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, wholeheartedly agrees. “They are very astute people; they are extremely aware of trends, more so than most of us,” he says. “They understand the power of their own brand and they want to be involved…. Plus, they feel the same things we feel as consumers, and that’s priceless.

He notes that many celebrities face diminishing returns from their primary music or acting businesses as a result of streaming services that have changed the economics of the fame game.

Ohana said celebrities have gradually established themselves as actors of capital and not just guns.

For several decades, sponsorship deals for cash were the norm, and huge windfalls for the likes of Charlize Theron at Dior or Michael Jordan when he became an ambassador at Nike. Tom Brady helped break the mold when he signed with Under Armor in 2010, taking stock options as part of his endorsement pay. “An extra sweetener,” Ohana calls it.

Now, celebrities have become such professional investors that some even have their own venture capital 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, into 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 executive Jay Sammons as co-founder.

In most cases, celebrities invest in mainstream brands that reflect their lifestyle, image and expertise, with Ohana citing basketball player Tony Parker’s investment in sports e-tailer Colizey, and Andy Murray as other examples. taking a stake in the sportswear brand Castore.

“You can see there’s an overlap in these, where celebrities have credibility or understand what the consumer wants,” he says. “If you understand the space you are investing in and are able to add value to the business you are investing in, then you generally have a recipe for good investments.”

Fitness junkie Wahlberg, who has more than 19 million Instagram followers, not only flaunts his biceps and abs on the platform, but also his clothing brand Municipal, his fast food chain Wahlburgers and now shoes too. P448.

Wahlberg posted her Super Bowl outfit last February, black jeans livened up with a shocking pink hoodie and matching sneakers, and garnered 5.6 million likes.

“He only invests in things he really believes in,” Kulkin says, pointing out that Wahlberg, a sneakerhead, was also an early investor at resale site StockX. “Controlling their own narrative is another reason a celebrity invests in brands.”

Having a celebrity investor “certainly brings extra warmth,” Kulkin says, describing 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 almost became like a rock concert,” he marvels.

Certainly, Los Angeles is a hotbed of fashion investment.

“You have an environment where the entrepreneurs, the negotiators meet all the influencers, the ambassadors, the talents that essentially shape the aspirations of the new consumer,” says Ohana.

In 2020, CAA went so far as to partner with venture capital firm NEA to form Connect Ventures, an investment partnership that has made a number of investments in consumer start-ups in the areas of content and media, fashion, health and wellness, e-commerce, FMCG, Web 3 and NFT.

“As CAA clients continue to become more active and early stage investors and build their own personal portfolios, we have decided to share opportunities to co-invest Connect Ventures investments wherever possible,” says Blank. “These clients are actively seeking investment opportunities on their own or through the teams they have assembled for their investment activities, and Connect Ventures is just one deal flow pathway 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 Christian McCaffrey – co-invested alongside Connect Ventures in Pair Eyewear, a d-to-c brand.

Do celebrities get special consideration in deals?

“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 are no service obligations of any kind for talent, and that’s true for business as well. That being said, investors – talented and otherwise – are deeply interested in the success of the company and will often find ways to support growth initiatives.

UTA’s Wick says deal structures are varied and constantly changing, with a number of factors influencing the terms.

“Promotional obligations” are a key element. “It can vary widely, but potential factors can include exclusivity, name and likeness, advertising, social media, and in-store appearances,” he explains. “Additionally, there is potential for performance-based kickers tied to the aforementioned promotion. Likewise, these terms can typically vary based on perceived connection or category authenticity, social reach, and fame.

Pierre Mallevays, co-head of investment banking at Stanhope Capital in London, points to the rise of ethical investments in “useful brands” that allow cash-rich celebrities to express their beliefs and shine a light on the causes they they support.

“The two names that stand out in my opinion are Leonardo DiCaprio, a pioneer in supporting environmental projects, and Gwyneth Paltrow, considered by many to be the priestess of healthy living,” he says.

CAA’s Blank says some customers are particularly focused on specific categories or causes such as sustainability, eco-friendly businesses, women’s empowerment, plant-based foods/food tech, parenting, and childcare, to name a few. “Investing in start-ups allows all investors, not just talent, to support the future they would like to see,” he says.

Kulkin, who is passionate about sustainability, using lionfish skins as sneaker trim on P448 styles as a way to help reduce damage from an invasive species, says many celebrities share that mission and could help amplify these causes.

“They can give 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. Imagine all the good someone can do with it? »