Brand ambassador, or brand shareholder?
Growing numbers of celebrities are now opting for the latter, potentially more lucrative, path, applying their wealth, fame, credibility and consumer insights to a host of fashion companies.
According to talent agents and investment specialists, it’s no coincidence that recent months have seen Oprah Winfrey and Reese Witherspoon invest in Spanx; Priyanka Chopra and Nick Jonas in skiwear maker Perfect Moment; Beyoncé, 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 but a few such transactions.
“We are seeing interest coming from both sides,” says Michael Blank, head of consumer investments at Creative Artists Agency, one of the big Hollywood 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 a growth in ‘equity’ mind-set 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.
“Talent are increasingly interested in investing in themselves, both in terms of their time and capital, even for brands that don’t carry their names. The opportunities for increased financial returns are a key driver of this shift, along with pride of ownership and legacy,” Wick says.
Fashion brands looking to jumpstart growth have had access to “an abundance of available capital” in recent years, but have come to learn that not all capital is equal, according to Blank.
“Many founders are focused on bringing in investors that 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 that has had on the cost of mobile advertising and rising acquisition costs. These changes made 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.”
What made celebrities wake up to the potential of owning brands, versus simply fronting them?
Some point to George Clooney, who became the world’s highest paid actor in 2017 after he and buddy Rande Gerber sold their premium tequila brand Casamigos to distribution giant Diageo for a cool $1 billion.
“The number-one thing consumer brands need is exposure, and celebrities can leverage their image, and their credibility to help companies grow faster,” says Ariel Ohana, a Los Angeles-based principal in boutique investment firm Ohana & Co. “As an investor, you need to have very strong opinions on 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 chief executive officer of Italian sneaker maker P448, couldn’t agree more. “They’re very shrewd people; they’re extremely aware of trends, more than most of us,” he says. “They understand the power of their own brand and they want to be involved…. Also, they feel the same things we feel as consumers, and that’s invaluable.”
He notes many celebrities face diminishing returns from their core businesses of music or acting in the wake of streaming services that have changed the economics of the fame game.
Ohana said celebrities have been building up gradually to become equity players and not only guns for hire.
For several decades, endorsement deals for cash were the norm, and huge windfalls for the likes of Charlize Theron at Dior, or Michael Jordan when he first became an ambassador at Nike. Tom Brady helped break the mold when he signed on with Under Armour in 2010, taking stock options as part of his endorsement compensation. “An additional 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, Ohana notes. 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, massage-gun maker Therobody and lingerie firm Savage x Fenty.
Earlier this month, Kim Kardashian launched a private equity fund called Skky Partners, with Carlyle Group executive Jay Sammons as cofounder.
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 taking a stake in activewear brand Castore.
“You can see that there is overlap in these, where celebrities have credibility, or understand what the consumer wants,” he says. “If you understand the space in which you’re investing, and you’re able to add value to the business that you’re investing in, then you typically 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 also P448 footwear.
Wahlberg posted his outfit for the Super Bowl last February, black jeans enlivened with a shocking pink hoodie and matching sneakers, and netted 5.6 million likes.
“He only invests in things he really believes in,” Kulkin says, pointing out that Wahlberg, a sneaker head, was also an early investor in resale site StockX. “Controlling your own narrative is another reason for a celebrity investing in brands.”
Having a celebrity investor certainly “brings extra heat,” 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 became almost like a rock concert,” he marvels.
To be sure, Los Angeles is a hotbed for fashion investments.
“You have an environment where entrepreneurs, dealmakers are all meeting with the influencers, the ambassadors, the talents that are essentially shaping the aspirations of the new consumer,” Ohana says.
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 early-stage consumer businesses in the content and media space, fashion, health and wellness, e -commerce, consumer products, Web 3 and NFTs.
“As CAA’s clients continue to become more active, early-stage investors, and build their own personal portfolios, we have set out to share co-investment opportunities from Connect Ventures’ investments whenever possible,” Blank explains. “These clients have been actively sourcing investment opportunities on their own, or through the teams that they have 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, gamer 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 deals?
“When Connect Ventures shares co-investment opportunities they are straight investments — not sweat equity or partnership deals — offered at the same terms as everyone else in the round,” CAA’s Blank says. “There are no service obligations of any kind for the talent , and that is equally true for the company. That being said, investors — talent 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 evolving, with a number of factors influencing the terms.
“Promotional obligations” are a key focus. “This can vary widely but potential factors can include exclusivity, name and likeness, publicity, social media and in-store appearances,” he explains. “In addition, there is the potential for performance- based kickers tied the aforementioned promotion. Similarly, these terms can generally vary based on perceived connection or authenticity in 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 “purposeful brands” that allow cash-rich 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 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 tech, parenthood and child care, 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, using lionfish skins as sneaker trim on P448’s styles as one way to help diminish the damage caused by an invasive species, says many celebrities share this mission and could help amplify such causes.
“They can give a critical mass to a lot of these things that need to be done fast,” he says. “I don’t think they know the power they have. Imagine how much good someone can do with it?”