Star power: Why direct-to-consumer brands are bringing celebrities on board

Entrepreneurial celebrities are no longer content simply being the face of a brand – they want to have a stake in its future.

Sarah Drumm

Editor
In June, U.K. supplement brand Feel announced that pop and TV personality Cheryl had taken an equity stake in the brand. (Photo: Feel)
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In June, singer Ellie Goulding announced that she had acquired a "significant stake" in U.K. hard seltzer brand Served.

And while her new role as a direct-to-consumer brand co-owner is quite different from her pop career, it isn’t completely unexpected. Goulding’s move follows in the footsteps of a number of celebrities that have decided they want to be more than just brand ambassadors.

Also in June, U.K. supplement brand Feel announced that singer Cheryl (formerly Cole) had become an equity partner in the business, following its recent £4.5 million funding round. In November, U.S. actress Dakota Johnson announced her role as both an investor in and co-creative director of sexual wellness brand Maude, while jewelry brand Aurate confirmed that actress Kerry Washington was now among its investors. A month before, Emily Ratajkowski was appointed creative director and an equity partner of face mask brand Loops.

The evolution of the celebrity endorsement

Celebrity endorsements have been around for almost as long as brands have been selling us things, and many have dabbled with investing in smaller companies, too. According to the Money.co.uk’s Celebrity Investments Index, the 30 most prolific celebrity investors have financed a total of $11.9 billion across 339 different deals. Jay-Z, who recently backed NUGGS maker Simulate, takes the number one spot on the ranking.

“Celebrities want to be seen as entrepreneurs because that is the new celebrity – there’s a financial element, but there’s also this idea that business is cool and startups are cool in a way they weren’t 20, 30 years ago,” says Nicole Green, the cofounder of Catch Communications, a communications agency that has worked with celebrity-backed startups.

The proliferation of influencer culture has pulled back the curtain on the world of brand sponsorships and endorsements, leading consumers to become more skeptical of what motivates a celebrity to make a product recommendation. According to a 2018 survey by influencer marketing agency ExpertVoice, just 4% of consumers trust celebrity endorsements.

Taking on a more active role in a business – or at least appearing to – essentially demonstrates that the celebrity has a stake in the success of that business, beyond the money they would receive for an endorsement.

“A savvy celebrity who partners with a brand where there’s a genuine connection – a consumer’s going to be able to see that,” Green says. “Partnering with sports people, for example, is hugely beneficial for breakthrough health brands because ultimately [consumers] see that as being legitimate. If you rename [an endorser] as a ‘creative director,’ it gives it a bit more credibility.”

There is also another, more pragmatic reason celebrities are interested in backing brands: they want to get richer. The average retirement age of a soccer player, for example, is 35 years old – meaning they can’t rely on that income forever. In 2015, Beyonce asked Uber to provide equity, rather than cash, in exchange for a performance at a corporate event the company hosted. When the ride-sharing app went public in 2019, she was able to cash out. It may not have been as much as she was hoping to make – initial reports put her stake at $300 million; later it was estimated to have been much lower – but an extra $1 million in the bank isn’t exactly something to be disappointed about.

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