Here's what triggered this analysis: Over the past few weeks, I've been meeting with celebrity managers and hearing the same story repeatedly. They've facilitated dozens of co-founder equity deals for their clients. The success rate? Near zero. One manager told me they helped structure 12 celebrity co-founder deals over the past couple of years. 11 companies went under. Not a single dollar returned to the celebrity or their team.

The response from celebrities and their managers has been swift and understandable. They're now demanding upfront cash, royalties, or minimum guarantees in addition to equity. They want to get paid whether the company succeeds or fails. And while their reaction makes complete sense, that single change is destroying everything that made celebrity-founded brands special in the first place.

Today, I'm breaking down exactly why this hybrid model guarantees failure, what the math really looks like, and why we need a complete reset before the entire celebrity co-founder ecosystem implodes.

Let me paint you a picture of how we got here.

2017: George Clooney sells Casamigos for $1 billion.

2021: Rihanna's Fenty Beauty hits a $2.8 billion valuation.

2023: Kim Kardashian's Skims reaches a $4 billion valuation.

These valuations created a gold rush. Every celebrity, creator, and their management teams rushed to replicate the model. The logic seemed simple: If Clooney can turn tequila into a billion dollars, why can't we?

But here's what everyone missed: Venture is a power law game.

For every Casamigos, there are 100 celebrity liquor brands gathering dust in warehouses. For every Fenty, there are 100 celebrity beauty brands that never cleared $1M in revenue. That's not failure. That's the venture model working exactly as designed.

Just like traditional startups, celebrity-founded brands follow the same brutal math. For every Uber or Airbnb, thousands of startups fail. Celebrity co-founder involvement doesn't change the fundamental laws of venture. 

VCs understand this math. We invest in 20 companies expecting 19 to fail and 1 to return the entire fund. That's how the game works.

But celebrities and their teams can't afford to be wrong 19 out of 20 times. They don't have a portfolio of bets. They have their reputation, their time, and their platform. When they fail, it's personal. When VCs fail, it's Tuesday.

To understand why the current approach is so destructive, you need to understand what made celebrity-founded brands special in the first place.

Traditional consumer brands have a fundamental problem: customer acquisition costs. Most of their expense is acquiring and retaining customers. They typically spend 30-50% of revenue on marketing. Instagram ads, influencer partnerships, PR agencies. It adds up fast.

Celebrity-founded brands have a massive competitive advantage. Take Rhode Beauty by Hailey Bieber, they spend just 11% on marketing. Most beauty brands burn 30-50% on customer acquisition.

Why the difference? Because Hailey Bieber IS the marketing. Every selfie is an ad. Every red carpet appearance is product placement. When she posts about Rhode to her 50 million followers, that's marketing traditional brands would pay millions for.

That margin difference was transformative. It meant celebrity-founded brands could:

That's why companies like Rhode, Skims, Fenty, and Casamigos have been able to outperform traditional brands.

The gold rush we just described led to thousands of celebrities launching brands or taking co-founder equity deals. Most failed, which is completely normal for venture. But for the celebrities who invested significant time and resources and got nothing in return, it was devastating.

So they adapted. When co-founding a company or doing a co-founder equity deal, they started demanding a new deal structure that involved equity plus cash, which could look something like:

On the surface, this seems reasonable. Celebrities are mitigating their risk. They're ensuring they get paid for their time and influence even if the company fails.

But this completely destroys the economics that made celebrity co-founder brands succeed.

Remember that marketing advantage? Gone.

Let's look at Rhode's numbers again. Rhode spends just 11% on marketing because Hailey Bieber is a true co-founder with no cash compensation.

But if Rhode had used today's typical celebrity deal structure:

And that's assuming you hit $20M in Year 1 revenue, which very few celebrity brands achieve. At more realistic revenue levels, that upfront payment could represent 15-20% of revenue.

You're right back where traditional brands started, spending 30%+ on marketing. You've lost the competitive advantage that gave celebrity-founded brands the right to exist and outperform in the first place.

But it gets worse. Now you have a celebrity "co-founder" with only 5% equity instead of 25%. When you own 5%, you post when required. When you own 25%, you live and breathe the brand. The incentive to go above and beyond disappears. 

So now you have:

It's a recipe for guaranteed failure.

What's happening is a vicious cycle that's slowly destroying the potential of the model:

Phase 1: Early Success Stories

Phase 2: Market Saturation

Phase 3: Deal Structure Changes

Phase 4: Competitive Advantage Erodes

Phase 5: More Protection Demanded

We're heading toward Phase 5, and it's getting ugly. If we don't reset now, this vicious cycle will destroy the entire model's potential.

I hear the term "opportunity cost" thrown around constantly to justify cash payments. But that's missing the entire point of venture.

Taking the risk of not getting paid in the short term to potentially build a billion-dollar company and create generational wealth IS the opportunity cost calculation. You're choosing between:

• Safe route: Focus on paid brand deals, make $3M over 5 years. No headache. No risk.

• Venture route: Take the risk, probably fail, but give yourself a chance to build a billion-dollar company and walk away with $300M at exit.

There is no middle way.

And here's what celebrities need to understand: The co-founders building alongside them face the same choice. Talented people nowadays can get $1M salaries and stock options at NVIDIA, Google, or Netflix. In fact, approximately 80% of NVIDIA employees are millionaires, with nearly half reportedly having a net worth over $25 million.

Yet they still choose to bet on themselves, eat ramen for two years, and invest their own savings into making it work. They're giving up guaranteed million-dollar compensation packages for equity in an unproven startup.

So why is opportunity cost different for celebrities versus these co-founders? It's not. The choice is the same: guaranteed income or potential generational wealth. You can't have both.

There's another critical issue destroying the model: celebrities launching or taking co-founder equity in companies that were never venture-scalable in the first place.

I see this constantly. A celebrity takes 10% equity in a lifestyle brand that will clearly plateau at $12M in annual revenue. They promote it heavily for four years. The company maybe exits for $25M. The celebrity's take? $2.5M for four years of work.

If they'd spent that same time and exposure on paid endorsements, they'd have made 3x as much without any risk or hassle.

Before any equity deal, celebrities need to ask: Can this company realistically scale to $200M+ in annual revenue? If the answer is no, and you're trying to do a venture business, don't do the deal.

It's fine if it's a passion project or something you genuinely want to exist in the world. But understand what you're signing up for. A company that plateaus at $12M isn't a venture business – it's an expensive hobby.

The early successes of Skims, Fenty, and Casamigos showcased the incredible potential of the celebrity co-founder model. But those same successes created unrealistic expectations and a gold rush that's now imploding. To fully realize the model's potential, we need a complete reset.

Here are the three non-negotiables:

1. Understand the Game You're Playing

Venture is not a guaranteed return business. It's a power law game where most bets fail but winners create generational wealth.

If you need guaranteed returns, don't play venture. Stick to brand deals, appearance fees, and licensing. There's no shame in that. It's a legitimate business model with predictable income.

But if you want to build a billion-dollar business, you need to accept the risk. In venture, you need to be all-in. That's the only way it works. There is no middle way. The moment you ask for cash upfront, you're destroying your own upside and the company's potential to succeed. You're betting against yourself.

2. Go Back to the Original Structure

To make sure you're all-in, we need to go back to the original formula that made these brands successful. Just look at the winners:

The deals that work follow a simple formula:

This isn't about being cheap. It's about alignment. When celebrities have real skin in the game, they show up differently. They solve problems instead of creating them. They build instead of just promote. They're in the trenches during the hard times, not just at the launch party.

The equity percentage matters because it changes behavior. At 5%, you're a spokesperson. At 25%, you're an owner. At 35%, it's your baby. The commitment scales with ownership. When you have a large equity stake and real skin in the game, the commitment matches the potential outcome.

3. Do Fewer Deals, Not More

The world doesn't need another celebrity anything. We already have 2,000+ celebrity-founded brands, most of which shouldn't exist. We need celebrities solving real problems with genuine conviction who are willing to lean in.

This means being ruthlessly selective. Celebrities should only start or join companies where:

If any of these are missing, walk away. 

Implementing these three measures should lead to higher-quality celebrity-founded brands instead of quantity plays. When celebrities truly commit and lean in with the right structure, the success rate could improve dramatically. The built-in advantages celebrity co-founders bring – distribution, credibility, network effects, could push success rates far above the traditional venture model.

The celebrity co-founder model has massive potential. But only with the right structure.

The current hybrid model where celebrities get paid regardless of outcome isn't just suboptimal. It increases failure by removing the very advantages that made celebrity-founded brands special.

We're at an inflection point. Either we reset to what works – true partnership, real equity, authentic commitment – or we watch the entire ecosystem implode.

The early successes of Casamigos, Skims, and Fenty showed what's possible when celebrities become real founders. The current wave of failures shows what happens when everyone tries to copy the surface without understanding the substance.

It's time to choose: Are we building real businesses or just playing dress-up?

We’ve opened an SPV to invest in The Absorption Company, co-founded by Ian Somerhalder and Nikki Reed.

Despite the scale of the global supplements market, most brands still compete on ingredients, branding, or trends—not outcomes. The Absorption Company is built around a single, differentiated insight: efficacy is driven by absorption. By making absorption the core of product development, the company is the only platform in the category designed around whether products actually work.

That focus translates directly into higher consumer trust, stronger repeat purchase behavior, and a fundamentally different growth and margin profile as the category shifts toward results-driven brands.

The company grew 147% last year, finishing 2025 with $5M in revenue. We are now opening this round at a $15M pre-money valuation, unchanged from pre-launch pricing—despite meaningful revenue growth, improving unit economics, and a clearly defined expansion roadmap.

If you’re interested in participating, reply here and I’ll share the deck, deal memo, and full investment details.

The latest episode of the HotStart VC Podcast is here. This week, I’m joined by Jerome Aceti, a creator who has published at least one piece of content every single day since 2012, over 13 years without missing a day. Jerome started uploading at 14, dropped out of college when his channel exploded, and now has more than 8 million subscribers across platforms alongside a portfolio that includes co-founding startups, angel investing, and LP positions in VC and PE funds.

In this episode, Jerome breaks down why the next wave of creator companies won’t be consumer brands but infrastructure, how his latest company, NextTide, uses patent-pending AI to protect ad campaigns in real time by shutting off ads when streams become brand-unsafe, and why brand safety fears have held back streaming ad spend for decades. We also talk about why creators are uniquely positioned to build the tools their industry needs, how he’s thought about diversifying income since 2010, and why he advises creators to save and invest as if their entire career ends in one year.

Now available on YouTube, Spotify, and Apple Podcasts.

About HotStart VC

HotStart VC is launching a new fund to invest in brands founded by celebrities and creators. We’re building the go-to platform for creators and celebrities launching brands, providing capital, strategic support, and the infrastructure to scale.