While there is a steady stream of new celebrity brand announcements, the bankruptcy of other companies such as Hello Bello and Forma Brands has left some skeptical about the sector. Reed Dascher, CEO of MrBeast's management company Night (until it folded this month), recently told The Hollywood Reporter that there was a lack of “investable businesses,” especially in the creator space. Dakshar said more and more creators are raising money just to raise money without having a concrete business plan first.
One of the big selling points of creator- and celebrity-led startups has long been that their large followings allow brands to acquire new customers faster and build deeper loyalty. But more investors now realize that having a famous face is just the starting point for building a sustainable business. As a result, investors are scrutinizing celebrity-backed brands more closely. They want to learn more about your product development, distribution planning, and day-to-day business operations team experience.
Still, there's an appetite among investors looking to strike gold to back brands with recognizable faces. Despite inflation and customer spending restraints, the selected group of brands continues to perform well. In March, Business of Fashion reported that Selena Gomez's Rare Beauty had just surpassed $400 million in net sales and was exploring a sale or IPO. Meanwhile, Hailey Bieber's Lorde continues to gain fans. Last year, Lorde reportedly achieved eight-figure sales in its first year. Beauty seems to be an outlier category. According to NIQ tracking, 43 celebrity beauty brands will collectively record annual sales of $1.1 billion in 2023, surpassing the $1 billion mark for the first time. Celebrities like Dua Lipa and Oprah are increasingly choosing not to launch their own brands and instead invest in existing products they already love.
But despite this success, it has come under increasing scrutiny from investors.
Focus on collecting more data points
Jocelyn Florence, a partner at Parallel, a celebrity talent partnership studio and strategic investor, said her company is “marketed to a number of talent incubator brands.”
Florence explained that data has historically not been given enough weight when it comes to investing in celebrity-backed brands, leading to mismatched product launches that fail. “It was about the vibe, and more importantly, the feeling that it was a good idea,” Florence said. And Florence says that while public persona is important to consider, investors now want to know specifically how it impacts CAC, customer trials, and repurchase rates. Stated. For example, you might want to know how celebrity founder posts typically perform compared to standard brand posts.
Other investors are also taking a closer look before backing a celebrity's next venture.
Over the past few years, Springdale Ventures has cultivated a portfolio of brands founded by Hollywood stars. These include Gal Gadot's Goodles, Melissa McCarthy's Big Nose Whiskey, and The Absorption Company, a supplement brand that debuted in Erewhon earlier this year.
Springdale Ventures founding partner Genevieve Gilbreath said the company is currently hard at work developing three new celebrity-led brands.
“But we've also taken over a lot of big-name brands recently,” Gilbreath said. In some cases, she said, the product just doesn't solve the real problem. Gilbreath also said that she had been trying to avoid these brands because she was concerned that the brands the company was nurturing lacked “very important” operating founders. . For example, Springdale sold off the celebrity brand it was cultivating last year. That's because “they didn't have the capital to bring in a real founding team to manage it,” she said.
Gilbreth said that when a talent management company pitches a new celebrity brand, what she wants to know most is: [the celebrity] Are you doing this, is it your true passion? ” Products and businesses must also be able to stand on their own. “We think of celebrities as a bonus, someone who can save us PR and get us noticed.” He says retail buyers like to meet celebrities, so they can close deals. He added that it would be helpful to have celebrities participate in such meetings.
Mr. Gilbreth said he was also drawn to celebrity founders who put their own money into their companies. “It doesn’t matter the amount, but you know they’re personally invested,” she said.
One of Springdale's recent investments was Robert Downey Jr.'s new coffee brand, Happy. The brand was co-founded with Craig Dubitsky, founder of Eos and personal care brand Hello. “Robert Downey Jr. is a coffee lover, so this made sense,” said Gilbreth, who also has a mission for the brand to partner with NAMI. “He spent his own money to appear at industry events such as the Beverage Forum.”
While Parallel sometimes helps brands that are just starting to form, “I’m more bullish on partnering with brands and talent that already exist and have a track record,” Florence said.
Ideally, these companies already have $5 million to $10 million in revenue and have a clear roadmap for product development and sales. “We ask brands, 'What are your priorities for the next two years and how can a particular celebrity help you achieve those goals?'” Florence said. . By doing so, brands can quickly leverage the talent's following and media reach without having to start from scratch.
In terms of Parallel's talent partnerships, the company works to match brands with creators and celebrities, who help increase awareness of their products through ambassadorships and short-term sponsorship deals. Data is also important here for a successful partnership.
Florence said Parallel is working with a food startup that has been around for a few years and is currently selling at Walmart, though he declined to name the brand. To succeed at Walmart and expand to other retailers, the brand's founders want to provide a recognizable face to reach new audiences and drive trial. So Parallel is talking to former sitcom stars with a similar reach. “Their management has the data to prove they're doing really well with Walmart shoppers.” Similar deals in the works include intermediary talent partners for food startups like Behave.
It's been such a turbulent year for the entertainment industry that it's understandable that celebrities would want to explore starting a brand and ideally create a bigger, more sustainable source of income for themselves. Florence said. “But I don't think it's realistic to ask a big celebrity who has a lot on his plate to run the entire business,” Florence said. “We don't expect founders to win Oscars, so that's not necessarily a fair expectation.”
