What an Investor Actually Looks For in Celebrity Brands | Genevieve Gilbreath

0:00When we look at the kind of the celebrity or influencer component, there's a few things that we look at. I mean, the first thing is, is it really an authentic fit? Does this influencer celebrity person with the eyes drawing towards the brand, do they really believe in what they're doing here? Is there a reason that it makes sense for them beyond just, hey, this is like a cool endorsement deal? Like, do they really have like a passion for supplements? Do they really have a passion for healthy snacking?

0:27Genevieve Gilbreath: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 Genevieve Gilbreth, general partner at Springdale Ventures, a fund that invests in consumer brands and has backed several celebrity and creative-founded brands, like Feastables, Happy, Tone, and many more. We discuss why she thinks that celebrity and creative founded brands are such interesting investment opportunities, how she explicitly performs due diligence on them, how their fundraising processes differ from traditional early stage companies, and more.

0:58Genevieve Gilbreath:So without further ado, let's get into the conversation. Danaviv, thank you so much for coming on. Yeah, it's a pleasure to be here. Thanks for having me. Yeah, I'm excited to talk to you because you've obviously invested in several celebrity and creative founded brands like Feastables, Tone, Cloud, Elm, you name it. But before we actually talk about that, I want to learn more about how you actually got into venture and how you eventually launched your own fund. Sure. Happy to share. So I've been in consumer products since the early thousands, and I got into it originally as an entrepreneur. And I got into being an entrepreneur because I was super interested in how people heal and how they use plants to heal and what culture impacts healing.

1:36And so I started at two different supplement companies. One was a contract manufacturer, B2B export from the U.S. over to Europe. And we were producing one of the first, some noni products, and then one of the first vitamin D mushroom products back in like 2003. So it really kind of had a bit of time at that point. And then I had another company where I imported a Ayurvedic product from Sri Lanka and brought it to market in the U.S., thinking, you know, how hard it could be. You know, I know how to do import-export to Europe and B2B. It can't be that hard to bring something into the country and then get it into consumers' hands.

2:09And of course, you know, you learn the hard way. But yeah, it is actually very challenging. So I did that for a number of years and ended up selling that company in small transaction and started doing a little angel investing, running a consumer products accelerator. And through that process was seeing a lot of brands that were not getting the kind of investment they needed. They would get investment from doctors and lawyers or, you know, tech entrepreneurs at the early stages. And the money was great, but they didn't have a lot of strategic support. While I was running the accelerator, I met my partner in the fund, Dan Graham, who's an incredible entrepreneur.

2:41And we both were seeing the same thing. And being entrepreneurs, we were like, hey, we should start a fund. We can solve this problem. And there's a great opportunity as well for getting into the early stages, being able to help these brands so we could produce great returns for our LPs. And so that's what we did in 2019. We set out to raise a$20 million fund. Ended up raising 27. Invested in about 30 companies. And then we raised a second fund that's about$40 million and invested, gosh, I think we're at like maybe 25 there, almost done deploying and we're on to fund three. So that's the origin of it all.

3:16Genevieve Gilbreath:Yeah. Thank you so much for that context. And like, could you maybe give us an overview of the fund? Like what is your investment thesis and what would you say really makes your fund stand out from other funds? Yeah, sure. We invest in companies when they have product market fit. So when they know that they've got a consumer, they're solving a real problem. So that's the stage where we come in. And that varies depending on the company. As you can see in our portfolio, we have some products and investments where we've done that, where they're pre-revenue. But there is already clear product market fit from research that they've done, distribution agreements that they've had, just contacts from the market more broadly.

3:55But I'd say generally we're investing in consumer product brands across the spectrum. So food, beverage, durable goods, anything you can bring into the home to make life better. And usually the revenue range is somewhere between one to eight million is where we're jumping in. Again, sometimes a little pre-revenue, sometimes a little further upstream.

4:12Genevieve Gilbreath:Yeah, I think for these celebrity brands in general, it's quite hard to invest in them actually after they found product market fit with real revenues, just because the revenue and the valuation becomes so high. So yeah, let's talk about celebrity and creative founder brands for a second. And although like your fund is not exclusively investing these companies, you've invested in several, like as mentioned, Feastables, the Absorption Company, Bloxlex, Cloud, Elm, you name it. Was that kind of on purpose or was it kind of by accident? Like how did you guys get into this whole vertical in the first place?

4:41You know, that's an interesting question. I think people who know both Dan and I, we would like we are the most unlikely celebrity investors you will ever meet.

4:49Genevieve Gilbreath:Neither one of us are, you know, really in that kind of the that scene of influencer and celebrity on a personal level. But really, you know, what we started and we've seen so many celebrity brands. But what we started to see was that, you know, when you have a great operator and when you have a great concept and then you have somebody who has influence and a community and awareness around them who can amplify that, especially in the early days, it really helps to get to a bigger point faster. So it's really, we think about it as an accelerator and it was not, and it still is not, like it's not a core thesis of ours.

5:25You know, we're really looking for great companies and great operators who have a great strategy to reach their community. And part of that strategy can be a celebrity co-founder or, you know, a larger kind of celebrity influence network. So I find it really compelling, but it's not something that we, I'd say, integrate into our core thesis.

5:43Genevieve Gilbreath:Yeah, I love actually that you mentioned kind of the celebrity and creator angle as last and not actually as first. Like you still need to have a great team. You still need to have a great product. And celebrity is really the accelerator, but it's not a business model in itself. So when you're kind of doing due diligence on these companies, how would you say that still the due diligence is different or similar than the traditional early stage investments that you make in consumer brands? Yeah, I mean, I think our diligence is the same at the core. So we're looking at, you know, A, is it a big enough market or is it a sleepy enough market that's big enough that has a niche that can grow into?

6:18Is the operating founder really strong? Is the operating team that's in place somewhere, you know, somebody that can get it to zero to 10 or zero to 20 because, you know, teams evolve over time? You know, we're looking at the gross margins there. Is the distribution strategy clear and focused? And so those are, you know, we're looking at all the same things that we look at. But then when we look at the kind of the celebrity or influencer component, there's a few things that we look at. I mean, the first thing is, is it really an authentic fit? Does this influencer celebrity person with the eyes drawing towards the brand, do they really believe in what they're doing here?

6:53Is there a reason that it makes sense for them beyond just, hey, this is like a cool endorsement deal? Like, do they really have like a passion for supplements? Do they really have a passion for healthy snacking? You know, with Martha Stewart, I mean, she's just she's she's an icon. She's amazing. She takes great care of herself. And like there's there's really like there has to be like a really sticky reason for it. And so that's that's number one. I think a number two is like, you know, looking at all these deals are structured differently. But like is the structure of the deal? Does it make sense?

7:23Because we've seen a lot of deals, celebrity and or incubation, where the cap table may just not be quite right sized. So we want the celebrity to have enough or the influencer or creator to have enough that they're heavily incentivized. But we also want there to be enough equity there that the team is heavily.

7:39Genevieve Gilbreath: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. Sign up for free via the link in the description. And now back to the episode. Incentivized. So it has to be a really like a healthy balance. And sometimes it is and sometimes it's not. And, you know, if it's really out of whack from early days and kind of the founding group or whoever is not, it doesn't, you know, maybe they don't see that. We've passed on a number of deals just because of that, which can be disappointing to pass on.

8:11But at the same time, a lot of times we see it play out kind of as we expected.

8:15Genevieve Gilbreath:Yeah, we just say there's kind of a range or a sweet spot that makes most sense. Like I've been approached by celebrity and creative brands on one hand. Some of them have like a 90 percent ownership stake for the celebrity or creator. there and sometimes I get approached by like yeah this is a celebrity brand and then you look on the cap table and someone has like a 0.25 percent equity stake and it's not really involved so like is there like a specific sweet spot you would say or like a range that you guys feel most comfortable with no I mean that's a hard one to put a finger on I don't I mean I think those two ranges that you talked about are off well so I mean something in the middle I mean we've seen everything from, you know, and not saying the deals that we're in, but we've seen everything from kind of five to 50 and even a little bit less at some times.

9:00And I, you know, I think that it has to be big enough, like a similar to what a founder would, like an operating founder would have if they're coming in on the very, very early stages. You know, so I think it just, it really depends, but they have to have enough that it's going to be worth it for them.

9:16Genevieve Gilbreath:Yeah. And in the past, you've also openly talked about passing on many celebrity founder brands. And you already mentioned one of the reasons, like the deal structure not making any sense or them actually not being really involved or there's like a lack of authentic fit. What are some other common reasons why you guys pass on actually these investment opportunities? You know, I mean, we've seen a couple where there was not a good operating team, you know, so it was it was more I'd say that's that's a big reason that we've passed on a few of them is that it's still just kind of idea driven. and maybe there was a passion with the celebrity, but it wasn't a, the operating team wasn't in a good spot and it didn't look very clear that it could get in a good spot.

9:55I mean, sometimes that can be remedied and fixed, but it has to, there has to be kind of a clear understanding of on the, you know, the celebrity or the influencers part of how important that is and a respect for that. So I think that that's, that's, we've seen a couple of those we passed on. And then there are other reasons I think, yeah, just, just the brand fit I think is when we pass on it a lot more than anything.

10:16Genevieve Gilbreath:And you've also invested in a wide range of different type of celebrities and creators. So on one end of the spectrum, you have like a core content creator, like a Mr. Beast with Feastables. On the other hand, you have like a traditional celebrity like Martha Stewart, 84 years old, that is now launching Elm Biosciences. How would you also say that these different type of celebrities and creators add different value to the companies and not specifically getting into Mr. Beast versus Martha Stewart, but kind of talking about the spectrum of creative versus celebrity. Yeah, I think it's, it comes down to like how sticky is their community.

10:52You know, I think there can be like a A-list movie star who has a really huge following in a sticky community, despite not having a lot of social media presence or a lot of like direct engagement with their fans. So that's, that's one thing. But I think, I mean, more and more, like when you talk about Martha Stewart and Mr. Beast, for example, I mean, she's kind of a social media queen now too. So she was traditional celebrity and she's really learned how to leverage and communicate with her community through social and through a bunch of different other channels. So I think it is when we're looking at it is like, how are these people reaching their community?

11:25What does their community look like? Like how engaged are they? And I'm trying to think of like, I think, you know, we were also, we kind of incubated and helped launch Magnolia Table, which is with Chip and Joanna Gaines, a frozen fruit brand based on some of Joanna Gaines' bestselling recipes from some of her bestselling cookbooks. And I think they're, you know, they're also kind of more traditional. They have traditional media. They've got a network and are on television. But they also have like an incredibly engaged community through social and through multiple channels. So I think it's more we don't think about it in terms as much of what type of celebrity they are, but like how they communicate with and what kind of, you know, community love they have.

12:03Genevieve Gilbreath:Yeah, it's funny. Like the lines are also getting a little bit blurry, right? Like celebrities are becoming creators and creators are becoming celebrities. It's actually funny because I create content about celebrity creator found the brands online. And I created this short form video about Elm Biosciences. And Martha Stewart actually reposted to her story. And I was like, oh, that's so funny that she's actually also looking at Instagram and actually looking at what type of content is being produced. You mentioned like the company that you helped incubate. Is that something that you guys also like do more often or are interested in doing more often?

12:36I wouldn't necessarily say that. I mean, they had the idea and they just wanted strategic partners to come along with them. So I wouldn't, I mean, it wasn't incubator in like the traditional sense. You know, our venture partner, operating partner, Greg Fleischman was very close to them and helping them develop it. And so we just came in kind of as a strategic partner on it. And yeah, we would love to do more of that, but super selectively again, you know, really make, I think, you know, with Chip and Joanna Gaines, they're not only have a high profile, but they're also entrepreneurs, you know, so they really appreciate and understand how business works and run their own businesses in addition to the media portion of their, you know, of their exposure.

13:16So I really love that. So if we could find more partners who have that community love and the high profile and also have a kind of a core understanding of business, those are kind of, I think we'd be really excited about that.

13:29Genevieve Gilbreath:Yeah. Is it also something that you guys perform due diligence around? Because you have invested in the absorption company with Ian and Nikki, and they are obviously very entrepreneurial. They have their own companies. Miss the Beast is super entrepreneurial. Martha Stewart is obviously super entrepreneurial. Is that something that you guys actively look for? Because I've also kind of like get approached often by celebrities and creators and immediately think like just because they have 20 million followers means they're great entrepreneurs too. But being a celebrity or being a content creator is something completely different than being an entrepreneur.

14:00Genevieve Gilbreath:So wondering, is that something that you guys also actively do diligence on? We, you know, we, we definitely look at that. I mean, like to your point, because I think a lot of the influencers now are incredibly entrepreneurial because they built them, you know, they built their own brand, they built themselves up. And so they know how to, you know, leverage that. But when it comes into like having a physical product, there's a different understanding. I think what we look at is, you know, yeah, a, what is kind of their business acumen? How curious are they? That's something we look at in all founders.

14:29It's like, we really want people to be curious and have a learner's mindset and people that are hungry for knowledge. That's always a great sign and like that they're going to be successful because they want to run all the traps on everything. So, you know, we do we do look at that definitely in diligence and then also look at, you know, who's around them and how do they how do they respect and treat the people that are around them? Do they do they understand like, hey, this is where I am really great and this is where the people around me are really great and really kind of are able to delegate and lean on that and listen and be discerning.

15:01So I think that's that's how we think about it.

15:02Genevieve Gilbreath:Yeah, I recently had Katie Hunt from O Norman on my podcast, and she is launching this company with Kaley Cuoco, an actress. And she mentioned that there's kind of a new role within the company. And that is a specific person who is bridging the world between O Norman and Kaley Cuoco. So you kind of need to understand both roles to be able to really leverage Kaley Cuoco to the best of their ability. And you're kind of now mentioning something similar to like someone around the creator's team that can also really step in whenever this person is shooting his or her next movie or doing something else which doesn't allow them to be in.

15:36Genevieve Gilbreath:Is that something that you see also within your own portfolio? You know, we have seen we have seen that. I'm trying to think of this somewhat. We've seen that a little bit. A lot of the folks that we work with are they do kind of have more direct involvement. But I think anybody who has so much going on, like so many of these, you know, creators, celebrities, influencers, if they have a right hand person around them who has that, you know, ability to kind of be between, then it's more effective for sure. And that can be an agent or business manager or, you know, a chief of staff or an EA or somebody, you know, somebody internal on the company team.

16:12So I've seen it take several different forms.

16:14Genevieve Gilbreath:Yeah, it will be interesting to see going forward if there's going to be like a dedicated role as we are going to see more and more of these companies being incubated and being launched. I'm curious to kind of how do you think like these companies should best position their celebrity and create a co-founder? Like if you look at some of the companies in your portfolio, like with Feastables, Mr. Beast is really front and center in the marketing. But you also have the absorption company who actually doesn't want to be considered a celebrity brand. Or you have Goodles with like Gal Gadot's involvement.

16:43Genevieve Gilbreath:but many people actually have no idea that she's involved. So how do you also think about that? You know, I think it works. It depends. And Feastables is a unique case. I mean, Mr. Beast has so many eyeballs and such a connected community. So that one was a little bit that and that when we invested in that one, it was also, OK, well, this one's a higher risk than some of the others because of the key man risk. So generally what we like to see is a brand that can stand on its own, as we mentioned in the beginning. And the celebrity or influencer is the accelerator. So and then eventually, as the brand begins to mature, continue to use those relationships to accelerate.

17:20But let the brand be able to stand on its own. Because, you know, if the brand sells to a strategic, maybe the talent partner is not so excited to continue on with it. But having, you know, so having it be able to stand on its own, it is the most attractive thing for us. I mean, I think, again, when you look at Elm, I mean, Martha is absolutely amazing. But the products themselves are incredible. And Daval, who's the co-founder, he's a brilliant entrepreneur and a brilliant dermatologist and has created something that her amplification is amazing, but the products themselves absolutely stand on their own.

17:53And that's what we want to see.

17:55Genevieve Gilbreath:Yeah, we always say that the best celebrity brands are always product first because the celebrity might help you sell the first product. But the quality of the product is going to determine if people are going to buy it the second, third, or fourth time. And that's obviously where you build a real business on. So it's really important to have a great product. One of the ways that I kind of see companies now building in this space to become less dependent on one celebrity is to actually have like a multi-creator or celebrity founding team. So you have seen Prime with Logan Paul KSI. You have Blox Next in your portfolio that is like have several creators on the cap table.