What are the risks with celebrity founders?

Planning around scandal and fatigue

October 21, 2020
Fire Ant

As I’ve stated before, I believe that the next generation of culture defining brands will be founded by influencers. We’re already seeing this trend play out through success stories such as Fenty Beauty, Goop, and Yeezy.

My conviction around this belief stems from the observation that commerce is increasingly being informed at the intersection of original content, social media, and IRL experiences. These are themes that I’ve explored extensively in the past, and what’s key to note is that they all represent areas of expertise for influencers. Influencers are the ultimate manufacturers of original content, they are the main drivers of purchasing behaviour on all the major social media platforms, and (depending on their talents) they are also connoisseurs of crafting experiences that people enjoy — be it through the arts, music, or sports.

Given the growing power of fame to push products to the masses, and the fact that more influencers are thinking about diversifying their talents to launch new brands, I had a fleeting thought about what could go wrong. Celebrities can be very seductive — both for their large fan followings, and also investors who see their fans as a means to avoid the issue of needing to spend too much money to acquire customers. And the baked-in status of celebrities as symbols of contemporary popular culture lends itself really well to crafting brand DNA. But there are indeed some notable risks that accompany working with prominent people. Two in particular come to mind, both of which potential partners of and/or investors of influencer-backed brands should keep in mind:

  1. Reputational risk if influencer is caught up in scandal and brand loses steam: There could be potential reputational damage to a brand in the event a founding influencer is caught up in a scandal — enough to grind product sales to a halt.
  2. Not being able to maintain influencer interest in the brand long-term: Regardless of the amount of time and effort invested upfront in gauging the seriousness and authenticity of influencers as it relates to wanting to build a brand, they are unpredictable and may decide to bail early in the business’ lifecycle.

Dhani Mau wrote a helpful article for Fashionista that reflects many of my thoughts on the pros and cons of public-facing founders:

One of the experts she interviewed for the article (Ariyana Smith Hernandez, co-founder of Nora Agency) echoes my sentiments with the following commentary:

“Having a public facing founder isn’t required to have a successful company. In fact, it can sometimes be a hindrance because the brand is tethered to an individual who is innately human, and makes mistakes… But when there is a strong founder story, consumers have something to connect to and it can assist the brand in being viewed as authentic — specifically if the founder’s background directly links to the product or service.”

Ultimately I’d take on the risks attached to working with A-listers despite the potential downsides. After all, a variety of creative strategies can be used to mitigate their impact should something go wrong down the road. For example:

  1. Re: reputational risk: A potential mitigant is diversifying across a broad base of influencers, which can help reduce the impacts felt by having to pull the plug on any one brand.
  2. Re: loss of influencer interest: In addition to diversification, another potential mitigant includes incorporating and emphasizing the right incentive structures to ensure influencers have skin in the game long-term (i.e. founder equity in addition to commissions on sales).

Despite the risks, I’d always err on the side of launching a brand with, or through the support of an influencer. The opportunity in mobilizing their millions of fans is too great to be meek.

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