Some Advice for Celebrities and Startups Seeking Their Endorsements

Posted on Nov 23, 2012 | 32 comments


I live in LA. And I’m a VC. So you can imagine I see my fair share of celebrities looking to get into the technology industry. And equal numbers of startups seeking celebrity endorsements in exchange for equity.

For the most part my advice is simple, “don’t bother.”

But as ever I’ve had to have this debate in numerous company pitches and board meetings. So I guess it requires some explanation.

For Startups Wanting to Work with Celebrities

Don’t give up your hard-earned equity to celebrities. It is a waste. Here’s why:

1. Your product is mediocre or sucks: If your product isn’t amazing having a celebrity endorsement isn’t going to make it so. It’s going to get you some press buzz – sure. For 5 minutes. But customers will come to your website, realize your product isn’t amazing and will leave. So having a huge celeb who takes 10% of your company is – well – taking 10% dilution for 0% benefit.

Like many companies that launch an MVP product, you  may eventually find your way and build a great product. But by then the celeb will be on to their next opportunity and you will be out some equity. They simply don’t get product / market fit and aren’t patient to stick around and help you find it.

2. Your product totally rocks. If your product rocks you don’t need a celeb to take 10% of your company. If your product is great and you are reasonable at marketing then customers will find you, you will get adoption, the press will build authentic buzz and celebrities will use your product. For free. See:Justin Bieber / Instagram.

If your product is great you can pay a celebrity a normal fee for a real endorsement. This can be in the form of cash compensation or performance-based warrants.

Wait, Mark. Didn’t Kim Kardashian help make ShoeDazzle?

Well, sort of. I think really Brian Lee made ShoeDazzle because without his entrepreneurial prowess the company wouldn’t have raised all the money they did, hired the tech talent that they did and had the original business model idea that they had.  But Kardashian was the perfectly authentic spokesperson for a brand with this target customer audience.

And I wonder how ShoeDazzle feels about Kardashian now? I’m not sure being so closely tied to one spokesperson makes much sense in the long run.

But ever since Kardashian got behind ShoeDazzle and when all of LA thought ShoeDazzle was a guaranteed success (hint: nobody is saying that now) then every celeb in town was thinking, “if that bitch could get rich of an Internet company with no skills AT ALL then I should be making at least 2x what she’s making at ShoeDazzle.”

Thus my phone started ringing more. And I started cursing Kardashian. And all of the coattail-hanging agents in search of their next big money source.

If you DO want to do endorsements do them the old-fashioned way – trade what celebrities really care about (hint: $$$) in exchange for their endorsement of your product. And make sure you choose influencers who are authentic to your audience.

For Celebrities Seeking Their Fortunes Working with Startup

1. Don’t.

2. If you are amazing at what you do (read: an A-Lister) then you will make far more money sticking to your day job. If you make $5 million per movie – trust me you are not guaranteed that kind of return in working with a startup. The reason I hate working on tech deals with celebs is that when things get hard (hint: startups always get hard) it is far easier for them to disappear and go make another: Movie, TV show, hit song, whatever than it is to figure out how to make the startup work.

3. You risk your personal brand for no reason. If the product you’re endorsing isn’t a home run (in a startup chances are it will be yesterday’s news faster than your sex-tape video) your personal brand will be associated with it and that could hurt your day job. Why risk it? Startups aren’t all that.

What Should We Do if We’re a Celeb and Want to Do Startups?

1. You either need a real authentic desire to help build a company and the smarts and drive to pull it off (see: Jessica Alba – Honest Company)

2. You need to be extraordinarily giften in both vision and networking [and have deep pockets backing you] (see: Ashton Kutcher … yes, I will admit that I respect his judgment a great deal on tech startups).

And now that leaves 95% of the rest of you.

3. Put your money behind a fund that knows how to invest in startups. You could contact Adam Lilling who is rumored to be raising a new fund and has deep ties to both the tech world & Hollywood. Or back somebody like Chris Sacca who is also betting on the intersection of both.

4. Or just get paid a fee to endorse bigger tech co’s that are probably dying to work with you and already have lots of money. See: Spotify, Apple, Microsoft Surface. [but please don't do rookie moves like this or you'll just prove my point that you should stick to your day job]

And if We’re a Startup and Want to Work with a Celeb?

Build a great product that solves a real problem. The rest will sort itself out.

  • http://www.facebook.com/profile.php?id=218435 facebook-218435

    I’m pretty excited by startups which allow celebrities or influencers (the line is blurring these days) to authentically reach their community for engagement, commerce, etc. such as opensky out of NYC. In these cases I think it might be ok to incentivize the early adopting celebs who can trial the product and then evangelize.

  • http://slugball.com/ matthughes

    File this under, “West coast problems”.

  • http://bothsidesofthetable.com msuster

    re: “allow celebrities or influencers (the line is blurring these days) to authentically reach their community for engagement, commerce, etc.” – exactly. and that is what we at Adly have been doing for years and we were amongst the first doing it. Still, that’s a far cry from giving away meaningful parts of your company for an endorsement, which is what many in the industry are now doing.

  • http://www.ChrisNorstrom.com Chris Norström

    Hey Mark, I sent you a Calendar in the mail to GRP Partners’ address. Did you get it yet?

  • pgollakota

    Yup! If your product is great you don’t need celebrity endorsements. On a related note, it’ll be interesting to see how http://littlemonsters.com backed by Lady Gaga is going to turn out. Seems like she invested in the right space, or at least in a space she can influence directly through her celebrity status.

  • http://bothsidesofthetable.com msuster

    What does that even mean? A physical calendar? No, I did not. Maybe I will have it Monday.

  • http://twitter.com/LongviewSources Longview Sources

    I really enjoyed this article – From a startup’s point of view, I think as long as the product is terrific and the celebrity they reach out to has real influence among its target audience, it doesn’t hurt to explore a partnership. But as Mark said, I’d definitely be wary of giving any sort of equity.

  • http://blog.19lights.com John Hable

    I basically agree, although I think of it more in terms of ROI. Suppose that you value your company at $1m. If you are giving away 10% to a celebrity then you are pricing that celebrity endorsement at $100k. You’d probably get much more traffic by raising $100k and spending it on adwords, and it would be targeted traffic that helps you refine your marketing message and determine your important metrics (like CPA).

  • http://feedspot.com/ Anuj Agarwal

    Great article. I remember Ashton Kutcher tweeting about a startup during the london olympics(… with A-list board members) which was just not working and hardly anyone was using it. I saw the founder bragging about the tweet on facebook. It just makes no sense. If you do not have product/market fit, no matter you get million users signing up on that day they will all drain and never come back.

  • http://www.bluecoastrecords.com/ Cookie Marenco

    LOL. Great response. :)

  • http://arnoldwaldstein.com/ awaldstein

    I agree somewhat but think it is more complex than you state Mark.

    Celebrity endorsements come in all shapes and sizes and sometimes in the form of VCs and tech press coverage.

    The line between endorsement of a (let’s say) movie star saying “I like this” and a tech star saying “I use this” is both wide and thin.

    Venues like Twitter are celebrity (aka “well known’) based and it is just smart marketing to have people with large networks speak publicly on your product’s value.

    So yes, agree. But define celebrity larger beyond ‘I buy shoes there’ to ‘I organize all my contacts here’ and the story changes.

    Happy Thanksgiving Mark!

  • http://amble.com/ambler/ Amble Resorts

    As brands become more “human” (especially startups) I think partnerships ought to reflect the way our friends & family support our pet projects and meaningful endeavors.
    Both my personal friends and professional contacts who are sympathetic to the mission of the startup I work for (Amble Resorts) currently support it by word-of-mouth advertising within their own networks to individuals who fit the bill as our target customers. They’re not trying to gain a share in our success, but they are confident in the excellence of our niche luxury travel product, and they give it powerful endorsement in their own circles.
    I think any good celebrity partnership will have a similarly organic feel and will not be about stealing a slice of a great startup’s pie.
    — Rachel Kowalczyk, Managing Editor, Amble Resorts

  • MissSuccess

    Great advice, Mark. Happy Holidays.

  • http://www.bluecoastrecords.com/ Cookie Marenco

    All very good points. Yesterday’s ‘Celebrity’ is today’s “So what!” and tomorrow’s “Who?”. Customers are more savvy about people and paid endorsements. The brand/product has to stand out beyond the celebrity.

    I think Nike has done a pretty good job with celebrity endorsements over the years. Customers feel like the athletes really use the products. But do customers believe Kim K is really wearing shoes she gets in the mail for $20? NOT! If the celebrity falls out of favor with the public, you face damage control on your products also.

    Celebrities are human. When a celeb uses your products because you solve their problems it is a bonus. An endorsement that comes like this with a great product can help propel a startup;s customer adoption. I totally agree that it has to start with a great product, though.

  • jake

    So, build a great product. This really goes without saying. Beyond that obvious bit of advice, “great” is subjective, of course.

    This article is saying that VC’s know what “great” is and celebrities don’t.

    Given that VC’s are batting about .100, the odds to beat for the celebrity are pretty good. So, what might celebrities know more about that would give them better odds? Well, they deal with more people and more and more complex deals than VCs daily. They kinda know the music biz, movie biz, sports, etc. maybe even better than a VC (sarcasm intended).

    Some celebrities are business people – are they not as smart as VCs either?

    Please re-read this article and replace the word celebrity with VC and not a single thing changes for the entrepreneur. So, pick your business partners and supporters wisely and if people really believe in your product take advantage of their support – wisely.

  • http://twitter.com/Reuven Reuven Moskowitz

    Great read. (IG is unique, celebrity is natural user -sharing service to connect with broad audience)….

  • http://www.bluecoastrecords.com/ Cookie Marenco

    And speaking of Celebrity endorsements that live to bite you in the ass. This one is out today…
    Microsoft hired Oprah to endorse Surface. She (or whoever works her tweets) sends out a message about how much she loves it and bought more as gifts.. Problem was the tweet was sent out from an iPad, apparently.
    http://thenextweb.com/shareables/2012/11/19/oprah-plugs-the-surface-on-twitter-uses-an-ipad-to-do-so/

    Lesson.. don’t be drinking a Pepsi in a Coke commercial

  • ruchitgarg

    Make your product awesome! rest will follow. Great advice above @msuster:disqus

  • Greg Mand

    Mark…another home run post. Remind me of this one the next time we see each other. Agree with you in so many ways. Btw…think action tonight in the stands at the Linc will be more exciting than on the field.

  • http://www.hypedsound.com/ jonathanjaeger

    Little Monsters is geared specifically to Lady Gaga fans, though. Rather than being an endorsement with some occasional benefits, like Shoe Dazzle with Kim Kardashian or an Ashton Kutcher-backed startup, this is a Lady Gaga social network (not just a social network endorsed by Lady Gaga).

  • http://www.bluecoastrecords.com/ Cookie Marenco

    Lady Gaga and her manager, Troy, raised money for a website company called backplane.com which appears to be about 20 programmers working on littlemonsters.com. They seem to be using that as a ‘test’ site to build other sites for artists. I’m not aware if they’ve debuted other sites for high profile artists yet, but there is definitely a need.

    A few years ago, Cisco had an on offshoot called “Eos” and were building sites for Warner Bros artists. These sites were ridiculously expensive and badly laid out to attract fans. Some of the worse sites out there with no functionality for the specific needs of artists. They killed Eos about a year ago.

    I’m on the mailing list for littlemonsters.com and at the moment, it’s pretty lack luster, but Gaga and Troy are smart to use this as a test case and white label it for others. On a much smaller scale, that’s what we’ve been doing for our artists. Our artists control their brand, the customers and the pocketbook directly. It’s a beautiful thing. :).

    Ownership of the website is ownership of the customers, which is as important as owning the music content… and maybe more. Not having access to your customers (as is the case with sales at iTunes or Spotify streams) is the new record company model.

  • http://twitter.com/robbieab Robbie Abed

    99problems and a celebrity isn’t one.

  • http://www.hypedsound.com/ jonathanjaeger

    Thanks for the elaboration. I didn’t look into it deep enough to know those distinctions.

  • Profile Defenders

    Suster,

    Dont you think the average actor’s career is similar to a startup in how they are trying to hustle every second they are not waiting tables to hit the next big gig. Watching my friends in their respective bands trying to get some momentum reminded me greatly of a lot of startups trying to build stronger social media followings and traction.

  • http://www.bluecoastrecords.com/ Cookie Marenco

    I don’t believe Mark is putting down anyone in the arts. I consult musicians on their businesses to think about themselves as entrepreneurs (if they’re interested in having a career, that is… and some aren’t). The equivalent for musicians would be if a high profile CEO of a Silicon Valley company were to be given a large percentage of equity for standing up and saying.. “I like this band” (hm, sounds kind of familiar, actually). What’s that worth? If the higher profile CEO uses his/her celebrity then does something stupid to fall out of favor, the upstart band may suffer by association… and would still have the CEO as an equity partner.

    But ya know… I’d take a high profile CEO endorsement for our music label, come to think of it. :) And any player on the SF Giants baseball team.

  • ccardillo

    I have mixed feelings about this. We have great traction doing what we’ve been doing, but want to get more exposure. I am talking to some retired, 30-something/40-something former athletes (NBA/NFL) regarding my start up. We are NYC based, in the building products industry where almost everyone is a huge sports fan. I’m trying to see the value for me to give equity, and cash down the road. Their names will attract some users, but how many and for how long ?

  • http://www.ChrisNorstrom.com Chris Norström

    I just checked the USPS delivery confirmation, it was delivered back on Nov 23rd. I hope you got it. Consider it an early holiday present.

  • Linda R.

    All in favor of great products that sell themselves! Great post.

  • Annas wideski

    I am really impressed by this blog! Very clear explanation of issues and It Is Given IS open to everyone.Capital accounts collection agency

  • http://velocitylocal.com/ Velocity Local

    Every product and services advertise or endorse pertains accountability. Its more favorable to just kip it short and simple, without removing the mainstream. What is more vibrant in each start ups? It should always be commending the means.

  • kelly

    That would have been something pretty cool to organize! Just like http://www.essaybox.com/essay-writing/essay-for-sale.html wouldn’t it?

  • http://www.facebook.com/ScottRogers1521 Scott Rogers

    Glad I found this blog, We are a two year old company who has had phenomenal growth over the last two 9 months. We went from 140k 2011 in revnues to 2.5 million this year and have been looking really hard to obtain a celebrity endorsement. Our business has grown so fast we dont have the cash on hand to make the initial upfront investment for a typical endorsement. Obtaining one is very crucial to our next step. We want to offer royalties and equity in exchange. Finding this to be much harder than expected to achieve. Any help would be greatly appreciated…