People as Platforms

Why the next wave of creators may very well be business owners too

The rise of celebrity brand partnerships has arguably been highlighted ad-nauseum over the past ten years. Hip-hop and basketball fans in particular will recognize how game-changing partnerships with major brands can be, from Michael Jordan and Nike to Jay-Z and Live Nation. They’ll also recognize how big of a failure these partnerships can be if values and interests do not align (see Kanye West and Gap). 

In this post, let’s focus on what is perhaps a bigger, and more underappreciated shift: there’s an emerging longtail of creators on social media platforms that have amassed massive followings, and launched products that make a lot of money. Some of them have even started raising from private equity and venture capital firms, a trend we’ll call ‘people as platforms.’ 

Top Down: Celebrity Partnerships to Strategic Owners

In the media industry, celebrities and artists traditionally partner with brands to co-launch lines as they gain more recognition and status. These celebrities lend their name, approval and creative direction while companies handle the back-end of launching the product. 

Well-known examples of this include the aforementioned examples of Jordan and Jay-Z, IVY Park x Adidas by Beyoncé, and Rihanna with Puma. 

More and more however, artists are choosing ownership over partnership. Not only is this showing up in how they build their companies, but also in how they fundraise. For example, Rihanna originally launched her clothing line with Puma before ending it in 2018 and launching Fenty. A few years later in 2021, the lingerie line Savage x Fenty raised a $115M series B at a $1Bn valuation led by private-equity firm L Catterton (which is backed by the LVMH founder). Rihanna owned 30% at that time. In 2022, Savage x Fenty raised another $125M from LionTree, ACME Capital and others at an undisclosed valuation. Meanwhile, Fenty, the cosmetics line, was estimated to be worth $2.8 billion in 2021 by Forbes, of which 50 percent was owned by Rihanna. In other words, Rihanna chose to own her brands rather than simply partner or receive licensing royalties, and she chose to raise growth capital from the private equity industry. Interestingly enough, Rihanna is re-launching her partnership with Puma this year, though the details of the partnership remain to be seen.

Another example is Spring Hill Company, founded by Lebron James and Maverick Carter. In 2020, Spring Hill raised $100M from a group that included Guggenheim Partners and Elisabeth Murdoch. Then, just one year later, Spring Hill sold a minority stake valuing the company at $725M, led by Redbird Capital. Other investors included Fenway Sports Group, Epic Games, and Nike (a perfect example of how the model has done a complete 180 from partnership to ownership; Lebron partnered with Nike to start his career, and then Nike bought an ownership stake in Spring Hill a couple of decades later). You’ll also recognize Redbird Capital from their recent deal with Ryan Reynolds. They, along with other investors, bought a 24% stake in the F1 team Alpine for 200 million euros. 

Our last example is Jay Z, who bought Armand de Brignac (AKA “Ace of Spades”) in full back in 2014, several years after his fallout with the Cristal champagne owners. He then sold a 50% stake in Ace of Spades to LVMH, pocketing at least $315M, implying the brand was worth over $600M. Speaking to the power of strategic ownership, Jay-Z stated in an interview with Kevin Hart: “I owned a 100 percent. I could’ve said, ‘I want to own 100 percent of this thing,’ or I could own 50 percent of it and … push it even further…It’s still an asset that I can pass on to my kids.”

There are countless others that we can walk through here, such as how Tracey Ellis Ross launched Pattern Beauty with a venture capital group or how Reese Witherspoon sold a stake in Hello Sunshine to a group led by Blackstone, but the trend is the same. Instead of licensing or partnering, some celebrities are choosing strategic ownership by raising growth capital and becoming platforms themselves. 

(Some examples)

The model does not always work. If you take a look at IVY x Adidas for example, sales are in sharp decline. This thread highlights how Beyoncé launched the brand through Parkwood, which is similar to Lebron’s Spring Hill. However, IVY x Adidas, is not a natural extension of Beyoncé’s image. She hardly wears athletic clothes (at least not on her IG), which makes it hard for fans to relate. Perhaps thanks to social media, fans subscribe to ideology and quality, more than just quality. Celebrities do best launching brands that align with the topic they were already doing before the launch. 

That brings us to why ‘ordinary’ people that gain massive influence are just as well positioned as celebrities to build market defining brands, more than ever before. 

Bottoms Up: Influencers to Owners

On social media apps like Instagram, TikTok and YouTube, influencers gain followers, and followers earn them brand partnerships. The more engagement an influencer has, the more likely a brand is to strike a marketing deal with an influencer. You might have heard this described as the creator economy. As VC firm SignalFire describes, “It’s defined as the class of businesses built by over 50 million independent content creators, curators, and community builders including social media influencers, bloggers, and videographers, plus the software and finance tools designed to help them with growth and monetization.” This is a massively growing market. Goldman Sachs estimates the TAM of the creator economy to 2x over the next five years from $250B today to $480B by 2027. Most of this is driven by advertising spend. 

While half a trillion dollars is a lot of money, when we zoom in, the vast majority of creators do not make enough on an individual basis to pursue this path professionally. Today, GS estimates that only 4% of the 50 million creators globally earn $100,000 or more per year. They also estimate this 4% number will not change — but I disagree.

In the same way that celebrities are moving from partnerships to strategic ownership, new ‘people as platform’ companies will emerge from creators launching their own products. This opportunity doesn’t just start and end with creators; we’ll see this across the board in technology. For example, tools to support these creators, who are akin to small and medium size business owners. Think of new financial infrastructure, like expense management and tax filings, new analytics products, healthcare management, and CRM tracking tools. Some of the early companies include Beacons, Fourthwall, Hypd, and Typedream, which all have out of the box solutions to help creators launch and manage brands online. It is also highly likely that the success rates (i.e. making over $100K) will stop looking like a power law distribution of 4%, and more like a bell curve. 

Well-known creator examples, which admittedly, sit in the current power law distribution, include Whitney White of Melanin Hair Care and Telfar Clemens of Telfar. Neither raised significant capital to reach scale as CAC remained low (and quite frankly, capital was largely unavailable for them), a nod to the early days of direct to consumer marketing. 

There are, of course, issues with the above model. The large platforms still capture most of the revenue via billions of dollars in ads, a problem that many startups, particularly those in web3, are looking to fix.  Rally enables creators to launch their own coins. Nike’s .SWOOSH marketplace, currently in beta, allows users to collect, and eventually co-create virtual goods on the Nike brand. OpenSea, a NFT marketplace, recently dropped its creator fee cut from 2.5% to 0.5% in response to competition from new marketplace Blur. 

But the trend is clear. The single person behind a brand (the new ‘founder’), matters more than ever. Consumers inherently trust these founders over the brand name itself, leading to higher conversion and faster sales. It is also clear that the people who become owners will look different than in the past. Many of the creators who have launched brands are underrepresented in beauty, tech & fashion. While there are countless other examples, I highlighted Whitney White and Telfar to illustrate that Black creators drive much of culture, and have historically been underpaid. In light of this, and how quickly the market size is accelerating, it is fascinating to think about how funding models might evolve to invest in the breakout products and technology companies emerging from people as platforms.

Disclaimer: The above is an opinion and for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

A special thanks to Tracey Thompson for providing input on this post.