When Does Creator Equity Make Sense For A Business?

Having a well-known creator or celebrity join a company as an equity partner is often over-romanticized. But, when it works it can be, “lightning in a bottle.”

Happy Tuesday Friends,

Today we dive into the general benefits of creator equity, common misconceptions, and when we believe creator equity may make sense for a business. Let’s get to it.

General Benefits of Creator Equity 👍️👍️ 

Below are potential benefits of creator equity:

• Aligns interests over the long-term → providing a share in the company’s success and growth aligns the interests of the creator and the company for a long period of time vs having a short-term, transactional relationship.

• Marketing → this is the obvious one. Companies can get in front of millions of consumers and win market share without spending marketing dollars. The concept of media-for-equity has been around for a long time in the traditional media space, creator equity is just a new form of this.

• Product development → having creators with deep experience in your product category can be invaluable when designing and improving a product. Their expertise and insights can be utilized over a long period of time since they are an owner in the business.

• Leverage with traditional retailers → winning shelf space at big box retailers can be a painful, time-intensive process. Many retailers actually operate like banks or insurance companies (that’s an entirely different newsletter). In addition to building their businesses off the backs of suppliers, they want to make sure any new products they put on their shelves will be successful. Despite the negatives, omnichannel still makes the most sense for the majority of companies as 80%+ of global retail spend is in bricks and mortar stores. Having creators on the cap table can provide confidence to retailers that the products will sell and having them on the shelves will drive foot traffic.

• Makes other people want to be involved → having creators on the cap table can create other business opportunities and partnerships with those that want to be associated with the talent’s brand for a variety of reasons.

Common Misconceptions of Creator Equity 😕 

Let’s first establish what creator equity IS NOT:

• Creator equity IS NOT a strategy by itself. The creator and their respective role in the company should be a natural fit and be one part of the company’s overall strategy.

• Creator equity IS NOT will not make an average product or mediocre service succeed in the market. No matter how big of an audience a creator has, it will not make the company successful over the long term if people do not love the product or service.

It’s surprising how many companies contact us about creator equity and think it’s a magic pill for a product or service that hasn’t got much traction in the market. It’s also surprising how many founders are ready to give equity away just at the prospect of having a celebrity or famous talent involved with the business.

There seems to be a romanticism that comes along with getting well-known public figures involved with a company. It’s very important to get over the emotional piece and be more pragmatic like with any other business decision. Creators and celebrities are just people. Just like us. They have the same problems and challenges in their lives. Providing equity into a company is a long-term relationship and should not be taken lightly.

When Creator Equity Can Make Sense 💡 💡 

It’s important to state that every business is different and there is no one size fits all. Below is what we have found serves as a good framework for when to start looking at creator equity as a strategy.

• When the business can create clear value for the creator - we believe this is the most important. It will only be a successful relationship if your company can create value for the creator. It needs to be a two-way street. Most companies we speak to are like, “hey, I have a product and by getting creators on board we can have them sell my stuff to their millions of followers.” This is the completely wrong approach. The creator must have a deep connection to what the company is doing and the company must provide value to the creator throughout the process. If the company helps the creator expand their brand, reach, and career, they will in turn work much harder for the company. It needs to be a true partnership.

• After spending a bit of time together - many companies want to rush the process of bringing a creator on to their cap table. We tell companies upfront it’s a minimum 6 month process - and that is if the stars align. Creators are busy people and the larger the following, the more opportunities they have in front of them. If a creator will not carve out enough time to get to know the business and founders, then they are probably not a fit for an equity deal. The talent may really like the opportunity, but they have too much going on to make a longer-term commitment. We often find it is just bad timing and a deal can get done further down the road.

• After dipping the toes in the water - we often suggest for companies to find a lightweight way to work with creators to establish a working relationship before making a deeper commitment to one another. This will also see if the creator can hit certain KPIs and be effective for the business in whatever capacity they are interested in. The talent agents will always push for money upfront as many creators need cash to support their work and this is how agents get paid. We have found if there is a strong connection with the underlying mission of the company, the creator will lean in at a reduced rate or go beyond contractual obligations.

  Now, on to a couple creator equity examples.

From Promoting to Co-owning It 🖥️ 📱 

YouTuber tech reviewer Marques Brownlee has been promoting Ridge’s wallets and accessories since 2020. He recently joined as chief creative partner to focus on product development and work with the manufacturer to launch new products.

🍿 Synopsis: YouTuber Marques Brownlee (aka MKBHD) received equity in Ridge, a wallet and accessories product manufacturer in February 2024. Brownlee joined the company as an executive board member and chief creative partner. Exact terms of the deal were not disclosed. Ridge was founded in 2013 by a father-son team, Daniel and Paul Kane, who believed that good products should be designed for a lifetime. The company’s original patented everyday carry wallet is now carried by over 4 million people and they have expanded the brand to deliver a full range of everyday goods. They design uncomplicated, functional products that are ready for anything and everything. MKBHD will leverage his experience reviewing thousands of leading tech and consumer products to direct Ridge’s brand strategy and design limited-edition wallet and accessory collections. Ridge has the vision of becoming an, “American Mont Blanc” and feels that bringing a creator into the boardroom is the next logical step to help them scale.

📚 Learnings: This partnership is a perfect example of three things: “creator-product-market fit, “ dipping the toes into the water before doing an equity deal, and the company creating value for the creator. The two have been working together since 2020 when MKBHD first began promoting products of Ridge. This equity deal deepens the relationship by bringing together Ridge's commitment to quality and functionality with Brownlee's unparalleled influence in the tech space and understanding of the modern consumers' evolving needs. However, creating such a relationship took time. In the case of Ridge, it was 3+ years before MKBHD came on board as a real partner. Probably the most important point - the company creates tremendous value for where Brownlee wants to go in his career. MKBHD has been quoted saying that Ridge was the perfect partner. “They are big and experienced enough to have the manufacturing expertise to turn ideas into reality, but not too big that they're unwilling to listen and be nimble. I have a lot of product ideas, and together we're going to actually make them happen.”

👀 Learn More: check out the Forbes article talking about the Ridge/Marques Brownlee partnership:

Choosing the Right Celebrity/Creator

Mobile teen banking app Step partnered with TikTok sensation Charli D’Amelio in exchange for being the face of the brand and promoting the company. A few months after announcing the deal, Charli invested her own cash into the company as her first direct equity investment.

🍿 Synopsis: Step is a mobile banking service aimed at teens. Step's goal is to close the financial literacy gap and educate teens on money management. So what better way than to partner with someone who has influence over teens? That’s why in 2020 Step partnered with TikTok star Charli D’Amelio and made her the face of the company where she promoted Step on her socials and was involved with product development. At the time of the deal she had 100 million followers on TikTok and 30 million on Instagram. Four months into the partnership, Step gained over 1 million users and D’Amelio believed so much in the product that she made a direct equity investment into the company alongside several other celebrities. Today, the company has 5 million users and raised over $500M in equity and debt.

📚 Learnings: When a company partners with the right creator or celebrity, it can create, “lightning in a bottle” distribution. Step was searching for someone who influences teens and can talk to them in an honest way about their finances. Charli D’Amelio was exactly that. The partnership is an amazing example of celebrity-product-market fit. Yet at the time of partnering, Step was still a startup. They didn’t have the financial resources to offer D’Amelio an appealing enough offer to have her promote the company to her hundreds of millions of fans. That’s where the equity component came in. D’Amelio bet on herself by choosing equity over cash and may result in 10x - 20x the amount she would normally get when paid in cash. Can you imagine the increase in enterprise value after adding 1 million users in just four months? The main takeaway here is that being involved with Step created a lot of value for D’Amelio and her following. So much that she also decided to invest her own money into the company. She was quoted in saying, “As a Step partner and customer, I’ve been able to see firsthand how easy Step makes it to manage your money while providing the educational resources that today’s teens need but have largely been unable to find—myself included. I’m excited to be able to use my platform to help close this gap and have made a direct investment in Step to help them develop even more useful products.” Step was unique in that they did not really dip their toes into the water with D’Amelio. They had such conviction she was the right person to get involved with the company and it seems like D’Amelio felt the same way.

👀 Learn More: check out Charli D’Amelio’s Step invite page on their website:

Have a great week and remember to Go Direct!

Build with love,

Jordan & Scott