Equity Partnerships vs. Endorsement Deals: How the Increase in Athlete Equity Partnerships May Transfer to the Influencer Space
When Lebron James agreed to endorse Beats Electronics in 2008 in exchange for a share of the company’s equity, people were curious why the NBA superstar opted for long-term valuation instead of immediate cash. However, his unusual decision at the time sparked the attention of other athletes after Apple purchased Beats Electronics and Beats Music for $3 billion in 2014, which pocketed James $30 million in cash and stock options as a result of the acquisition. James’ equity partnership is just one example of the changing nature of athlete and celebrity endorsements.
Long gone are the days of athletes blowing all their contract money within a few years. Athletes are now at the forefront of investing and building brand portfolios, seeking to create lasting legacies that will provide for their families and communities for generations to come. This past year, Kansas City Chiefs quarterback Patrick Mahomes accepted ownership stakes with performance tech company Hyperice and nutrition company BioSteel. Sports performance beverage BodyArmor also followed suit in a recent partnership with Christian McCaffrey, Trae Young, Sabrina Ionescu, CeeDee Lamb, and several other notable athletes who all received equity in the company.
Rather than upfront cash payouts, athletes are increasingly looking to ownership shares in businesses they endorse. Hybrid endorsement-investment deals and equity partnerships are becoming the new ideal for athletes and celebrities, offering them the opportunity to receive dividends even after their professional playing days are over. Equity partnerships allow athletes to become more involved in the daily operations of companies and invest their own capital into brands they believe in. Giving athletes a stake in the growth of the company gives them an interest in promoting the brand beyond the traditional one-off advertisements and promotional campaigns. As these equity deals become more attractive to both businesses and athletes, this mutually beneficial framework may transfer into the influencer and entertainment space as well.
Influencers are expert brand-builders. As social media becomes increasingly effective in reaching a wide audience, an influencer brings more value in a partnership than solely content creation and name recognition. Allowing influencers to receive some level of ownership within a business allows that company to obtain access to the influencer’s intellectual capital, such as trend expertise and industry connections. Brands are finding that an influencer entrepreneur is much more advantageous than an influencer endorser. Not only will they care about the product, but they will be invested in its success. Similar to athletes, this incentivizes influencers to build their business skills through companies and products they are passionate about. Monetizing their audience while drawing upon their brand-building expertise creates a mutually beneficial relationship that demonstrates the power of influencer investors.
As the social media economy continues to grow, influencers may also begin to follow athletes and seek out equity deals instead of flat fee compensation. Charlie D’Amelio tested this endorsement structure in her recent partnership with Step, a mobile banking service for teens. With her 107M TikTok followers and 36.9M Instagram followers, she will use her platform to promote the product and talk about financial literacy–both as a customer and an investor.
“As a Step partner and customer, I’ve been able to see firsthand how easy Step makes it to manage your money while providing the educational resources that today’s teens need but have largely been unable to find — myself included,” said D’Amelio, in a statement. “I’m excited to be able to use my platform to help close this gap and have made a direct investment in Step to help them develop even more useful products.”
This is the TikTok star’s first startup investment and likely not the last. As companies continue to tap into Charli’s extensive following, she can leverage her marketability by offering brand-building expertise in the digital space through an ownership stake. Josh Richards, another TikTok sensation, has also leveraged his platform and capitalized on his fame through earning equity stake Triller, another video-making social platform. Not only is he an investor in the startup, but the young social media star also sits on the executive board as the Chief Strategy Officer.
“Influencers need to learn how to properly monetize,” Richards said. “It’s about creating companies or getting equity in companies.”
It won’t be long before other influencers follow Charli and Josh’s lead and seek equity partnerships and investment deals to monetize their platforms for the long-term. This increasingly popular endorsement framework is likely to gain a stronger foothold in the influencer space and demonstrate a shift in the marketability of content creators.
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