Influencer Investors

In recent months, we have seen the emergence of influencers and celebrities setting up their own investment companies. Reality TV star Kim Kardashian set up SKKY Partners in September with Jay Sammons, a former executive from the Carlyle Group, while Lionel Messi set up the investment holding company Play Time Sports-Tech in October. This trend is set only to continue, as content creation and distribution continue to disrupt traditional businesses.

Kim Kardashian (left) and Jay Sammons (right) from SKKY Partners

In many ways, it made a lot of sense for Kim Kardashian to set up a private equity company focused on consumer and media investments. She has a $3.2bn consumer brand in Skims and an Instagram following of 333 million users, offering an immediate distribution channel for her products. The visibility she brings from her strong following, coupled with the investment expertise from her business partner, Jay Sammons, delivers a potent mixture. By identifying attractive investment opportunities and then scaling these through her visibility, valuations of their portfolio companies could be driven upward to realise attractive returns.

From a business-to-consumer perspective, influencer marketing is considered by many as the most cost-effective customer acquisition channel for consumer products and services. This is because influencers speak to consumers in ways brands cannot, as it is easier for people to connect with a person than to connect with a brand. By accessing direct-to-consumer channels, brands benefit from greater customer engagement and reduction in their advertising spend to market their products. This will ultimately lead to significant margin improvement, which is the bread and butter of a private equity investment model. Influencers can also help to build trust and credibility for associated brands and ventures, reducing customer churn and increasing customer loyalty. Intangibles such as audience and brand are becoming invaluable differentiators between consumers goods and services companies.

Many influencers and celebrities have set up their own investment companies

Another significant proxy for the recent investment shift toward content creation is Penn National Gaming's (now Penn Entertainment) acquisition of a 36% stake in Barstool Sports in January 2020. Barstool Sports, founded by internet celebrity Dave Portnoy, is a blog and digital media company headquartered in New York City that produces content on sports and pop culture. The deal valued Barstool at an eye-watering $450 million, showing the appeal in Barstool's expanding reach and younger audience that can be driven to Penn, an operator of casinos and racetracks in the U.S. Since the acquisition, Penn has helped to roll out the Barstool Sportsbook app, with the launch of the platform registering over 72,000 customers in the Pennsylvania state and generating a total handle of nearly $300 million. It comes as no surprise that Penn has since announced that they would complete the purchase of the remaining Barstool shares by February 2023.

Dave Portnoy, Founder of Barstool Sports

One of the key takeaways is that capital markets are moving toward influencer-driven and content-based business models. This will undoubtedly disrupt the way traditional investment companies attract, allocate and deploy capital in the future.