Celebrity Investors

Kim Kardashian is partnering with Jay Sammons, a former partner at the Carlyle Group who spent 16 years at the firm to launch SKKY Partners: a private equity firm focused on investing in and building consumer and media businesses.

I am fascinated by this concept of having a celebrity megaphone attached to investor capital. Kardashian has had plenty of success building her own empire. Per an article in the WSJ:

The undergarment and apparel business she started in 2019, Skims, was valued at $3.2 billion in January. The company raised $240 million at that time in a funding round led by Lone Pine Capital. This year she launched a skin-care line, SKKN BY KIM, a nine-product collection.

Now with this partnership, Kardashian will benefit from the wealth created by performance fees generated with other people’s money (OPM). For Sammons, its an opportunity to accelerate growth with Kardashian’s global reach and social media empire.

No investments have been made yet, but it will be interesting to see how they perform with this unique combination.

Conan O’Brien is “retiring” from late-night television to manage an audio empire. His company, Team Coco (official name Conaverticals LLC) manages a portfolio of podcasts and distributes video clips across YouTube, Facebook and other platforms. Collectively revenue is expected to jump from $10 million this year to $20 million in 2021. Conan’s most popular podcast, “Conan O’Brien Needs a Friend,” accounts for two-thirds of Team Coco’s 13 million total monthly downloads.

Per an article in the WSJ, one of the most impressive aspects of Team Coco is what they can charge for sponsorship opportunities: “Mr. O’Brien’s arch style lets him satirize the sponsorship system and himself as pitchman, while still delivering the goods and preventing listeners from skipping the ads. Advertisers pay a premium for that: between $40 and $50 for every thousand downloads of his show, Team Coco says, roughly twice the typical fee for a popular podcast.”

Bloomberg Businessweek published a “how-to” series and one of the articles covered Alex Rodriguez’s thoughts on maturing as an investor. I was particularly fond of the parallels between his professional career as an athlete and now as an investor.

As a professional athlete, you learn to go narrow and deep. You train to be perfect—or at least try. You learn from your coaches. It’s the same as an investor. You adopt attributes from mentors. I’ve learned that we can be good at a lot of things but can’t be great at everything. Narrow and deeper plays, where we invest our energy and interests, are the most worthwhile. By investing with that philosophy, others begin to learn what you like, and we’re presented with better opportunities.

To ensure we’re allocating resources where it makes sense, we like to move quickly and say no to deals that don’t fit. People appreciate clear communication, and even if that first deal doesn’t work out, it can be the beginning of a relationship. Declining certain deals properly and responsibly often creates future opportunities.

Diageo has agreed to acquire Davos Brands LLC for $610 million. The portfolio of brands includes Aviation Gin, which benefited from Ryan Reynolds’ investment (2018) and marketing strategy. In 2019, one year after Reynolds’ investment in the company, sales reportedly doubled from $20 million to $40 million. Analysts estimate that the company sold 96,000 cases last year.

The world’s largest liquor maker said it would make an initial payment of $335 million and a further potential consideration of as much as $275 million based on performance over 10 years. The deal is expected to close by the end of the year.

Exploring the cost of advertising during the Super Bowl was a light bulb moment for Mint Mobile investor (2019) Ryan Reynolds: why not use the same amount of capital to provide the service for free? Mint Mobile is a low-cost cellphone provider, and rather than pay $5 million for a 30-second spot on Super Bowl Sunday, Reynolds decided to take out a $100,000 full-page ad in the New York Times and give away over 300,000 months of free service.

“We could literally give away over 300,000 months of free service and still save money. And that’s exactly what we’re going to do.” As Reynolds explains it, “There’s something fascinating to me about creating a piece of content that’s shareable and acknowledges quite nakedly that it’s an ad. And it’s certainly more honest.”

I have thoroughly enjoyed reading about Ryan Reynolds as a private equity investor. At the center of it all is a company he launched to help market Deadpool: Maximum Effort Productions (fantastic name). This venture was formalized in 2018 when Deadpool 2 raked in $785 million at the box office. He has since used Maximum Effort every time he makes an investment.

To avoid over-ornamentation and grandiosity of ideas and creativity, Reynolds and Dewey work on self-imposed stricter deadlines, break the advertising norms, and keep the ad budgets under $1 million. Two major clients of Maximum Effort Productions are Aviation American Gin and Mint Mobile, both of which Ryan Reynolds happens to hold ownership stakes in.

LinkedIn: https://www.linkedin.com/company/maximumeffort/