The VC Backing Snoop Dogg, Kris Jenner and the Future of Celebrity Brands | Jackie Fast, Sandbox Stu

0:00And the point of celebrity isn't so that you build a brand off the celebrity. And I think that's where most celebrity brands fail. The point of using a celebrity is to get your first customer to try. Because it still is and it will always be the people that are most interested in purchasing something. It comes from your friend, your best friend, your family, like it's still going to be peer to peer recommendations. But in order to get those peer to peer recommendations, you have to get first time customers. And so talent is basically an arbitrage about being able to get the distribution advantage.

0:30And that's the way that we look at it. Welcome to the Hot Start VC podcast, the show where we break down how celebrities and creators build billion dollar brands. Today, I'm joined by Jackie Fast, general partner at Sandbox Studios, a fund that exclusively invests in celebrity brands with portfolio companies like Dr. Bombay by Snoop Dogg and Safely by Kris Jenner. Jackie breaks down what celebrity brands have become such interesting investment opportunities, what Jackie specifically looks for when backing these companies, the common misconceptions people have about celebrity brands, and more. So without further ado, let's get into the conversation.

1:04Jackie, I'm excited to have you here. Thank you so much for coming on. Thanks for having me, Scott. As far as I know, Sandbox Studio is the only other fund that exclusively invests in celebrity brands other than my own fund, and you started this way before I did. So I'm curious, how did you get into the whole celebrity brand investing world in the first place? So I founded a company called Slingshot Sponsorship. And Slingshot Sponsorship primarily helped brands reach new audiences through IP and sports and in some circumstances, celebrities. Some of our noteworthy clients are the Rolling Stones, Prince, Elton John, Richard Branson.

1:39And I founded that in 2010. So we've been doing this. I've been kind of with a front row seat at how celebrities could influence consumers and also just the change of distribution. So Slingshot was really well known for helping move brands away from television broadcast and into social media and why that works. So we did all the measurement and that kind of led into the foundation of why we rolled up a fund in 2022. Yeah, perfect. So, yeah, you launched Sendbook Studios, a fund that exclusively invests in celebrity brands. So could you maybe give a brief introduction about the fund and what you typically look for in companies whenever you're investing?

2:17For sure. So Sandbox Studios, we invest globally. We'll invest in early stage, so pre-seed, seed, brands that are at the inflection of culture and commerce. So a lot of the times that does mean a celebrity founding a CPG brand, for instance. But it also means that we invest across the cultural distribution stack. So we'll invest in infrastructure that powers celebrity brands. We'll invest in platforms that help drive creator economy brands. And we invest in the brands themselves. Yeah. Whenever we like specifically talking about the celebrity founder brand investments that you do, what would you say?

2:49And I'm obviously very biased because I invest in the same thesis. But what would you say makes those opportunities the most interesting investment opportunities in the current ecosystem? I think if you're looking at consumer, the whole point of consumer is selling your product to a customer. And back in the day, it used to be brick and mortar. And the buried entry was buying or leasing a shop and getting the fit for that shop and, you know, selling your wares and producing ads in paper like the newspaper. Things are very different now. And I think D2C only really scratches the surface. But the point is, is that customers and consumers are everywhere and they're bombarded by so many messages.

3:27So the trick isn't like what is the best product? The trick now is what's the distribution advantage? And celebrities come with it, an inbuilt audience. And whether that audience is a million followers or 300 million followers, the point is, is they have an audience of which are going to be interested in the content that they produce, are going to be interested in the products that they talk about. And the point of celebrity isn't so that you build a brand off the celebrity. And I think that's where most celebrity brands fail. The point of using a celebrity is to get your first customer to try.

3:58Because it still is and it will always be the people that are most interested in purchasing something. It comes from your friend, your best friend, your family. Like it's still going to be peer-to-peer recommendations. But in order to get those peer-to-peer recommendations, you have to get first-time customers. And so talent is basically an arbitrage about being able to get the distribution advantage. And that's the way that we look at it. Hey, quick one before we get back to the episode. If you love conversations like this one, you would love The Fame Game, our weekly newsletter in which we break down how celebrities and creators build billion-dollar brands.

4:30Sign up for free via the link in the description. And now back to the episode. Yeah, like obviously the distribution advantage is used. And I always also talk about kind of the hidden superpowers that these celebrities have. So they can open doors that you simply cannot. They can help with retail distribution. They can help with fundraising, with PR and that type of stuff. Can you maybe talk a little bit more about those unique elements too and how they're weighed into the whole play of investing in celebrity brands? So it depends on the brand, right? So not all brands are D2C. We have many in our portfolio that don't sell online at all.

5:03are only just going onto Amazon. Safely, Kris Jenner's cleaning company is a great example. The product is amazing. They were retail first and retail only for like five years, really. And their current clients are Target and Walmart. Those are probably our biggest distribution points and obviously selling through other grocery stores and independents. They never needed to do this. Their Kris Jenner and truthfully, the Kardashians wider network supports is that they collectively will talk about the brand. And the eyeballs of the Kardashians is well over a billion eyeballs. We did a Christmas campaign for Target that reached 1.2 billion views in like three weeks or something.

5:44We shifted 120 ,000 units. And at Target, you just can't do that without the reach and the power of the Kardashian network. And Target's aware of that. So Target and Walmart suffer from the same problems that all of the brands suffer from. They need more customers. And it's so hard to drag somebody into a Walmart these days. And I think if you ask yourself, when's the last time you went into a Target, you know, it's certainly the number is much lower, if not zero, compared to what it was 10 years ago. And so Target and Walmart are looking at ways that they can attract customers into stores. Celebrity brands are an easy way because it's an asset that they can utilize.

6:18So when you look at a Sephora, for instance, in their windows, all you see are celebrities promoting brands and products. And it's because it catches attention. And so retailers like to use celebrities for the same reason brands like to use celebrities. It's to attract customers. And so you can, that thesis can be utilized across almost all areas of growth. And definitely it's important to understand when to push pull on that. And it isn't always the right strategy to have a celebrity doing everything. You know, they shouldn't be on all of the flyer calls and all of the PRs and all of the meet and greets and all of the comic cons and, you know, all of the Expo West floors.

6:56But being able to do that will cut through the noise. So it's all about how you get attention. Yeah, no, I love those practical examples. And especially the first one that you mentioned, kind of the Kris Jenner can also leverage the other Kardashian sisters to basically promote the product. I typically call this kind of celebrity friends with benefits. I don't know if you're looking online right now with a brand like Alex Earl that she's now launching, like all like influencers received this PR kits and authentically are promoting it because Alex Earl has this kind of pool that people are just wanting to support her because that's what friends do.

7:28There's that. Another trick, like beyond the friends thing, other influencers want to be recognized as influencers. And so getting an influencer like Alex Earl to post about you being an influencer is how you kind of get that wider reach. It's like it's a really well-known tactic. I mean, Kylie Jenner probably started it, quite frankly. So, you know, again, it's all about how do you get attention and how to use distribution. And whether they're real friends or not, it actually doesn't even matter. Like other influencers want to support other people because they hope that those people then promote their accounts so that they then get followers and they look like they're associated with it.

8:07So it's like, again, you have to really understand the objectives between all of the parties involved. And again, it just goes down to like, how do you get recognition and reach? For the people that are like listening to this for kind of the first time and they're looking to invest in celebrity brands, what would you say is kind of the difference in due diligence compared to traditional consumer brands? Like what is the same and what is different for these types of celebrity founded brands? So I would say don't do it unless you have somebody like Scott or myself helping you out. Truthfully, the gap really between really well-known investors and investors like us is the celebrity piece.

8:43And I think a lot of people talk about the importance of founder fit and being able to diligence a founder. And I usually like historically VCs took that experience from founding companies themselves and understanding like what is a priority and what is not. Celebrity brands are a real anomaly because the celebrity and talent industry is really niche. Not a lot of people have worked in that and have experience. And usually people that do are within that ecosystem their entire career. So it's really difficult to, it's like a network effect, right? Like you don't, most investors who are looking to invest in celebrity brands can't call friends up to ask them, what's it like working with Snoop Dogg?

9:21Or we can, you know. So I think Sandbox is really uniquely placed because we have worked with all of these people and have such good relationships and recognition with these people that it allows us to do due diligence, unlike other VC funds who are probably, well, better connected than us in the ecosystem, but just not in talent. And talent is the future. And so it is a real, it's a real gap. So if you were to not invest through a fund or through not even a fund. So if you were not to invest in Scott's fund or my fund, I think what you would want to do is your second bet is like find somebody who you know, who's got experience in entertainment and celebrity and ask them what they think about it.

10:04Because I guarantee you people that work in talent view celebrity brands very differently than the average consumer. And a lot of it's personality, right? Like for us, when we back a celebrity founder, it's not about how many followers they have. Most of the time, it's about attitude, motivation and like work ethic, quite frankly, because it's still a startup. You're still going from zero to 100. You still need to put in the work. You still need to have the right attitude to want to post when things are not going so well. And that takes a certain kind of celebrity founder, quite frankly. So I would definitely say get some more background from somebody who works in the industry.

10:43The second thing I would probably say, I think a lot of people talk about authenticity, but I think what people don't understand is authenticity can be manufactured. So celebrities specifically are like really media trained. And at the time that you speak to them, it's going to seem like it's the most important thing in the world. Like that's the whole point of it, right? So I think you really need to get down to the nitty gritty about like, what is the commitment? What is the relationship with the celebrity? Do they have contractual posts? What are their future plans? I think sports stars specifically are really hard, active ones, because they're training and working.

11:18Baseball players specifically have a bazillion games a year. There's no time for them to do a meet and greet or a pop-up shot or all the other things that you would want to use for a celebrity. They just don't have the bandwidth. So understanding the commitment, I think, is important as well. Yeah, no, I love that example. And I think also with athletes, it's always about how relevant are they also post their career, right? If you look at someone like a Steph Curry, now playing in the NBA, is he still going to be as popular if he's not playing 80 games a year anymore and fighting for championships?

11:48So yeah, I love that example. I also want to kind of go back to that authenticity, because on one hand, you kind of mentioned you can manufacture it. And you also mentioned it's more about personality. but in a world where we've seen a lot of inauthentic celebrity brands where The Rock is launching like shampoo, even though he's like bald for 20 years. Or you see like Jennifer Lopez trying to sell alcohol, even though she has clearly stated that she doesn't drink alcohol. How do you also kind of look at those types of facts whenever you're looking at the due diligence and the alignment between their content, their audience, for example?

12:20So I think, again, somebody promoting an alcohol brand who's clearly sober is very different from like not caring about the product. They're like, you know, saying like, you know, I can guarantee you The Rock doesn't drink as much vodka or as much tequila as you think. You can't not get a body like that drinking that much tequila. So like it's just it doesn't mean that he can't promote the brand and talk about the brand and create great content for the brand and help that brand get distribution and reach the audience. So I am not as finicky, I think, as other people would be around stuff like that, as long as the go to market strategy is there.

12:58Like you have to have a really, really strong go to market strategy. If your go to market strategy is weak and your content is weak, that is when authenticity is really, really important. But I can say like Prince was one of my earliest clients. He is maybe the was what maybe the hardest person to work with commercially because he doesn't care about money. He only cares about music. And you can create moments that work for him and work for the audience, all centered around things that he cares about, which is music, but for other people would be different. So, again, you have to really know what you're doing to manufacture authenticity.

13:29If you don't know what you're doing, which most people don't, then, yeah, it's better to just have something that's a little bit true and authentic. Another example, Kristen Bell and her husband, with their children, they watched Hella Bello, and then their children aged out of it. And she had, you know, they had a hard time promoting the brand when their kids were 15. So there's things that can be authentic at the time that they started and then become less part or relevant to their life. And you have to adjust for that. And you have to think about that long term. You know, I think we would be so lucky to invest in a company that exits in two to three years like road.

14:02But like, it's just not normal. It's not the typical journey for brands, all brands, celebrity or not. Yeah, that makes sense. And you talked about motivation and also kind of the deal terms. Like, are there specific red flags or deals you typically don't do whenever we're talking about equity stakes or minimum guarantees or cash component? Like, is the equity too high or is it too little for the celebrity really to lean in? Okay, maybe tap into that. So we, I think there's always a case for an outlier. But on the whole, we would look, we would think that a good celebrity deal is roughly 10 to 15 percent equity, no cash component, no royalty component.

14:42They're a partner within the fund. There are certain circumstances, and we even have them within our portfolio, where the talent owns 50 percent or a majority ownership. And I think that's fine in most circumstances. The issue is, is the person who has the majority ownership should be doing the majority of the work, right? So I think where at the outset, most founders don't mind if they're operationally, but I think when it comes six years down the line, they've been diluted from 20 % down to seven. They work 24-7. They've given up family life, family decisions, and they're working with a partner who dips in and out once or twice a year and owns 60 % of the brand.

15:24That is where problems arise. And so we want to see ownership reflected on work. invested is typically the way that we would look at it would want to restructure deals that have a cash component and we have done with a couple of brands in our portfolio that initially started with a cash component list like you have to also understand the celebrity like it's this in the celebrity's best interest to get as much cash as possible with as little involvement and work as possible it doesn't mean that they personally want to do that it's just that's that is in their best interest. And so those deals can be restructured usually if you have a good celebrity and you guys are working towards the same thing.

16:09But we would typically not invest in a deal that has a minimum guarantee. And I would say with certain celebrities, with most celebrities, we wouldn't do that. There are certain celebrities that I would do that and I would go to them and restructure it. Yeah, that makes sense. I think like the broken cap table argument is one of the most arguments I use whenever we're like deciding not to invest in one of these brands, especially nowadays when so many venture studios are popping up and they want to kind of build companies with talents. They kind of start with 70 % is for us and 30 % is for the talent.

16:42And we're now going to bring in an operator who gets 10 % and that person is actually going to lead the company day to day. And then in two years time, you see kind of that the venture studio, they took a complete distant and you have someone that only owns a 10 % equity stake is actually running the day to day. how incentive is that person actually to run the companies? Yeah, I think that argument is brilliant. Like the term celebrity nowadays is quite broad. Like you can argue that content creators and influencers can be celebrities, athletes can be celebrities, artists can be celebrities. Is there a specific celebrity type that you are most interested in backing?

17:16No, mostly because I think celebrity is, again, it's all totally based on the product. I think we don't, and you can see it in our portfolio, We don't tend to back active sports athletes, not because we don't want to. But again, it's a time commitment. That's kind of where the issue always lies. And I think sports stars are probably more aware of that than you would expect. And that's why you don't see as many do it either. So it's like it's a kind of combination there. We really like creators. I would say one of our most more interesting companies, Sorelli, which is co-founded with Anna Sorelli.

17:51Anna Sorelli is a relatively small in like the American sense influencer. She has, I mean, maybe she's probably got 2 million followers on Instagram, but she was kind of one of the early vloggers in the Hispanic community to have like makeup tutorials done in the American style for the Mexican audience. And she crushes because she understands her audience. She knows what they want. She's really good at the content because like that was what she built. and she adds so much value to the brand because we don't have to think about content. She does all of the thinking. She's like the creative brains behind the product, behind the content.

18:27And then Remy, her partner, is basically the back end and he just makes sure the ship is running and growing and doing stuff. They are like a really formidable team and one of the more exciting brands in our portfolio and truthfully like a really great example of proving that you don't need 300 million followers to create a really strong brand. Yeah. And like talking about kind of the different influencer types or the celebrity types, would you say they also add different values to a company? Let's say Alex Earl and Kim Kardashian were to launch a similar product in a similar market. Would you say they add different values to that companies as acting co-founders?

19:04I mean, I can't speak to the work ethic of Alex Earl, but I can speak to an audience differential. Like Kim grew up through broadcast, right? Like her audience was really built through Keeping Up with the Kardashians and sharing her entire life. She has a huge reach that is global. And I think she more than most has real business acumen that she's built over the years. And, you know, she's a real professional when it comes to what she gets involved in and how she works. And she she will put in the effort. I mean, all of the like she she puts in the work, really. Alex Earl, smaller following, probably more engaged, very different generation.

19:40And so So again, like what are the products that you're trying to sell and what's the purpose and what's the content is what I would be looking at. But it's horses for courses. They both can work. They both can fail. And just talking about the positioning, you alluded to this earlier, kind of in the conversation, you have some celebrity brands who are kind of happily leaning on the celebrity. So an example here is Prime by Logan Paul, or you have Feast the Boss with Mr. Beast. Then you kind of have the other end, companies like the absorption companies. I actually had Seek on the podcast last week.

20:10So again, thank you for that introduction. But one of the first things that Seek immediately told me is like the absorption company is not a celebrity brand. It's just a company that happened to have celebrity co-founders, but they're not on the website. They're not on the branding. They're not front and center in the marketing. So how are you thinking kind of about the positioning of the celebrity co-founders? I think it just depends on what you're looking for and what you're wanting to do. And I think with the absorption company, they were very deliberate early on that they wanted this brand to stand alone.

20:40I think to Ian specifically's point, Ian is very built in with Brothers Bond, where him and Paul are very much the face. And I think it would have been hard for Ian to have another full face, full positioning brand just from a time commitment. But Ian and Nikki are so bought in and they really work super hard behind the scenes. And so they'll do all of the podcasts, they do the meet and greets, they'll go to all of the openings, the press, and they like really lean in and their audience loves them for that. And so I think it's by definition what you consider a celebrity brand. So we use those assets.

21:16Zeke might not make Ian the face of it and Ian's face might not be on the product, but the brand certainly benefits from the fact that we have two very engaged, very involved celebrity founders. And so we would consider that a celebrity round because a lot of those outputs, especially early on, would never have happened if we didn't have celebrity founders. Again, this is horses for courses. This is why these things are more an art than a science. But Dr. Bombay is Snoop Dogg's ice cream. We are putting him on the branding. We never used to do that. So in the first three years, he was very much behind the scenes.

21:52We didn't even use his name in any of the thing. We wanted to use his like NFT after the Bored Yacht Ape Club guy, which is Dr. Pepe. And that was a mistake for us. And so you will see Snoop on all of the pints soon. We're going to be doing a big press awareness this year just to link him to the ice cream because I think a lot of people have experienced ice cream and not understood that it was Snoop's ice cream. I wouldn't normally recommend that if I'm perfectly honest. I think having one person's face on the front of an ice cream is weird. But in this circumstance, it works because who in the right mind in the world does not know what Snoop Dogg looks like?

22:32He's like, there are very few people in the world that are instantly recognizable globally than Snoop. And so that's a huge asset that we have. So we absolutely need to use that. And so we have. And you would say, I think that's the only brand in our entire portfolio. We have 17 brands that will do that. Yeah, so it just, it kind of just depends. It really, really depends. And you have to know when to use it. Like I think putting Ian on the face of the advertising company would have been a mistake. We never did that, but I'm just saying it would have been a mistake. Yeah, I think that's so interesting about this industry is that so much is deal by deal dependent, whether like you put a celebrity on the front end of the marketing, how much equity the specific person has.

23:17So many people always reach out to me and they're like, okay, I'm negotiating with this celebrity to come on board as a co-founder. How much equity should I give him or her? And I'm like, I can't give that answer because it really depends on so many factors. So yeah. I just say 15%. You should just tell them 15%. That's my blanket answer. Yeah. One of my biggest frustrations in this space is that so many celebrities are still launching very superb products in oversaturated markets where they just white label another liquor, beauty, apparel company. Why do you think that's the case? Why wouldn't you?