LeBron James's media company lost $28 million in 2023 — and was on pace to lose millions more in 2024, report says. Why celeb-backed startups can struggle, and what investors should focus on

Since its launch, the company has helped produce noteworthy media properties such as “Space Jam” and “Shooting Stars.” However, its struggles to turn a profit highlight the fact that star power isn’t enough to make a business successful.

Brand awareness is a key ingredient for success in business, which is why many celebrities with name recognition leverage their reputation to boost a company’s profile. But an enterprise cannot survive on this alone. Profitability requires savvy. For its part, SpringHill says it has adjusted to a changing media landscape and aims to be profitable in the near future, according to Bloomberg.

Here’s why some celeb-backed startups fail to gain traction and what investors should focus on instead.

The limits of fame

For as many celebrity business success stories exist, there’s also a long list of disasters.

Ryan Reynolds is estimated to have made $300-plus million after the sale of Mint Mobile to T-Mobile for up to $1.35 billion in 2023, according to The Wall Street Journal. Meanwhile, Kylie Jenner sold a controlling stake in her cosmetics line for $600 million to Coty in 2020, per Forbes.

On the other hand, Pharrell Williams’s collaboration with Diageo to sell Qream liqueur went south, Kevin Hart’s chain of vegan fast food restaurants, Hart House, was shut down after just two years, and YouTuber Jimmy Donaldson, also known as MrBeast, ended up suing the food company that produced the MrBeast Burger.

Many more examples can be named, but the point is there are limits to fame. A well-known brand can only get you so far. For durable, long-term success, entrepreneurs and investors need to look deeper than the brand.

Focus on the business

Investors should probably set aside name recognition and focus on the underlying business.

Jensen Huang, Reed Hastings and Jeff Bezos were completely unknown when they launched Nvidia, Netflix and Amazon, respectively. However, the stunning success of their ventures has helped them and millions of early investors build wealth.

The launch of new products or services could also shift the trajectory of a business. Google’s recent launch of Gemini gives it a foothold in the emerging artificial intelligence industry, while the RayBan Meta Smart Glasses and Meta Quest 3 give Meta a hardware platform to expand its offerings.

Investors looking to make long-term bets should focus on the potential success or failure of new products and services rather than the celebrities or star power attached to any new ventures.