The ceiling for influencer-based business models has just been lifted about a hundred floors. Kim K is starting a Private Equity firm with the former head of consumer at Carlyle Group, Jay Sammons. For reference, some of Jay’s wins include investing $500M in Beats By Dre before it sold to Apple for $3B and acquiring a 50% stake in Supreme before it was sold to VF for $2.1B.
I don’t think anyone predicted how impactful the influencer economy would become. We’ve reached a point where just about anyone with a smartphone can get paid for inserting products into their content.
But like anything, there are levels to it. And Kim K just created an entirely new level.
The Levels to Influence
- Level 1: Go viral and get free products. (Ex: just about everyone on your timeline)
- Level 2: Sustain an audience and get paid to promote businesses. (Ex: JxmyHighroller makes NBA video essays and gets paid to promote DraftKings)
- Level 3: Build impact in an industry and co-create products with established brands. (Ex: Lethal Shooter, a guy who trains athletes, gets his own exclusive Jordan shoe)
- Level 4: Amass wealth through your influence and invest in startups you love. (Ex: Kevin Durant and Serena Williams enter Venture Capital)
- Level 5: Become one of the most influential voices in the world and use that to buy, grow, and sell entire companies. (Ex: Kim K starts SKKY Partners)
Private Equity is Not Venture Capital
There’s no shortage of athletes and influencers entering venture capital. It’s the tastiest flavor of capitalizing on one’s personal brand. After all, wouldn’t you rather have Tom Brady invest in your company than some other person with $250M but no social media influence?
But there’s a big difference between venture capital and private equity.
It’s the difference between ordering the most expensive item on the menu and ordering one of everything on the menu. It’s the difference between the strongest person at your local gym and 4-time World’s Strongest Man Brian Shaw.
Venture capital is about investing in many startups to hit it big with one unicorn. Private equity is about buying controlling stakes in established companies, restructuring them, and selling them to the next big fish (or the public market).
Essentially, private equity looks for businesses that aren’t reaching their full potential. They’re much more interested in turning a $200M company into a $2B company or a $2B company into a $3B company, in layman’s terms.
And that brings us to Kim K’s creation of SKKY, her private equity firm.
The SKKY is the Limit
With a private equity firm, Kim will be looking to make deals across consumer products, hospitality, luxury, digital commerce, and media. Essentially, all of the verticals she’s already made moves in, but with an upgraded playbook.
For example, the Kardashians received $100M to bring their show over to Hulu. With SKKY in the play, that deal might instead look like:
- SKKY wants a 1% stake in Disney which owns Hulu
- 1% in Disney is valued at $2.25B (as shown by Bank of America’s share in Disney)
- With their show as leverage, Kim can do a ten-year deal with Hulu valued at $1B and pay the remaining $1.25B in cash
Obviously, this is an overly simplified version. But it shows how the Kardashians can move the weight of their influence around to get much bigger deals – deals that are at the private equity level, which primarily deals with billions of dollars.
I imagine that SKKY will be targeting consumer goods around the $500M to $1B value mark and buying controlling stakes in the companies. The Kardashians will insert these products into their TV show and proven impression engine to grow revenue. At this point, SKKY will likely look for an acquisition from tech companies like Google, Amazon, Apple, and Microsoft because they need to broaden their market share in consumer goods (like Jay did with the Beats x Apple deal).
That seems like the obvious playbook here.
At every level, Kim K has shown how to use influence over eyeballs and wallets to build a business. The move into private equity, once again, proves how important influence is as an asset in getting deals done.