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Tips on How to Approach Celebrity Investments for Your Startup

It’s your job to maximize the value of your celebrity partners.

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.shock — stock.adobe.com

Opinions expressed are solely those of the author and do not reflect the views of Rolling Stone editors or publishers.

Cultural icons have been helping brands gain awareness and validation since Mark Twain started hawking Conklin Crescent pens in the early 1900s. Sustained brand lift from A-list celebrity endorsement has faded over the years with the decentralization of media. Today everyone has their own unique combination of platforms that keep their interest, making universal awareness of anyone or anything less likely.

The good news is, there is still tremendous value in partnering with influential people. The bad news is, it’s quite tricky, with many pitfalls that require focus and due diligence to create great alliances.

As an insurgent in an established category, you can’t directly compete with the legacy brands that spend millions on endorsements and national ad campaigns; however, if you’re savvy, your celebrity partners can add major value — through investment and awareness — to your brand.

Here are some tips on how to value the services provided by celebrity investors:

1. Find the right following.

Make sure the celebrity has high awareness from your potential audience. Talk to your customers if you’re not sure. Unfortunately, your childhood hero may not be the best fit for your business, so you must have the discipline to hide your inner fan. We use a social listening tool called Grin to help us determine the size, engagement and demographic of a celebrity’s audience. The best celebrity and brand accounts shoot for five percent engagement (i.e., comments and likes) from their audience per post. These are the followers who are really influenced by the content and the brand association. Calculate what five percent of your potential partner’s following would be, and decide if this audience is worth the money they are requesting. It’s critical that their five percent of engaged followers fits your target consumer’s persona.

2. Passionate relationships matter.

Is the celebrity excited about your brand? Did they seek you out, or did you find your way to them? Raising money from public figures is like dating — the people you partner with are a direct extension and reflection of your brand. Those who are genuine users of your products will be more inclined to overdeliver. Their enthusiasm is authentic, and your consumers will feel that love. Staged product posts once per quarter don’t move the needle, but if your celebrity investor uses your product in their daily routine, then that authenticity is invaluable.

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3. Avoid agents — go direct.

Your A-list celebrity has an entourage managing their money, image, time and attention. Many of these folks get paid from the cash endorsement deals they negotiate on behalf of their celebrity clientele. Agents can’t pay their bills with startup stock options, yet stock options (or warrants) in an early-stage startup can sometimes be the most fruitful compensation a celebrity can receive. Generally, when celebrities make angel investments, their incentives are no longer aligned with their agents’. To get the deal done right, you have to build a relationship with the celebrity and garner their trust. During the pitch process, it’s critical to get as much face time with your celebrity as possible. This is tricky, as agents are gatekeepers, trained to protect their client’s time and privacy. Be persistent; you need the celebrity, not just their team, to believe in you and your vision.

4. Avoid investment discounts.

Every investor believes they are strategic and deserve a discount. The best way to keep a level playing field is to make each investor, including the celebrities, participate at the share price on your lead investor’s term sheet. This isn’t Shark Tank; this is your livelihood. When your A-list celebrity invests, you can match their investment with stock options tied to deliverables in a marketing services agreement. Deliverables like Instagram posts/stories, TikTok videos, in-person appearances and interviews typically have a fair-market cash value based on the celebrity’s following, engagement, cultural relevance and comparable deals.

Pro tip: Rather than negotiating the value of a deal by speaking in ownership percentages, always refer to stock-option compensation in relative cash value. For example, if one percent of your company is worth $1 million at today’s valuation, you wouldn’t give that up for merely $100,000 in marketing services, despite the star power of your new celebrity partner. Ensure the marketing deliverables match today’s fair-market cash value, and remind your celebrity that their shares could be worth 10 times as much when you exit three years from now.

5. The right celebrities will promote your brand at their discretion.

At my company, Super Coffee, we’ve had the privilege of working closely with investors like Jennifer Lopez, Alex Rodriguez, Kevin Hart, Aaron Rodgers, Baron Davis and Patrick Schwarzenegger. They are household names because they are the best at what they do — the pinnacles of excellence in their respective industries. There’s no doubt that A-list celebrities are culture creators; they break down barriers and move society forward.

However, their image alone does not move the needle. A one-off Instagram post will not spike your DTC sales. It’s your job to maximize the value of your celebrity partners. You do that by ensuring they are as excited about your products and vision as you are. Then make them owners in your business while building a personal relationship so strong that they brag to their friends about how proud they are to be your partner.

Be creative; there are many right ways to structure successful celebrity partnerships. The tips above are just some of the lessons that my brothers and I have learned over the last five years. Perhaps the most important lesson is that nobody is going to care about your business as much as you do. Your passion will attract those who share your vision. The right partners will help you get there faster than you could on your own. Keep your head up, and continue to work hard and be nice to people.

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