Are you a brand ambassador or a brand shareholder?

A growing number of celebrities are opting for the potentially more lucrative latter path, applying wealth, fame, credibility and consumer insight to a multitude of fashion companies.

It’s no coincidence that Oprah Winfrey and Reese Witherspoon have invested in Spanx in recent months, according to talent agents and investment experts. Priyanka Chopra and Nick Jonas of Perfect Moment, a skiwear company. Beyoncé, Jessica Alba and Rihanna belong to French accessories company Detree. Mila Kunis, Cameron Diaz and Gabrielle Union for Autumn Adeibo and Mark Wahlberg for Italian sneaker brand P448, to name a few such deals.

Michael Blank, Head of Consumer Investments at Creative Artists Agency, said: The creative artist agency is one of Hollywood’s leading talent agencies, not only finding new roles for clients, but also making early-stage investments in consumer brands. , as a way to diversify the portfolio.

“There is a growing ‘fairness’ mindset in all segments of the talent ecosystem,” said partner and head of UTA Ventures, a unit of United Talent Agency that invests in businesses across media, consumer goods and technology. Sam Wick agrees.

“Talent is increasingly interested in investing in themselves, both in terms of time and capital, even in brands that do not bear their own name. Along with our heritage pride, we are a key driver of this change,” says Wick.

Fashion brands seeking rapid growth have had access to “an abundance of available capital” over the last few years, but they’ve learned that not all capital is created equal, according to Blank. .

“Many founders focus on attracting investors who can add value to their business,” he explains. “This thinking has been further accelerated by Apple’s privacy and tracking changes, as well as the impact of rising mobile advertising costs and acquisition costs. In addition to the earned media that comes from our investor relationship, we have come to recognize the potential value that celebrities with large social audiences bring.”

What made you wake up to the possibility of celebrity owning a brand?

George Clooney became the world’s highest-paid actor in 2017 after he and fellow Rande Gerber sold premium tequila brand Casamigos to distribution giant Diageo for $1 billion.

“Consumer brands need exposure most, and celebrities can leverage their image and credibility to accelerate the growth of their businesses,” says Los Angeles-based boutique investment firm. Ariel Ohana, principal of Ohana & Co. Investors need to have a very strong opinion of what consumers want, and many celebrities feel they actually understand what consumers want.

Wayne Kulkin, founder and CEO of Italian sneaker maker P448, couldn’t agree more. They are very smart people. “They are much more aware of trends than most of us,” he says. We feel the same as we do as consumers, and that’s invaluable.”

He points out that many celebrities are facing diminishing returns from their core businesses of music and acting as a result of streaming services that have changed the economics of the fame game.

Celebrities are slowly growing to become equity players, not just rental guns, Ohana said.

For decades, cash endorsement deals have been commonplace, yielding huge profits for people like Dior’s Charlize Theron and first-time Nike ambassador Michael Jordan. Tom Brady helped him break the mold when he signed with Under His Armor in 2010. “Additional sweetener,” says Ohana.

Now celebrities have become professional investors, and some even have their own venture funds, like Serena Williams and Jay-Z, Ohana points out. The former has invested in dozens of companies, including nutritional supplement maker Weil, recipe marketplace Hoody, and fashion supply chain software company Calico. The latter, through Marcy Venture Partners, includes his d-to-c brand Andie Swim, massage gun maker He Herobody, and lingerie company Savage x Fenty.

Earlier this month, Kim Kardashian launched a private equity fund called Skky Partners.

Most of the time, celebrities invest in consumer brands that reflect their lifestyle, image and expertise. Ohana cites basketball player Tony Parker’s investment in his sports e-tailer Colizey and Andy Murray’s investment in his activewear brand Castore as other examples.

“When celebrities have credibility or understand what consumers want, you know there’s some overlap between these things,” he says. If you can understand and add value to the business you’re investing in, you usually have a good investment recipe.”

A fitness junkie with more than 19 million followers on Instagram, Wahlberg not only boosts his biceps and six-pack abs on the platform, but also his clothing brand Municipal, fast-food chain Wahlburgers, and now P448 footwear is also showing off.

Wahlberg posted her Super Bowl outfit from last February, in black jeans paired with a hot pink hoodie and matching sneakers, which garnered 5.6 million likes.

“He only invests in things he truly believes in,” Culkin said, noting that Wahlberg, head of sneakers, was also an early investor in resale site StockX. Controlling is another reason celebrities invest in brands.”

Having a celebrity investor certainly “brings extra heat,” Culkin said, adding that 1,500 people attended Wahlberg’s personal appearance at the P448 pop-up at Le Bon Marche in Paris last June. “It was like a rock concert,” he marvels, describing the chaotic scene that emerged.

Indeed, Los Angeles is a hotbed of fashion investment.

“There is an environment where entrepreneurs and dealmakers all meet influencers, ambassadors and talent who are essentially shaping new consumer aspirations,” says Ohana.

In 2020, CAA partnered with venture capital firm NEA to create Connect Ventures. This investment partnership has made significant investments in early stage consumer businesses in the content and media space, fashion, health and wellness. – Commerce, Consumer Goods, Web3, and NFTs.

“As CAA clients become more active early-stage investors and continue to build their own portfolios, we set out to share co-investment opportunities wherever possible from our Connect Ventures investments,” said Blank. explains. “These clients are actively sourcing investment opportunities either on their own or through the teams they have built to pursue their investments, and Connect Ventures is just one of his vehicles for deal flow for them. .”

More recently, NBA player D’Angelo Russell, influencer Olivia Culpo, actor Sterling K. Brown, YouTuber Lachlan Ross Power, gamer Tyler “Ninja” Blevins, NFL player Christian McCaffrey, and many more talents have joined Connect. Invested in Pair Eyewear in conjunction with Ventures. , d to c brand.

Do celebrities receive special consideration in transactions?

“When Connect Ventures shares co-investment opportunities, they are straight investments, not sweat equity or partnership agreements, and are offered on the same terms as everyone else in the round,” said CAA’s Blank. . “Talent has no service obligations of any kind, and that applies equally to companies. and often find ways to support growth initiatives.”

UTA’s Wick said contract structures vary and are constantly evolving with many factors affecting the terms.

“Promotional obligations” is a key focus. “This can vary greatly, but potential factors could include exclusivity, name and likeness, publicity, social media and in-store appearance,” he explains. In addition, performance-based kickers can be tied to the aforementioned elevations.Likewise, these terms can generally change based on perceived ties or credibility in category, social reach, and prestige. there is potential.”

Pierre Malvaise, co-head of Merchant Banking at Stanhope Capital in London, called it a “brand with purpose” that allows high-net-worth celebrities to express their beliefs and shine a light on the causes they support. points to the rise of ethical investment in

“Two names stand out in my opinion: Leonardo DiCaprio, a pioneer in supporting environmental projects, and Gwyneth Paltrow, seen by many as the priest of healthy living,” he said. say.

According to CAA’s Blank, some clients focus specifically on specific categories or causes, such as sustainability, green businesses, women’s empowerment, plant-based foods/food technology, parenthood and parenting. “By investing in early-stage companies, we can support not just talent, but the future that every investor wants,” he says.

Passionate about sustainability, Culkin uses lionfish skin as sneaker trim in the style of the P448 as one way to reduce the damage caused by invasive species.

“They can give critical mass to a lot of these things that need to be done quickly,” he says. “I think they don’t know the power they have. Imagine how good someone could do with it.”