March 7, 2025 • 19 mins
In this episode of How I Invest, I interview Scott van den Berg, an expert in celebrity-founded brands and the managing partner of Hotstar VC. Scott shares deep insights into how celebrities are leveraging their platforms to build billion-dollar businesses and why some partnerships thrive while others fail. We discuss the shift in celebrity investments, the rise of creator-led brands, and key lessons from success stories like Ryan Reynolds' Mint Mobile, Kim Kardashian's Skims, and George Clooney's Casamigos.
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Transcript
Episode Transcript
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(00:00):
Tell me about your team.
A little bit about my team and myself.
So we have been involved in 55 celebrityfounded brands, including some of the most
successful ones.
So I've worked with a lot of celebrities overthe last couple of years to help them do equity
deals with startups.
And I've also been, like, an angel investor incompanies of people like Selena Gomez, DJ
Khaled.
We are obviously co investors in Jake Paul'sBetter and some others.
(00:22):
And I also create a lot of content online aboutcelebrity founded brands.
So whenever, like, people are thinking aboutlaunching their own brand as a celebrity,
oftentimes, I'm one of the first people thatthey reach out to.
And then the rest of my team consists of peoplelike Ben Acot who cofounded Feastables together
with Mr.
Beast.
And that company is doing, like, 400,000,000 inrevenue in the second year of business.
So one of the fastest growing consumer brandsever.
(00:44):
Another one on my team is actually one of thecofounders of The Honest Company, Christopher
Gaffigan, which he started with Jessica Ova andIPO ed in 02/2021.
Honest company and Feast of Walls are two ofthe most successful celebrity founder brands.
So we like to think that beyond capital, we canalso add expertise to these portfolio
companies.
(01:05):
How did Ryan Reynolds sell Mint Mobile in threeyears for $1,350,000,000?
The company was founded in 02/2015, and RyanReynolds was actually an early customer, and he
absolutely loved the product.
And they were able to strike a deal in 02/2019where he became, like, a co owner of the brand,
and also got, like, a 25% equity stake.
And this allowed Mint Mobile to leverage RyanReynolds millions of followers to basically
(01:30):
promote the product for free, and this issomething that traditional brands have to pay
millions of dollars for.
When it comes to Ryan Reynolds, he not only didit with Mint Mobile, he also did it with
Wrexham Football Club and Aviation Gin.
What is his unfair advantage?
I think his real unfair advantage is actuallythe way how he looks at business in comparison
(01:50):
to other celebrities.
So to be honest, like, having a celebritynowadays in full video companies is quite of a
commodity.
There's, like, thousands of startups that have,like, a celebrity cofounder, co owner, creative
director, whatever title you wanna give it.
And if you also look at the type of companiesthat they want to align themselves with, it's
often, like, luxurious products or aspirationalproducts, that type of companies often in
(02:11):
saturated markets.
And then Ryan Reynolds had, like, a click andsaid, why am I not focusing on unsexy, highly
practical companies?
So that's why he's focused on datacommunication.
He's involved with 1Password, a passwordprotection company.
Those companies still have, like, highacquisition costs.
So thinking, hey.
Can I leverage my platform?
(02:32):
So instead of being a walking billboard todaypromoting this and then tomorrow promoting
something else, He works together with four orfive companies on a day to day basis and
promote those companies for the next five toten years.
That's what he does.
He's not working with 20 or 30 companies at thesame time.
You help startups partner with celebrities inorder to found and scale brands.
(02:54):
What's important when you think about combininga startup with a celebrity?
These companies always have to be productfirst.
Obviously, having a celebrity on board willhelp sell the product, but they might help sell
the first product, but the quality of productis actually gonna determine that people buy a
second, third, and fourth product.
They always have to be product first instead oflike, celebrity first.
(03:15):
It's also really important is that there's anauthentic fit between the celebrity, and the
brand.
We call this celebrity product market fit,where basically the brand is aligned with the
celebrity's persona, content, and audiencebefore you actually make a jump in making this
person like a co owner or co founder of thebrand.
We call this like dating before you getmarried.
(03:35):
So you first get dating, then you obviously getin a relationship, then you get engaged, and
then you get married.
And this also makes it much more authentic.
I think it's always so random when a newcelebrity launched like a new hot sauce brand
while they never talked about this openly.
And you're like, okay.
Why are you an authority in hot sauce?
And they're like, oh, I ate it with every dish.
And I'm like, okay.
But you never talked about this openly.
(03:56):
Whereas, like, if you have been workingtogether with this brand and after six months,
you say, hey.
Let's partner up and make become like acofounder.
The audience is like, oh, this makes so muchsense because there's a deeper alignment there.
Lastly, I would say is having a strategy.
You need to have a clear plan in order to makesure you can leverage the celebrities' platform
persona and networks to accelerate the growthof your company and make sure your product is
(04:17):
part of their story as well.
There's a lot of celebrity startup partnershipsthat haven't worked.
What are some partnerships that have worked?
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A great example is a company called DiffieHair.
It's founded by an influencer called DaniAustin.
She's, like, a lifestyle content creator whotalks about her whole life online.
(05:22):
And it got to a point where she was, like,experienced a lot of stress, and it lead to,
like, a lot of hair loss.
And then she got to a point where, like, Idon't wanna talk, like, in front of the camera
anymore because I'm a little bit insecure.
After a month, she was like, why don't I sharethis as well with my followers because I've
been open about my whole life.
So she started to talk openly about it.
Tens of thousands of women were like, wow.
(05:43):
Thank you so much for being open becausenormally influencers are just showcasing the
good and never the bad, and, yeah, reallyhelping her followers be more comfortable.
And then she was like, hey.
Why am I actually not going one step further?
Why don't I work together with like an R and Dteam for twelve months to find like a solution?
So that's where she actually created DiffieHair, which is a hair serum, which helps you
(06:03):
fight hair loss.
First year, that company did $40,000,000 insales and this influencer only had 2,000,000
followers.
So I think a lot of time people are mistaken,the follower count, thinking, oh, the bigger
the better, but sometimes it's just aboutcommunity and finding that perfect audience fit
with the product that they're selling.
If I'm a founder and I start a consumer brand,that may make sense to to partner with a
(06:25):
celebrity.
Walk me through the process I would go aboutfinding the right celebrity for my brand.
Recruiting first.
So, like, going through multiple profiles tounderstand who would be the right fit.
Obviously, first, I have to also create apersona.
So what are you looking for from this person?
Who is your audience?
And make sure that that audience is overlappingwith the celebrity.
Also finding out what is their personalmission, how much do they still have left in
(06:49):
the tank?
A lot of celebrities, they're very successful.
They've made hundreds of millions of dollars.
Are they still gonna care about your littlestartup, wanting to make it another success
working for the next five to ten years?
Really understanding also the celebrities'mission, and then you just have to connect with
them.
So whether it's like a direct connection orfire the management agencies.
And if they're interested, you can, yeah,basically go to the recruitment purse process
(07:11):
where you're, like, interviewing them,understanding their personal missions,
understanding if they're fit, having them testthe product, and then doing that multiple
times.
A big mistake is that people always fall inlove with a celebrity.
They're able to get in touch with a celebrity,and then, yeah, they're kind of starstruck
because this person has 20,000,000 followers,and then they're like, what if only 5% of this
20,000,000 followers will buy the product?
(07:33):
I'm gonna be like a billionaire.
But that's not the way I should think aboutthis.
You should really think about, okay, who's theright person, not only from an audience
perspective, but also from a personalperspective who can help my, yeah, company move
forward.
What are the most common mistakes that brandsmake when partnering with celebrity?
Not doing enough due diligence on thecelebrity.
(07:54):
If they're able to get in touch with thecelebrity or via telemanagement agencies,
they're being proposed to celebrity.
After one meeting, they're like, okay.
We really have to work together with thisperson instead of actually looking at their
audience and seeing if it makes sense.
They immediately jumped to the gun and theysay, oh, let's become my cofounders.
Here, you have a 20% stake in my company, andlet's work together.
Then they do a couple posts and they find outit's not leading to anything.
(08:17):
And now you have a disappointing startup and adisappointed, celebrity who's also not
motivating to keep on, promoting the brand.
But now that person is like an equity owner inyour company, so it makes it really hard to get
rid of each other.
So that's why it's really important to datebefore you get married.
And another like mistake that a lot of thesestarters make is actually that they're kind of
becoming too dependent on celebrity.
(08:39):
So they're taking a celebrity first approachinstead of a product first approach.
Let's say you partner up with an actress andthat actress has to shoot a movie for the next
two months in Hollywood.
She's not gonna be as involved with yourcompany as before.
So you see these spikes in revenue, and that isdefinitely something that you want to avoid.
We always kind of should build your companythat is supported by the celebrity instead of
(08:59):
dependent on.
When you're dealing with celebrities, you'renot only dealing with them, you're dealing with
their managers, with agencies.
What is it like dealing with these gatekeepers?
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It's a kind of a love hate relationship.
It's a great question because kind of theirbusiness model is not really aligned with my
(09:21):
business model, whereas I'm really focusing onlong term equity value.
The traditional business model of these telemanagers is that they get a 10 to 20% cut of
whatever the celebrity makes.
And unlike a celebrity who has a lot of moneyand can say, hey.
I don't care about my next pay cut, but I wantequity or wanna build my own company.
A lot of these telemanagement agencies, theyhave to pay their employees.
(09:42):
They have to pay rent.
They have to pay you utilities.
The individual managers, they have targets.
Those targets are based on cash that they bringin, which gives them bonuses, which gives them
promotions.
So naturally, they have a tendency to focus oncash over equity deals.
Slowly, these telemanagement agencies aregetting a little bit more entrepreneurial, but,
yeah, they're kind of still stuck in the oldway of thinking.
(10:03):
So whenever you approach them with, like, anequity deal, they're like, oh, we want equity
plus cash.
And then you're like, okay.
Let's hope they just say 25 or 50 k just as asign of goodwill.
And then they're like, no.
In addition to the equity, we wanna get, like,a high 6 or even a 7 figure cash check.
No seat or series a startup, just have amillion dollar laying around for a celebrity,
not knowing what they're gonna get in return.
(10:26):
So that is just quite frustrating.
To be respectful, a lot of them are talentmanagers.
They're not venture investors, so they don'tknow how to analyze these companies.
The questions that you get in these calls, it'slike the first question without actually having
any context.
It's like, when are you gonna exit yourcompany?
And I'm like, well, maybe we should start withthe mission and understand what the mission is
and why they're doing this, what is uniqueabout the company, and then talk about the exit
(10:48):
later.
Then we're talking about early stage companies.
And also if you approach them and you have,like, deal a, which is like a very high growth
company, they have product market fit, but theyonly wanna offer equity, and they have deal b.
A normal startup, I would say, don't haveproduct market fit, but they're willing to pay
equity plus cash.
The manager's influencing the celebrity to dodeal b.
And what is very frustrating is three yearsdown the line, company three goes bankrupt a b
(11:13):
goes bankrupt.
And then internally, the management firm islike, oh, we shouldn't do equity deals because
it's not paying off.
And I'm like, yeah, of course, because you'renot picking the right companies.
Because if you pick company a, you actuallywould have been very successful even without
the celebrity involvement.
But luckily, a lot of them are now getting moreentrepreneurial.
The largest ones even get their own venturedepartments, but it's more like an exemption to
(11:35):
the rule.
And they're kind of being forced to as well.
Their clients, their celebrities are like, hey,my peers have been very successful in this
space.
So can you actually get me similar deals?
So are they being forced to search for thesedeals?
And if they can't find them, the celebritiesgonna walk out of the door, including their 10
to 20% cut that they normally get.
It's interesting because there's this effect ofseeing your neighbors or your friends get big
(11:58):
exits.
In Silicon Valley, nobody really believed inequity until their next door neighbor got
10,000,000 or $20,000,000 as an engineer fromGoogle or Facebook, and then it started to
become real.
It started to become visceral.
And I think same thing is happening in thecelebrity world where you mentioned all all the
successful startups.
The more than that proliferate, the morecelebrities will take equity.
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Yeah.
There's like FOMO going on.
Like, all the celebrities are now, oh, wow.
Okay.
I also have to start my own company.
And, unfortunately, there's, like, a lot of badplayers, in the space who are, like, taking
advantage of that, just saying, okay.
I have this white label product.
(13:23):
Let's just put your name on it and try to sellit.
It doesn't add any value or solving anyproblems.
So it's just more superb products inoversaturated markets.
So Hotstar VC is a new fund from which we areinvesting in brands founded by celebrities and
creators.
And what has been interesting is that they havestarted to build their own audiences online and
are now creating businesses on top of it.
(13:43):
And it all has to do with their competitiveadvantage in company building as they have a
built in audience.
They can basically drive near instant tractionto their companies for free by simply posting
on their social media channels.
And that is something that traditional brandshave to pay millions of dollars for.
But not only that, it can also help you withretail.
It can help you with investors.
It can help you with PR.
So there's a lot of benefits to these celebritybrands.
(14:04):
And it has already resulted in companies likeSKIMS, Biking, Kardashian, which has set the
IPO this year for $4,000,000,000 Min Mobile byRyan Reynolds, we got, like, acquired for
1,350,000,000.
At Prime from Logan Paul and Keisai, we did,like, $1,200,000,000 in sales in the first two
years of business.
And many more are seeing growth thattraditional consumer brands have never seen
(14:25):
before.
And this is just the beginning.
Literally every single celebrity is thinkingabout launching their own brand after seeing
the successes of their peers.
That leads to a lot of deal flow.
We don't really care about the next celebritytequila or beauty or apparel company.
We don't care about celebrities launchingproducts in oversaturated markets.
We care about celebrities launching innovativeproducts and services that solve real customer
(14:46):
problems.
Those are the types of companies that we wouldlike to invest in.
Tell me about your team.
A little bit about my my team and myself.
So we have been involved in 55 celebrityfounded brands, including some of the most
successful ones.
So I've worked with a lot of celebrities overthe last couple of years to help them do equity
deals with start ups, and I've also been, like,an angel investor in companies of people like
(15:07):
Selena Gomez, DJ Khaled.
We are obviously co investors in Jake Paul'sBetter, and some others.
And I also create a lot of content online aboutcelebrity founded brands.
So whenever, like, people are thinking aboutlaunching their own brand as a celebrity,
oftentimes, I'm one of the first people thatthey reach out to.
And then the rest of my team consists of peoplelike Ben Acot who cofounded Feastables together
(15:28):
with MrBeast.
And that company is doing, like, $400,000,000in revenue in the second year of business, so
one of the fastest growing consumer brandsever.
Another one on my team is actually one of thecofounders of The Honest Company, Christopher
Gaffigan, which he started with Jessica Albaand IPO ed in 02/2021.
Honest company and Feast the Walls are two ofthe most successful celebrity founded brands.
So we like to think that beyond capital, we canalso add expertise to these portfolio
(15:52):
companies.
Why do so many celebrities launch tequilabrands?
So let's start with the statistic.
So in 02/2018, there were 40 celebrity liquorbrands.
Today, there's more than 800.
And probably if you ask on a, like, a celebritywhy, they say, yeah, we like to align ourselves
with, like, high quality brands that showcasetalent sophistication and that aligns well with
(16:13):
premium spirits.
I think that's BS.
I think the real answer is something along thelines of, these celebrities saw the successes
of Casa Michos from George Clooney, Minh Moffa,Aviation Gin of Ryan Reynolds, Tereman at
Tequila of The Rock, Conor McGregor, JC, theywere all very successful in the space thinking
that they can replicate the successes.
They're like, oh, I have a similar amount offollowers, so probably I will be as successful
(16:37):
or even at half of the followers.
So maybe in four years' time, I can get half ofthe billion that George Clooney got.
George Clooney famously sold Casamigos forbillion dollars.
Why was he able to pull that off?
His team.
So George Clooney was just one of thecomponents, but he experienced team who did it
before in the industry.
So, yeah, fired that network.
(16:58):
They were able to get in all the distributedistributors.
And then also, it took him, like, more than tenyears to do it.
Like, obviously, they sold their company withinfour years, but there was a contract that for
the next ten years, George Clooney has to beassociated with the company.
So it's more for, like, an earn out, like,where they got, like, 300,000,000 upfront and
700,000,000 has to be earned over the next tenyears.
(17:19):
It's not just a a quick flip and that's it.
When you go about investing to celebritybrands, what stage do you like to invest in and
why?
We like to invest as early as possible.
So we focus on, like, pre seed and seedopportunities.
This just allows us to, yeah, really be alignedon strategy from day one and make sure that we
have, like, a concrete plan on how we're gonnalaunch this.
Yeah.
(17:39):
Our team has a lot of experience in startingand scaling these celebrity founded brands, and
it's important that they are structured theright way from day one.
That's why we like to align align ourselvesfrom, like, day one.
What is your unfair advantage?
I would say it's our access and expertise, andI have, like, a lot of working relationship
with celebrities.
So oftentimes, whenever they're thinking aboutlaunching their own brands, I'm one of the
(17:59):
first people to know.
I'm also a content creator in the space, so Icreate a lot of content about celebrity founded
brands, which has helped me to gain more than10,000,000 views in the last year.
Our team has been involved in 55, celebrityfounded brands, including some, cofounding some
of the most successful ones like The HonestCompany and Feastables.
So we can pass on our learnings working withcelebrities, turning their companies into
(18:21):
billion dollar brands, and hopefullyreplicating the same successes for our
portfolio company.
What do you wish you knew before starting inthe celebrity investment space three years ago?
Great question because, the industry is notvery mature.
So the word influencer didn't even exist tenyears ago.
And I was thinking that these celebrities werevery sophisticated when it came to investing in
(18:42):
that type of stuff, but most of them have noidea what a series a round is.
Let alone if you're talking about preferredequity or common equity or or pro rata and that
type of stuff.
So you have to do a lot of hand holding to helpthem understand what is equity, how does it
work, how do you build a company, what is a captable, how do you divide equity and that type
of stuff.
(19:03):
They're like, okay.
I wanna get 10%.
And I'm like, but you don't even know what thevalue is of 10%.
There's an old VC joke.
You give me the valuation, I give you theterms.
Celebrities, may learn the lesson over time.
What would you like our audience to know aboutyou, about Hotstar VC, or anything else you'd
like to shine a light on?
Maybe a little bit of self promotion.
(19:23):
If you're interested in celebrity foundedbrands and would like to stay up to date it in
the space, feel free to connect with me onLinkedIn.
We'd love to connect there.
Awesome.
Thank you, Scott.
I appreciate it.
Thanks for listening to my conversation withScott Vandenberg.
If you enjoyed this episode, please share witha friend.
This helps us grow and also provides the bestfeedback when we review the episode's
analytics.
(19:44):
Thank you for your support.
Tell me about your team.
A little bit about my team and myself.
So we have been involved in 55 celebrityfounded brands, including some of the most
successful ones.
So I've worked with a lot of celebrities overthe last couple of years to help them do equity
deals with startups.
And I've also been, like, an angel investor incompanies of people like Selena Gomez, DJ
Khaled.
We are obviously co investors in Jake Paul'sBetter and some others.
(00:22):
And I also create a lot of content online aboutcelebrity founded brands.
So whenever, like, people are thinking aboutlaunching their own brand as a celebrity,
oftentimes, I'm one of the first people thatthey reach out to.
And then the rest of my team consists of peoplelike Ben Acot who cofounded Feastables together
with Mr.
Beast.
And that company is doing, like, 400,000,000 inrevenue in the second year of business.
So one of the fastest growing consumer brandsever.
(00:44):
Another one on my team is actually one of thecofounders of The Honest Company, Christopher
Gaffigan, which he started with Jessica Ova andIPO ed in 02/2021.
Honest company and Feast of Walls are two ofthe most successful celebrity founder brands.
So we like to think that beyond capital, we canalso add expertise to these portfolio
companies.
(01:05):
How did Ryan Reynolds sell Mint Mobile in threeyears for $1,350,000,000?
The company was founded in 02/2015, and RyanReynolds was actually an early customer, and he
absolutely loved the product.
And they were able to strike a deal in 02/2019where he became, like, a co owner of the brand,
and also got, like, a 25% equity stake.
And this allowed Mint Mobile to leverage RyanReynolds millions of followers to basically
(01:30):
promote the product for free, and this issomething that traditional brands have to pay
millions of dollars for.
When it comes to Ryan Reynolds, he not only didit with Mint Mobile, he also did it with
Wrexham Football Club and Aviation Gin.
What is his unfair advantage?
I think his real unfair advantage is actuallythe way how he looks at business in comparison
(01:50):
to other celebrities.
So to be honest, like, having a celebritynowadays in full video companies is quite of a
commodity.
There's, like, thousands of startups that have,like, a celebrity cofounder, co owner, creative
director, whatever title you wanna give it.
And if you also look at the type of companiesthat they want to align themselves with, it's
often, like, luxurious products or aspirationalproducts, that type of companies often in
(02:11):
saturated markets.
And then Ryan Reynolds had, like, a click andsaid, why am I not focusing on unsexy, highly
practical companies?
So that's why he's focused on datacommunication.
He's involved with 1Password, a passwordprotection company.
Those companies still have, like, highacquisition costs.
So thinking, hey.
Can I leverage my platform?
(02:32):
So instead of being a walking billboard todaypromoting this and then tomorrow promoting
something else, He works together with four orfive companies on a day to day basis and
promote those companies for the next five toten years.
That's what he does.
He's not working with 20 or 30 companies at thesame time.
You help startups partner with celebrities inorder to found and scale brands.
(02:54):
What's important when you think about combininga startup with a celebrity?
These companies always have to be productfirst.
Obviously, having a celebrity on board willhelp sell the product, but they might help sell
the first product, but the quality of productis actually gonna determine that people buy a
second, third, and fourth product.
They always have to be product first instead oflike, celebrity first.
(03:15):
It's also really important is that there's anauthentic fit between the celebrity, and the
brand.
We call this celebrity product market fit,where basically the brand is aligned with the
celebrity's persona, content, and audiencebefore you actually make a jump in making this
person like a co owner or co founder of thebrand.
We call this like dating before you getmarried.
(03:35):
So you first get dating, then you obviously getin a relationship, then you get engaged, and
then you get married.
And this also makes it much more authentic.
I think it's always so random when a newcelebrity launched like a new hot sauce brand
while they never talked about this openly.
And you're like, okay.
Why are you an authority in hot sauce?
And they're like, oh, I ate it with every dish.
And I'm like, okay.
But you never talked about this openly.
(03:56):
Whereas, like, if you have been workingtogether with this brand and after six months,
you say, hey.
Let's partner up and make become like acofounder.
The audience is like, oh, this makes so muchsense because there's a deeper alignment there.
Lastly, I would say is having a strategy.
You need to have a clear plan in order to makesure you can leverage the celebrities' platform
persona and networks to accelerate the growthof your company and make sure your product is
(04:17):
part of their story as well.
There's a lot of celebrity startup partnershipsthat haven't worked.
What are some partnerships that have worked?
If you're on a fund, then you know.
Having instant access to fund insights,modeling, and forecasting are critical for
producing returns, which is why I recommendTactic Bicarda.
With Tactic Bicarda, fund managers can now runcomplex fund construction, round modeling, and
(04:39):
scenario analysis, meaning for the first timeever, you could use a single centralized
platform to do everything from analyzingperformance to modeling returns with real
industry benchmarks.
Most importantly, communicate it all withprecision TRLPs.
Discover the new standard in private fundmanagement with access to key insights and data
driven analysis that could change thetrajectory of your fund.
(05:01):
Learn more at carta.com/howIinvest.
That's carta.com/h0wiinvest.
A great example is a company called DiffieHair.
It's founded by an influencer called DaniAustin.
She's, like, a lifestyle content creator whotalks about her whole life online.
(05:22):
And it got to a point where she was, like,experienced a lot of stress, and it lead to,
like, a lot of hair loss.
And then she got to a point where, like, Idon't wanna talk, like, in front of the camera
anymore because I'm a little bit insecure.
After a month, she was like, why don't I sharethis as well with my followers because I've
been open about my whole life.
So she started to talk openly about it.
Tens of thousands of women were like, wow.
(05:43):
Thank you so much for being open becausenormally influencers are just showcasing the
good and never the bad, and, yeah, reallyhelping her followers be more comfortable.
And then she was like, hey.
Why am I actually not going one step further?
Why don't I work together with like an R and Dteam for twelve months to find like a solution?
So that's where she actually created DiffieHair, which is a hair serum, which helps you
(06:03):
fight hair loss.
First year, that company did $40,000,000 insales and this influencer only had 2,000,000
followers.
So I think a lot of time people are mistaken,the follower count, thinking, oh, the bigger
the better, but sometimes it's just aboutcommunity and finding that perfect audience fit
with the product that they're selling.
If I'm a founder and I start a consumer brand,that may make sense to to partner with a
(06:25):
celebrity.
Walk me through the process I would go aboutfinding the right celebrity for my brand.
Recruiting first.
So, like, going through multiple profiles tounderstand who would be the right fit.
Obviously, first, I have to also create apersona.
So what are you looking for from this person?
Who is your audience?
And make sure that that audience is overlappingwith the celebrity.
Also finding out what is their personalmission, how much do they still have left in
(06:49):
the tank?
A lot of celebrities, they're very successful.
They've made hundreds of millions of dollars.
Are they still gonna care about your littlestartup, wanting to make it another success
working for the next five to ten years?
Really understanding also the celebrities'mission, and then you just have to connect with
them.
So whether it's like a direct connection orfire the management agencies.
And if they're interested, you can, yeah,basically go to the recruitment purse process
(07:11):
where you're, like, interviewing them,understanding their personal missions,
understanding if they're fit, having them testthe product, and then doing that multiple
times.
A big mistake is that people always fall inlove with a celebrity.
They're able to get in touch with a celebrity,and then, yeah, they're kind of starstruck
because this person has 20,000,000 followers,and then they're like, what if only 5% of this
20,000,000 followers will buy the product?
(07:33):
I'm gonna be like a billionaire.
But that's not the way I should think aboutthis.
You should really think about, okay, who's theright person, not only from an audience
perspective, but also from a personalperspective who can help my, yeah, company move
forward.
What are the most common mistakes that brandsmake when partnering with celebrity?
Not doing enough due diligence on thecelebrity.
(07:54):
If they're able to get in touch with thecelebrity or via telemanagement agencies,
they're being proposed to celebrity.
After one meeting, they're like, okay.
We really have to work together with thisperson instead of actually looking at their
audience and seeing if it makes sense.
They immediately jumped to the gun and theysay, oh, let's become my cofounders.
Here, you have a 20% stake in my company, andlet's work together.
Then they do a couple posts and they find outit's not leading to anything.
(08:17):
And now you have a disappointing startup and adisappointed, celebrity who's also not
motivating to keep on, promoting the brand.
But now that person is like an equity owner inyour company, so it makes it really hard to get
rid of each other.
So that's why it's really important to datebefore you get married.
And another like mistake that a lot of thesestarters make is actually that they're kind of
becoming too dependent on celebrity.
(08:39):
So they're taking a celebrity first approachinstead of a product first approach.
Let's say you partner up with an actress andthat actress has to shoot a movie for the next
two months in Hollywood.
She's not gonna be as involved with yourcompany as before.
So you see these spikes in revenue, and that isdefinitely something that you want to avoid.
We always kind of should build your companythat is supported by the celebrity instead of
(08:59):
dependent on.
When you're dealing with celebrities, you'renot only dealing with them, you're dealing with
their managers, with agencies.
What is it like dealing with these gatekeepers?
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It's a kind of a love hate relationship.
It's a great question because kind of theirbusiness model is not really aligned with my
(09:21):
business model, whereas I'm really focusing onlong term equity value.
The traditional business model of these telemanagers is that they get a 10 to 20% cut of
whatever the celebrity makes.
And unlike a celebrity who has a lot of moneyand can say, hey.
I don't care about my next pay cut, but I wantequity or wanna build my own company.
A lot of these telemanagement agencies, theyhave to pay their employees.
(09:42):
They have to pay rent.
They have to pay you utilities.
The individual managers, they have targets.
Those targets are based on cash that they bringin, which gives them bonuses, which gives them
promotions.
So naturally, they have a tendency to focus oncash over equity deals.
Slowly, these telemanagement agencies aregetting a little bit more entrepreneurial, but,
yeah, they're kind of still stuck in the oldway of thinking.
(10:03):
So whenever you approach them with, like, anequity deal, they're like, oh, we want equity
plus cash.
And then you're like, okay.
Let's hope they just say 25 or 50 k just as asign of goodwill.
And then they're like, no.
In addition to the equity, we wanna get, like,a high 6 or even a 7 figure cash check.
No seat or series a startup, just have amillion dollar laying around for a celebrity,
not knowing what they're gonna get in return.
(10:26):
So that is just quite frustrating.
To be respectful, a lot of them are talentmanagers.
They're not venture investors, so they don'tknow how to analyze these companies.
The questions that you get in these calls, it'slike the first question without actually having
any context.
It's like, when are you gonna exit yourcompany?
And I'm like, well, maybe we should start withthe mission and understand what the mission is
and why they're doing this, what is uniqueabout the company, and then talk about the exit
(10:48):
later.
Then we're talking about early stage companies.
And also if you approach them and you have,like, deal a, which is like a very high growth
company, they have product market fit, but theyonly wanna offer equity, and they have deal b.
A normal startup, I would say, don't haveproduct market fit, but they're willing to pay
equity plus cash.
The manager's influencing the celebrity to dodeal b.
And what is very frustrating is three yearsdown the line, company three goes bankrupt a b
(11:13):
goes bankrupt.
And then internally, the management firm islike, oh, we shouldn't do equity deals because
it's not paying off.
And I'm like, yeah, of course, because you'renot picking the right companies.
Because if you pick company a, you actuallywould have been very successful even without
the celebrity involvement.
But luckily, a lot of them are now getting moreentrepreneurial.
The largest ones even get their own venturedepartments, but it's more like an exemption to
(11:35):
the rule.
And they're kind of being forced to as well.
Their clients, their celebrities are like, hey,my peers have been very successful in this
space.
So can you actually get me similar deals?
So are they being forced to search for thesedeals?
And if they can't find them, the celebritiesgonna walk out of the door, including their 10
to 20% cut that they normally get.
It's interesting because there's this effect ofseeing your neighbors or your friends get big
(11:58):
exits.
In Silicon Valley, nobody really believed inequity until their next door neighbor got
10,000,000 or $20,000,000 as an engineer fromGoogle or Facebook, and then it started to
become real.
It started to become visceral.
And I think same thing is happening in thecelebrity world where you mentioned all all the
successful startups.
The more than that proliferate, the morecelebrities will take equity.
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Yeah.
There's like FOMO going on.
Like, all the celebrities are now, oh, wow.
Okay.
I also have to start my own company.
And, unfortunately, there's, like, a lot of badplayers, in the space who are, like, taking
advantage of that, just saying, okay.
I have this white label product.
(13:23):
Let's just put your name on it and try to sellit.
It doesn't add any value or solving anyproblems.
So it's just more superb products inoversaturated markets.
So Hotstar VC is a new fund from which we areinvesting in brands founded by celebrities and
creators.
And what has been interesting is that they havestarted to build their own audiences online and
are now creating businesses on top of it.
(13:43):
And it all has to do with their competitiveadvantage in company building as they have a
built in audience.
They can basically drive near instant tractionto their companies for free by simply posting
on their social media channels.
And that is something that traditional brandshave to pay millions of dollars for.
But not only that, it can also help you withretail.
It can help you with investors.
It can help you with PR.
So there's a lot of benefits to these celebritybrands.
(14:04):
And it has already resulted in companies likeSKIMS, Biking, Kardashian, which has set the
IPO this year for $4,000,000,000 Min Mobile byRyan Reynolds, we got, like, acquired for
1,350,000,000.
At Prime from Logan Paul and Keisai, we did,like, $1,200,000,000 in sales in the first two
years of business.
And many more are seeing growth thattraditional consumer brands have never seen
(14:25):
before.
And this is just the beginning.
Literally every single celebrity is thinkingabout launching their own brand after seeing
the successes of their peers.
That leads to a lot of deal flow.
We don't really care about the next celebritytequila or beauty or apparel company.
We don't care about celebrities launchingproducts in oversaturated markets.
We care about celebrities launching innovativeproducts and services that solve real customer
(14:46):
problems.
Those are the types of companies that we wouldlike to invest in.
Tell me about your team.
A little bit about my my team and myself.
So we have been involved in 55 celebrityfounded brands, including some of the most
successful ones.
So I've worked with a lot of celebrities overthe last couple of years to help them do equity
deals with start ups, and I've also been, like,an angel investor in companies of people like
(15:07):
Selena Gomez, DJ Khaled.
We are obviously co investors in Jake Paul'sBetter, and some others.
And I also create a lot of content online aboutcelebrity founded brands.
So whenever, like, people are thinking aboutlaunching their own brand as a celebrity,
oftentimes, I'm one of the first people thatthey reach out to.
And then the rest of my team consists of peoplelike Ben Acot who cofounded Feastables together
(15:28):
with MrBeast.
And that company is doing, like, $400,000,000in revenue in the second year of business, so
one of the fastest growing consumer brandsever.
Another one on my team is actually one of thecofounders of The Honest Company, Christopher
Gaffigan, which he started with Jessica Albaand IPO ed in 02/2021.
Honest company and Feast the Walls are two ofthe most successful celebrity founded brands.
So we like to think that beyond capital, we canalso add expertise to these portfolio
(15:52):
companies.
Why do so many celebrities launch tequilabrands?
So let's start with the statistic.
So in 02/2018, there were 40 celebrity liquorbrands.
Today, there's more than 800.
And probably if you ask on a, like, a celebritywhy, they say, yeah, we like to align ourselves
with, like, high quality brands that showcasetalent sophistication and that aligns well with
(16:13):
premium spirits.
I think that's BS.
I think the real answer is something along thelines of, these celebrities saw the successes
of Casa Michos from George Clooney, Minh Moffa,Aviation Gin of Ryan Reynolds, Tereman at
Tequila of The Rock, Conor McGregor, JC, theywere all very successful in the space thinking
that they can replicate the successes.
They're like, oh, I have a similar amount offollowers, so probably I will be as successful
(16:37):
or even at half of the followers.
So maybe in four years' time, I can get half ofthe billion that George Clooney got.
George Clooney famously sold Casamigos forbillion dollars.
Why was he able to pull that off?
His team.
So George Clooney was just one of thecomponents, but he experienced team who did it
before in the industry.
So, yeah, fired that network.
(16:58):
They were able to get in all the distributedistributors.
And then also, it took him, like, more than tenyears to do it.
Like, obviously, they sold their company withinfour years, but there was a contract that for
the next ten years, George Clooney has to beassociated with the company.
So it's more for, like, an earn out, like,where they got, like, 300,000,000 upfront and
700,000,000 has to be earned over the next tenyears.
(17:19):
It's not just a a quick flip and that's it.
When you go about investing to celebritybrands, what stage do you like to invest in and
why?
We like to invest as early as possible.
So we focus on, like, pre seed and seedopportunities.
This just allows us to, yeah, really be alignedon strategy from day one and make sure that we
have, like, a concrete plan on how we're gonnalaunch this.
Yeah.
(17:39):
Our team has a lot of experience in startingand scaling these celebrity founded brands, and
it's important that they are structured theright way from day one.
That's why we like to align align ourselvesfrom, like, day one.
What is your unfair advantage?
I would say it's our access and expertise, andI have, like, a lot of working relationship
with celebrities.
So oftentimes, whenever they're thinking aboutlaunching their own brands, I'm one of the
(17:59):
first people to know.
I'm also a content creator in the space, so Icreate a lot of content about celebrity founded
brands, which has helped me to gain more than10,000,000 views in the last year.
Our team has been involved in 55, celebrityfounded brands, including some, cofounding some
of the most successful ones like The HonestCompany and Feastables.
So we can pass on our learnings working withcelebrities, turning their companies into
(18:21):
billion dollar brands, and hopefullyreplicating the same successes for our
portfolio company.
What do you wish you knew before starting inthe celebrity investment space three years ago?
Great question because, the industry is notvery mature.
So the word influencer didn't even exist tenyears ago.
And I was thinking that these celebrities werevery sophisticated when it came to investing in
(18:42):
that type of stuff, but most of them have noidea what a series a round is.
Let alone if you're talking about preferredequity or common equity or or pro rata and that
type of stuff.
So you have to do a lot of hand holding to helpthem understand what is equity, how does it
work, how do you build a company, what is a captable, how do you divide equity and that type
of stuff.
(19:03):
They're like, okay.
I wanna get 10%.
And I'm like, but you don't even know what thevalue is of 10%.
There's an old VC joke.
You give me the valuation, I give you theterms.
Celebrities, may learn the lesson over time.
What would you like our audience to know aboutyou, about Hotstar VC, or anything else you'd
like to shine a light on?
Maybe a little bit of self promotion.
(19:23):
If you're interested in celebrity foundedbrands and would like to stay up to date it in
the space, feel free to connect with me onLinkedIn.
We'd love to connect there.
Awesome.
Thank you, Scott.
I appreciate it.
Thanks for listening to my conversation withScott Vandenberg.
If you enjoyed this episode, please share witha friend.
This helps us grow and also provides the bestfeedback when we review the episode's
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(19:44):
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