How celebrities use fame to fuel their startups — and then hide behind it

TThe intimate apparel industry got a lift this week when Rihanna and Kim Kardashian announced major funding rounds for their respective fashion ventures.

Rihanna’s lingerie brand, Savage X Fenty, secured $125 million in Series C. The next day, Bloomberg reported that Kardashian’s shapewear line, Skims, had doubled its valuation to $3.2 billion after raising $240 million in new capital.

Both Forbes Billionaires thanks to their businesses, Rihanna and the Kardashians rave about the company’s growth on social media and elsewhere, but, like many celebrity entrepreneurs, they are heavily guarded when it comes to disclosing important financial information.

Generally, celebrity entrepreneurs refuse to reveal how much they have personally invested and are tight-lipped about almost all sales figures.

“All these private companies are on a PR tear and it’s easier when a big name is involved,” says Sucharita Kodali, a retail analyst at Forrester. She adds that when it comes to valuations, most startups lie, usually by 2x to 10x. “Who knows,” she adds, “because no one has seen the pages.”

Still, celebrities continue to use their fame as a sword and shield to gain startup recognition.

Early examples include Gwyneth Paltrow, who launched her lifestyle brand, Goop, in 2008. A decade later when he raised $50 million in Series C funding, various sources estimated Goop’s revenue at $15 million to $20 million, but the company declined to confirm. the number

These days, Goop relies on selling stimulants — like its Jade Egg (which claims to increase sex drive when inserted into one’s vagina) and “Keep Your Hands Off My Vagina” candles — to generate more buzz than her acting career. But when it comes to reporting annual sales figures, the company is more reserved than its product lineup.

Country singer Blake Shelton, who is at No. 70 Forbes Earning the majority of his income as a coach on the Celebrity 100 list, NBC voice last year Rolling Stone He reportedly quietly sold his music catalog for $50 million. But when asked about the deal recently, the eloquent Shelton was reticent. He is now looking for a new revenue stream, his own line of hard seltzers, but has not yet disclosed how much he has invested in starting Smithworks.

And shortly after stepping down from their royal duties in the UK, Prince Harry and Meghan Markle went all American, announcing content partnerships with Netflix and Spotify. They also signed with the Harry Walker Agency to cash in on potential speaking engagements. But when it came to disclosing the value of those deals, the former royal couple remained as secretive as the firm they fled.

Some people just lie.

Kardashian’s half-sister, Kylie Jenner, is a prime example. The reality star and founder of Kylie Cosmetics boasted $360 million in revenue in 2019, making her the youngest self-made billionaire at the time. The following year, publicly traded Coty purchased 51% of the business for $1.2 billion. Soon after, Coty’s filings revealed that Kylie Cosmetics was half the size Jenner claimed. ForbesKnocking him off the list of billionaires.

So, why lie or hide information? “The SEC doesn’t regulate what private companies say and there’s no governing body,” Kodali says. “The venture capital community plays a huge role in propagating these lies, and no one questions them.”

Until a celebrity-driven company goes public, there’s no real way to quantitatively assess whether a brand has strong fundamentals, says Kodali, an expert in e-commerce and consumer behavior. “Jessica Alba’s early days at The Honest Co. seemed respectable,” but it took going public to confirm that her books were truly honest, Kodali says.

More recently, Kodali pointed to Roger Federer’s $50 million investment in sneaker company On Running as an example of a celebrity-backed venture. Founded in 2010, the company went public in September 2021 with a valuation of $11.3 billion. “Its growth doesn’t seem to be based on hype,” Kodali says. “I didn’t hear about it from the headlines, I heard about it from racing enthusiasts, then investors. It was rarely mentioned in the media until it became public.”

Meanwhile, it remains to be seen how much impact Dent Savage x Fenty or Skims will have on the traditional intimate apparel market in the long run. Simon Siegel, retail analyst at BMO Capital Markets, admits that many brands are looking to capitalize on Victoria’s Secret’s weakness in market share. But a lingerie company like Rihanna’s — even with $310 million in funding — is still “not even in the same ballpark as Victoria’s Secret,” which reported revenue of more than $5 billion in 2021.

However, with Rihanna and Kardashian’s huge social media followings — nearly 300 million each — both women have already used their fame as an express elevator to wealth.

“I bucket all of them into startups that overgrow their businesses, and this area happens in waves when it’s hot at once,” Kodali says. “But you can’t hide when it’s public.”

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