AREAS OF WISDOM

The Risk / Reward of Celebrity Co-Founders + Investors

Beyond Endorsements, How Companies + Celebrities Are Working Together In Deeper Ways Than Ever Before

In a merging world of social media, celebrity, and investing – there’s never been more interest from celebrities to channel their fame into building businesses. Celebrities are participating in business more than ever before, beyond just endorsements.

A celebrity partner can help drive mass awareness and as a brand in their own right, they can add equity and value to an emerging brand that has yet to establish its reputation in the public domain. 

But it is not risk-free. For both the brand and the celebrity, it is important that both parties are aware of the pitfalls of forming partnerships that are not based on shared values, common goals, and a foundation of true authenticity. 

And when it comes to celebrities in business, are they anything more than just a billboard? A way to grab attention, but fall short in adding real value to the business or truly educating consumers about why your product is better than others on the market?. 

Last week, Co-Founder and CEO of The Desire Company, Eric Sheinkop, moderated Foundermade’s panel titled, Celebrity-Backed Brands + Celebrity-Founded Companies which set out to provide entrepreneurs and brands with insights on what it takes to get a celebrity on board with your vision, how that can help move your brand forward, and what to watch out for.

The panel included supermodel and Co-Founder of Gryph & IvyRoseKarolina  Kurkova; Ryan Lupberger CEO of Cleancult who partnered with Rachel Zoe and whose celebrity investors include Kevin Hart; Jenne Moore, Founder of Sourse Inc who has Sarah Hyland as Creative Director; and Covergirl and supermodel Emily DiDonato the Co-Founder & CEO of Covey Skin

The discussion kicked off by looking at the different ways celebrities and brands can collaborate. 

Celebrity Endorsement vs. Celebrity Invested vs. Celebrity Co-Founded 

The core difference between the three main ways celebrities get involved with brands: skin in the game. While celebrity endorsements can be a shortcut to mass awareness and contribute to a spike in sales, celebrity spokespeople are expensive and the long-term ROI can be hard to measure.  

And this approach comes with not a little risk. When partnering with a celebrity for an endorsement, companies take on the duality of their existing fame and headlines. There are countless examples of celebrities whose missteps have cast a shadow over their brand partner –  think Lance Armstrong, Paula Dean, Tiger Woods – and the list goes on.

Yet there is little risk or responsibility shared by the celebrity, and they don’t always pay off. 

Similarly, when a celebrity VC backed startup folds, that’s just venture portfolio theory at work. On to the next one. But when a company co-founded by a celebrity falters, it’s the celebrity’s name, pride, and brand — not just their money — on the line. 

Karolina Kurkova spoke to this idea when she shared her celebrity perspective when it comes to deciding to work with a company. According to Kurkova, “It’s important for both sides to really know each other. If I’m going to work with a brand or even today, I did my homework on this panel. Especially when you are a celebrity, it’s important to do things that are authentic to you that you are truly passionate about. I have to love it and I have to like the people I am working with. It’s a relationship. It has to be authentic. You can feel it when your skin is in the game.”

The Risk of Celebrity Co-Founders + Investors: 

The first risk of working with celebrities can happen really early on when it comes to just starting the relationship. Ryan Lupberger, who has both celebrity investors and a celebrity partner,  discussed how he went into it the wrong way first in terms of his initial approach in getting  celebrities on board, “We were three, four, and then five months into the negotiations when we had an investor talk directly to the celebrity and they had never heard of our brand. So it was 100% just the talent agency trying to get their fee.” 

Lupberger’s advice: go direct. 

According to Emily Didanato, it’s definitely something she thinks about, “I see it as a reflection of me. Because of that I get into the weeds in terms of product development. I truly feel like I need to understand our formulations before I go out and talk about it with other people.” 

Jenne Moore, founder of Sourse, a startup that produces vitamin infused chocolates, added, “With early stage brands the stakes are much higher so there’s a lot of due diligence on both sides that’s needed. We had investors that knew Sarah Hyland and could speak to her character and then on our end we go above and beyond with our formulations to set the standard in the industry for functional food. Because there’s a lot at risk, it should take time.”

Before engaging with a celebrity, brands have to ensure that there is a foundation of authenticity. When the celebrity is a genuine fan of the brand, they can bring value in the long run since there’s a lot that can happen in a celebrity’s life that can negatively impact the brand. Sheinkop illustrated this point in a story about his wife, who is also his co-founder, and her experience as the Global Director of Brand, PR, and Communications at Coca-Cola. “The first person she engaged in their global influencer program was Britany Spears, who was coming off a multi-year Pepsi deal. And the reason is because Spears kept getting caught in photos behind the scenes drinking Coke, even though she was getting paid ridiculous amounts by Pepsi. That was something that reflected poorly on the brand.” 

Although it’s very tempting on both ends to take the deal and start a partnership or take their check, it’s not that simple. It requires a great amount of due diligence, assessing the right fit, building trust, and managing the expectations of the business relationship – on both sides. 

The Reward of Celebrity Co-Founders + Investors:

In an increasingly crowded market, it’s important to have distinct, unique advantages. For the best startups these advantages evolve into strong moats in customer acquisition, distribution channels, brand identity, and engaged community. 

According to a recent Forbes article, “By virtue of their recognizability and fan affinity, celebrities co-founding startups have helped dig not just one, but many moats. Their personal brand unlocks more cost-effective customer acquisition, whether on social or via earned media/PR, and the powerful draw of celebrity association makes it easier to access new distribution channels.” 

Moore has a similar positive experience in bringing on Sarah Hyland as a partner. Moore sent Hyland a sample of her vitamins and received a message saying how much she loved the product. As Moore describes, “As a new brand in terms of distribution – media and retail – Sarah was able to help us in conversations with retailers or on social media. A celebrity can come in at the ground floor and make an impact.”

Lupberger took a different route with Cleancult in finding a celebrity partner in Rachel Zoe, but with similarly positive results. He specifically waited several years to consider bringing a celebrity into the mix since he was determined not to use them to prop up the brand. “We wanted to get it right first, and then use the celebrity to amplify,” Lupberger shared. “There’s been pluses and minuses, but we feel we did it the right way.” 

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Where the stars align perfectly is when a celebrity is an expert in a specific area and their participation can be deeper than an endorsement. When they not only help develop a product, but their involvement adds value beyond simply drawing attention to it. When they are a true partner who can use their platform to raise awareness and also have the credibility and know-how to be able to educate shoppers, helping increase sales, decrease returns, and build a strong and sustainable brand. 

To watch the full panel, click here.

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About The Desire Company

The Desire Company is a product education solution with the world’s only community of experts who tell the truth about the products they actually use and trust. Our mission is to empower shoppers to make more educated, confident purchase decisions by providing credible, expert-driven product reviewshow-tos, and classes. The company was created around the passions of accomplished professionals at the top of their game, in order to democratize their knowledge and build a community to share it. 

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