Brand sponsorships have long offered an important revenue stream for celebrities. These deals have traditionally been a straightforward exchange of cash payments in return for an endorsement. In recent years, however, a trend of brands trading equity for endorsements has gained steam, and it’s a movement that could hold even greater financial upside for both parties than traditional endorsement deals.
Athletes and entertainers have inked such deals with major brands, but up-and-coming companies—and up-and-coming stars—also increasingly see value in this approach. Equity-for-endorsement deals may add more authenticity to such partnerships, since the talent now owns a piece of the product they’re endorsing, and the company gets a potentially valuable partner without having to lay out additional cash.
Plus, the talent (athlete, entertainer, etc.) acting as ambassador has an added incentive to do what they can to improve the value and visibility of the company, since the more the business grows, the higher the value of their equity return may be. New research shows that consumers are more likely to select products with a celebrity endorsement.1
Still, these equity-for-endorsement deals can be complex, with both parties taking on considerable risk. Like anyone evaluating equity compensation, you’ll need to consider the following questions to determine whether an equity-for-endorsement deal makes sense for you, and if so, how to make the most of the equity that you receive:
