And Why Lots of Talent-Led Brands Fail
Celebrities are often celebrities because they are exceptionally good at something – be it sport, art, acting, music, etc. They often spend their childhood doing the thing that they love. Over and over again, practice makes perfect after all. And after 10,000 hours of practicing and a whole lotta luck, they may find themselves winning Grammys and Oscars for all their dedication.
However, do not expect the same amount of effort put in if you have a celebrity co-founder. Especially if it is outside of the sector they are truly passionate about (which is almost always the case).
This expectation of celebrity co-founders doing everything they can to promote and push their own products and brands is misguided at best. There are many reasons, but truthfully if I asked you to spend time doing something you a) weren’t good at; or b) didn’t like – it tends to be low on the priority list.
But isn’t it in their best interest?!
This is where contracts and structures come into play, but only to an extent.
Having the right contractual agreement in place with the celebrity partner is important. Not everyone wants cash up front – some celebrity co-founders prefer equity, others like performance and royalties. If you want to learn more about structuring a typical talent deal then check out an earlier newsletter here. Putting the right type of contract in place at the outset with the right incentives is one way to help mitigate the risk of disengagement.
However, money isn’t everything. Especially for celebrities. So, mitigation is really all one can hope for.
When things do go south, I often hear founders and investors saying the same thing after the shock has worn off, “But they had 40% equity in the brand” or “But they loved the product and were super engaged when we met”.
The reality is that this isn’t enough
As you can appreciate, it’s in the celebrity’s best interest to get the best deal possible. While 40% equity might feel they are ‘real’ co-founders, it would be a red flag for Sandbox Studios to invest in because 40% for a relatively silent partner is a pretty big share of equity and doesn’t leave much to incentivize the team who do much of the legwork.
Furthermore, going back to personality traits, most celebrities are Creatives. And Creatives are typically very passionate people. So being highly engaged at the start of any deal is often down to their general enthusiasm. It can be difficult to keep that momentum up for the long term. And long term is the name of the game with any startup.
It is also in a celebrity founder’s best interest to do as many equity partnership deals as possible. Just as you would prefer to diversify your own investments, they too want to diversify theirs. So don’t be shocked when multiple celebrities are launching 5+ brands a year.
The Rocket Ship
The benefits of having a celebrity co-founder in any brand are fairly obvious and if you are reading this newsletter, I don’t need to belabour the point. But just like investors look to ‘grit’ to project founder success, Sandbox Studios looks to ‘work’ to project celebrity-founder success. And this work can take on a variety of forms. One of our trade secrets is that we often ‘test’ the celebrity in question by putting brand opportunities in front of them to see if they do them or not. Surprisingly (and disappointingly) many do not.
A great real-life example of this is that Sandbox Studios secured the keynote address at the latest iConnections Conference to host our ‘Celebrity Founder Panel’ – an easy Q&A session where we explore the inner workings of celebrity brands. The iConnections Conference is the world’s largest cap intro event for alternative investments, which is the perfect stage for the 10 celebrity founders we reached out to. None of the 10 celebrity founders wanted to take part despite all 10 being currently in the market to raise funding.
You know who showed up to take that slot?
Kim Kardashian.
So the next time you think the Kardashians are just lucky, I’d encourage you to really look at how much time and work they put into all of their brands – especially compared to other celebrity founders. They are some of the highest paid celebrity founders and it’s not because of their good looks and salad shaking. It’s because they put in the hours.
If you start to pull apart the big talent-led brands that have had substantial exits, you’ll start to see that this is a commonality amongst them. If the celebrity wants to show up, you’ve got yourself a rocket ship.
What Sandbox Studios does better than any other venture fund is not just picking the partnerships that are rocket ships, but motivating the celebrity founder in question to make sure that rocket ship takes off. For the long term.
That’s our secret sauce.