The Kardashians to the SKKY?

On Sep 8th, 2022, Kim Kardashian launched her Private Equity firm SKKY partners, co-founded with Jay Sammons, a former partner at Carlyle Group. 

What is a Private Equity (PE), what is the difference between PE and Venture Capital (VC)? Who is Jay Sammons, and what is Carlyle Group? Over the next 3 minutes, let us debunk all the questions above. 

What is Private Equity (PE)?

PE is a type of investment firms who invest in mature private companies, and tend to increase the worth of that private company before exiting 4-5 years later with significant returns. How do they increase the company value? They pump capital into the companies to acquire new technology, make acquisitions, expand working capital and so on. Due to the significant share that the PE firm holds, they could have an influence on the director board as well, which means they can hire strategists to advise how the company should operate. They can also extract value by selling parts of the business to other companies.

PE normally exits through an IPO, which sells the private company to the public or a strategic acquisition. A strategic acquisition means selling to another suitable company that has a strategic advantage as they complement each other like Krugman purchasing Financial Times!

What is Venture Capital (VC)?

VC is very similar to PE. However, the main difference is that they focus on startups, so they get involved with private companies at a much earlier stage compared to PE firms. This allows them to obtain a bigger percentage of ownership in the company, which means higher potential returns. Additionally, having a greater slice of the pie enables them to have a greater influence on the director board, allowing them to provide strategic advice more suited to their own interests. VC firms usually invest in start-ups in their second and third stages of fundraising.  First comes the friends and families and then comes the VC firms, initially regular VC firms invest followed by VC firms that specialize in late-stage investing.

You may be wondering, why does a company/start-up need a PE/VC firm to help them grow? Companies choose PE/VC firms to propel their business to avoid taking out loans with immensely high interest rates and also to profit on the talent and expertise of the PE/VC firms.

Jay Sammons?

Now let’s introduce Jay Sammons, a former Carlyle Group executive who has carved out a niche investing in celebrity-backed ventures. Sammons is a pioneer of advising entertainers financially using their fame on the rising online platform to monetize their personal brands. He brought Carlyle, the 3rd biggest PE firm by assets under management (AUM), into the unfamiliar world of show business, generating standout returns from star-studded deals, including an investment in the headphone maker Beats by Dre. 

Sammons’s latest venture connected him with the Kardashian family after attaining fame in 2007 with the reality TV show ‘Keeping Up with the Kardashians’. Since then, they have proved adept at monetizing their fame by associating with consumer brands most notably in shapewear label Skims, and KKW, a make-up brand. KKW obtained a huge $200 million investment from Coty, another beauty brand, at a $1bn valuation in 2020. It becomes very apparent that celebrities have a huge influence in consumer focussed businesses, and that’s where the power lies in SKKY.

SKKY?

SKKY announced its arrival in a tweet. It stated that its “target sectors include consumer products, digital and ecommerce, consumer media, hospitality and luxury”. SKKY hasn’t announced any funds being raised to carry out planned investments, but you can imagine with the expertise of Jay Sammons and the publicity of Kim Kardashian that this will be an extremely successful venture!

If any reader has 330m subscribers on Instagram, you should perhaps start thinking about launching a PE firm? It’s only a matter of time before Jay Sammons reaches out anyway!

Analyst: Han Liang