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A Look Into Celebrity Equity Deals For Startup Brands

President, Co-Founder of AMIBA Consulting.

The ever-changing fields of marketing, advertising and social media make it difficult for companies, especially younger companies, to stay ahead of the game. Startups typically face a difficult financial decision when looking to make large investments in marketing campaigns. This is particularly true when it comes to celebrity endorsements.

Utilizing a celebrity’s likeness is a proven way to grow a brand and reach a wider market. The difficult aspect of tapping into that network is the costly nature of traditional celebrity endorsements, not to mention the lack of authenticity of many campaigns running in magazines and on social media these days. Startups, as compared to more mature companies, have to focus more heavily on budget and ensuring that their investment is bringing positive returns for their business.

As social media expands and becomes a more trusted resource in the eyes of the user, consumers have become more discerning of how they are being sold to. Because of this, traditional celebrity endorsement deals have a tendency to seem falsified and have fallen flat in recent efforts. Instead of believing that Tom Brady is eating Subway on a weekly basis, audiences are much more likely to buy into a celebrity’s trust in a brand when seeing it promoted on their social platform in a natural, authentic way with many touches over time.

As someone who helps foster partnerships with celebrities, a strategic way I know of for both parties to benefit is for startups to offer a stake in their company in exchange for promotion. To many, this may seem like a risky endeavor — offering up a portion of your company that you’ve built. However, the benefits of finding the right celebrity partner can be immeasurable.

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Take Ryan Reynolds and Aviation Gin for example. It’s not widely known that Aviation Gin was already an established brand when Reynolds signed on as an equity partner in 2018. He acquired a stake in the company from Davos Brands, LLC and just two years later, Aviation Gin sold for $610 million in 2020. The passion that Reynolds brought to this product clearly made a distinction in the marketplace.

Likewise, many believe that Diddy’s involvement with Ciroc Vodka began from the start. In reality, the Ciroc brand was already developed when Diddy joined the team in an effort to expand marketing and bring the brand to the United States. This partnership is so compatible that the average consumer would believe that Ciroc was something that Diddy conceived himself. This is yet another example of a celebrity whose likeness can now be immediately identified with the brand due to a successful connection. Ciroc gained a true partner who went from retailer to retailer on behalf of the brand, and thus the brand’s success has skyrocketed since that day.

However, just because someone has a large presence does not mean that they are the right representative for the brand. The key to a mutually beneficial partnership is finding a collaborator who believes in your brand or service and can sell it naturally as a part of their already existing platform. Most importantly, they should be a consumer of the product themselves. The endorsement should feel like something that the personality promoting it would use on a regular basis or something that could come up naturally in conversation with them.

These types of partnerships can work in many ways. There are some celebrities who prefer to be a quiet stakeholder, dealing mainly with the promotional aspects of the company, while others prefer a seat at the table, so to speak. Olivia Culpo’s partnership with VIDE, a partnership my company helped secure with the ready-to-drink vodka and tequila soda brand, is a great example of this. While in discussions, Olivia was impressed with the company’s growth and business model and wanted to be more involved on a day-to-day basis. She now serves as VIDE’s creative director and is working closely with them on raising their next round of funding. Her dedication to the brand is the perfect example of a mutually beneficial connection that would have never developed in the case of a traditional endorsement deal.

Eliminating the endorsement deal that we are all used to seeing on television allows companies to bring many different ideas to the table. There are clearly a variety of ways to go about working with celebrities and tap into their network while gaining more than just marketing. The most important thing to negotiate is their involvement and to make sure that both parties involved are getting the most out of this partnership that they can.

The best partnerships are ones that once the contract is signed, neither side ever refers to the contract again, and rather, the celebrity partner simply does what is needed of them to grow the business. Some recent successful deals that have come about that are worth mentioning are Kerry Washington becoming an advisor for Byte, a personalized wearable teeth aligners, which was acquired by Dentsply Sirona for a little over $1 billion in December 2020, and Ellie Goulding’s partnership with Core Hydration which was later acquired by Keurig Dr. Pepper for $525 million.

Because my company was the one Byte hired to secure a talent partner for them, I can give you a bit of background into how this deal came to fruition; Kerry Washington and Byte were in discussions for almost a year before solidifying their deal. This year was spent ensuring that both parties shared the same vision, understanding and terms of process. Because these deals are not simply an exchange of money, negotiations become much more in-depth and personal.

There is an abundance of benefits for companies looking to make these types of unique alliances happen, and this is the perfect time and marketing landscape to make it happen. In an ever-changing world of consumers, this is the time for startups to think outside the box and utilize their unique offerings in negotiations.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

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