TikTok star Alix Earle is officially an investor in the Texas-based soda brand Poppi, according to a video posted over Memorial Day weekend. Earle shared a few details during the video, which fluctuated between advertisement and, as Earle described it, “business update.” The brand previously made its way into Earle’s feed through sponsorships and free swag.
“Beyond it being a great product,” Earle explains during the GRWM video to her 6.7 million followers, “their team was just so amazing to work with. So, I decided to invest in Poppi.”
One thing is now clear: the 23-year-old is an investor in a viral product that’s less than five years old. But, what does that actually mean?
The Rise of the Creator-Investor
Brands routinely struggle with an oversaturated market for marketing messages delivered to a fatigued audience. At the same time, creators are tapping into the world of consumer packaged goods, like foods and beverages — often through licensing deals where the creator’s name or brand is attached to a product.
The creator-investor structure offers the best of both worlds. Brands land an authentic spokesperson. Creators expand their business portfolio with an established, high-growth brand. Brands are able to move past the traditional endorsement deal (and upfront investment cost). Instead, they can offer a creator equity in the brand’s business.
“As [creators] start to mature in business, they want to get out of the grind of posting brands,” Tobin Jaramillo, an executive with Creative Artists Agency (CAA), told Passionfruit. “They want to start building their own thing that can live beyond and diversify their business.”
Additionally, brands can bring creators into the product development lifecycle. Creators can leverage their personal brand and expertise to create a unique product that resonates with their fan base. Business-savvy creators like Alix Earle, who graduated in 2023 from the University of Miami’s Miami Herbert Business School with a degree in marketing, offer a unique value proposition for brands.
Asking for and Structuring Equity
If creators, or their managers or agents, want to jump onto the equity train, it often simply starts by asking at the start of a brand deal discussion. The trend is hot, according to a LinkedIn post from Tyler Chou. Chou is the founder and CEO of a law firm for creators, and someone who says she frequently works on such deals.
Creators seeking equity have a variety of options. A direct equity stake offers creators a percentage of ownership in the company, aligning the creator’s financial interests with the company’s overall performance.
Similarly, a stock option, or investor structure, gives creators the opportunity to purchase company shares at a set price now or at a predetermined time in the future. However, under a stock option structure, the creator will need to put up their own money to buy in.
Another structure might include a profit-sharing model where the creator’s compensation is directly tied to the product’s sales or profits. This would seek to align the creator’s financial interests with the success of any campaign. The profit-sharing could lead to an equivalent dollar amount in the form of equity, or reduced-cost stock options.
“The parties also need to negotiate when the equity will be received, i.e., will it be received immediately, over time, or when the company hits certain business metrics,” explain attorneys Shane Nix, Michael Bloom, and Elizabeth Steigg of Venable LLP, who also note that the choice of equity can be driven by tax implications.
Chou also notes an additional option to pair with equity: monthly strategy meetings with a creator and a brand’s product and marketing teams. Adding access to a creator could be an opportunity for a brand to round out its relationship not just with the creator but also with the target audience.
It may also be fruitful for a creator to structure in an upfront cash payment component to the overall deal. If anything, just to cover the business costs of papering and managing the equity assets for transfer. It may also be a while before the creator is able to liquidate or realize any immediate return from the equity.
Ultimately, everyone involved (brands, creators, managers, and agents) should work with their tax and legal professionals when exploring deal structures. The tax and legal implications of any such deal could be enormous.
Some Legal Complications
Creators have long been owners of their businesses. But as evidenced in 2017 during the first Federal Trade Commission (FTC) complaint ever filed and settled against influencers, things can get complicated.
The FTC complaint stemmed from video game streamers Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell. The two creators failed to publicly disclose joint ownership of an online gambling service, in light of the endorsements the two were making during live streams.
As creators become investors, it’s equally important to consider what disclosures the FTC requires. And in some cases, what the Securities and Exchange Commission (SEC) requires.
The SEC has recently cracked down on investment-related posts, which could become problematic if creators partner with publicly traded companies. Creators may even face personal liability and lawsuits. Like influencer Logan Paul did following his involvement in an NFT project in 2023.
Alix Earle’s TikTok video included the hashtags “proudinvestor” and “poppipartner.” By themselves, these would not meet the FTC’s stringent disclosure rules, which require more than just hashtags.
However, Earle devotes much of the video to informing her audience that she has a direct financial connection to Poppi. One could argue the video as a whole is quite literally a disclosure of her new relationship with the brand. (Earle’s management team did not respond to a request for comment via email before publication.)
Going forward, the FTC would likely expect future videos to continue to explicitly note the connection through both hashtags, on-screen or verbal disclaimers, and written descriptions.
“If it is obvious from an influencer’s endorsement that the brand is the influencer’s own, no disclosure is necessary,” says the FTC as part of its updated disclosure guidelines. “If it’s not clear or sometimes not clear that it’s the influencer’s brand, that fact should be disclosed.”
In the UK, the Advertising Standards Authority (ASA) forced influencer Grace Beverly to take down six posts promoting her own fashion brand, Tala. The ASA maintains a list of influencers that it finds to be in non-compliance with disclosure rules it has published.
A general best practice for creators is to disclose, even if their government doesn’t require it.
Back to Poppi and Alix Earle
Poppi is on record for being in its growth-focused era and not negotiating any acquisition. For creator-investors like Alix Earle, that could lead to an even greater payout once the company does sell.
“The tough part with equity or investment deals is that it sounds really sexy, but it’s a long game,” explained Jaramillo. “In this instance, there’s an outlay of cash. And there might not be any sort of profit, or realization of profit, for a while, if ever.”
It’s worth noting the phrasing that Alix Earle uses in her video. “So, I decided to invest in Poppi,” seems to indicate it was her decision to invest.
Until more details emerge, many in the creator economy are wondering how these deals will evolve in the coming years.
