Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Influencer Equity Instead of Cash
Transcript
- Lucas: Most DTC brands think of influencer marketing as a transactional cost — you pay someone to post, get a spike in traffic, and move on. But there's a growing play where brands trade equity instead of cash for influencer partnerships. Luna: Equity instead of cash — that sounds like a deal that aligns incentives long-term. But it also sounds risky. Who's doing this well? Lucas: The clearest example right now is Whoop, the fitness wearable company. When they were still a young brand, they gave equity to a small group of influencers — including Tim Ferriss, Patrick Mahomes, and Rory McIlroy. Not as endorsers in the typical sense, but as early believers who got a piece of the company. Luna: So Tim Ferriss didn't get paid cash to talk about Whoop on his podcast? He got actual shares? Lucas: Exactly. The idea is: instead of writing a check for a one-off campaign, you give the influencer a stake that vests over time. They become genuine shareholders. Their incentive is to talk about the product repeatedly, authentically, because their equity value grows with the company's success. Luna: That makes sense for someone like Ferriss, who already has a long track record of building companies. But for a typical Instagram influencer with 50,000 followers — is equity even a useful tool? Lucas: It depends. The influencer has to believe the brand can grow significantly. If you're a pre-revenue DTC startup, equity could be worth zero. But if the brand has traction and a credible growth story, equity can be more valuable than a flat fee. The sweet spot seems to be micro-influencers with high engagement rates who become early brand evangelists. Luna: What's the typical structure? Is it common stock, options, something else? Lucas: Most deals use restricted stock units that vest over two to four years, often with a one-year cliff. So the influencer has to stay involved for at least a year to get any equity at all. That's a much stronger commitment than a single Instagram post. Some brands also tie the equity to performance metrics — like sales generated through a unique code. Luna: Let's talk numbers. How much equity are we talking? A percent? A fraction of a percent? Lucas: For a brand like Whoop, which has raised over $400 million and is valued in the billions, the equity given to influencers is likely very small — think 0.1% or less. But for a smaller DTC brand, you might offer 1% to 5% to a key influencer who can make or break your launch. The trade-off is diluting your ownership, but you're conserving cash. Luna: Cash conservation is a huge deal for early stage DTC. Ad costs have been climbing — Facebook CPMs are up something like 30% year over year. If you can trade equity instead of burning cash, that's attractive. Lucas: Exactly. And there's another layer: the influencer's audience sees that the influencer is a real stakeholder, not just a paid shill. That builds trust. A study by Influencer Marketing Hub found that 61% of consumers trust influencer recommendations more than brand ads, but that trust drops when the audience senses a purely transactional sponsorship. Luna: Right, so equity deals signal genuine belief. But what about the downside? What happens when an influencer does something controversial and they're still holding your stock? Lucas: That's the nightmare scenario. If an influencer gets canceled and they have a material equity stake, the brand can't easily sever ties. You'd have to buy back the shares, and if the influencer disagrees on valuation, you could end up in a messy situation. Some brands include clawback clauses or repurchase rights tied to behavior, but those are hard to enforce. Luna: So it's not for every brand. You need a strong legal framework and probably a board comfortable with complexity. Lucas: Agreed. But for the right brand, it's a genuine alternative to the ad tax. Think about it: a $10,000 cash payment to an influencer is gone. But $10,000 worth of equity, if the company grows, the influencer is motivated to keep promoting. The cost per acquisition can actually go down over time. Luna: Let's talk about measurement. How do you track ROI on an equity deal versus a cash deal? Lucas: It's trickier because the payoff is deferred. With cash, you can look at a campaign: spend $10,000, generate $30,000 in sales, that's a 3x ROAS. With equity, you have to model the long-term value of the influencer's audience and the potential exit value of the equity. Some brands use a discount rate to present-value the future equity cost. It's more art than science. Luna: But if the influencer drives a lot of repeat customers and word of mouth, that equity might be worth more to them than a flat fee — and cheaper for you in the long run. Lucas: Exactly. And that's the core insight: equity aligns incentives in a way cash never can. The influencer becomes a mini cmo, thinking about product quality, customer satisfaction, long-term brand health — because their net worth is tied to it. Luna: I've seen some brands do a hybrid model — smaller cash fee plus a smaller equity stake. That seems like a good middle ground. The influencer gets some immediate income but also has skin in the game. Lucas: Yeah, that's becoming more common. Think of it as a cash retainer plus a performance-based equity bonus. It gives the influencer downside protection while keeping the upside aligned. I think we'll see more of these structures as the influencer market matures and brands look for alternatives to the ad duopoly. Luna: We've talked about Whoop, but are there other DTC brands doing this well? Lucas: Gymshark famously gave equity to early fitness influencers before they blew up. That's a big reason why they built such a loyal community. More recently, I've seen supplement brands and skincare lines offer equity to micro-influencers with hyper-engaged audiences. It's still niche, but it's growing. Luna: What about the legal costs? Setting up an equity plan for a bunch of small influencers could get expensive in legal fees. Lucas: That's a real barrier. You need a good lawyer familiar with securities regulations, and you need to file proper disclosures. For a brand doing a handful of these deals, it might be worth it. But if you're trying to scale this to a hundred influencers, the admin burden becomes heavy. Some platforms are emerging to automate equity grants for creators, but it's early. Luna: So the takeaway is: equity deals are a powerful but niche tool. Best for brands that have a clear growth trajectory, a small number of highly aligned influencers, and the legal resources to manage it. Lucas: I'd add one more condition: the influencer has to genuinely believe in the product. If they're just in it for the financial upside, it won't feel authentic to their audience. The best equity partnerships happen when the influencer was already a customer. Luna: That's a good test. If the influencer wasn't using the product before the deal, the equity probably won't make them a credible advocate. Lucas: Exactly. And that brings us back to the core principle of DTC: authenticity is the currency. Cash buys attention, but equity buys belief. Luna: Speaking of belief — if these marketing conversations have sparked something you've actually used in your own work, a lot of listeners have asked how they can support the show beyond just listening. We keep the podcast ad-free because we hate the interruption, but listener support is what makes that possible. Lucas: Yeah, it's a small thing but it genuinely helps. If you've ever found a strategy from this show that saved you money or helped you grow, you can toss a few dollars our way at buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. Luna: No pressure at all — but every bit helps us keep doing episodes like this one. And your support goes directly into research and keeping the show independent. Lucas: Alright, back to the topic. I think the next frontier for equity deals is in the creator economy — where influencers build their own brands and then trade equity with each other. Imagine a beauty influencer with a million followers partnering with a DTC skincare brand and co-creating a product line with shared equity. Luna: That's already happening, actually. I know of a few cases where influencers have become co-founders of DTC brands, taking equity instead of a salary. It's a natural evolution from the model we discussed. Lucas: Right, and that's the ultimate alignment: the influencer is no longer just a promoter, they're a builder. The brand and the influencer's personal brand become intertwined. If the DTC brand succeeds, the influencer's equity could be life-changing. That's a powerful motivator. Luna: And it also means the influencer will fight for the brand during tough times — not just walk away when the paycheck stops. Lucas: Exactly. So if you're a DTC founder, the question isn't whether to use influencers. It's whether you want to rent their audience or own their loyalty. Equity is the path to ownership. Luna: Great way to put it. And on that note, I think we've given our listeners a lot to think about. Next time, maybe we can dig into how to structure the legal side of these deals. Lucas: Absolutely. That's a whole episode on its own. Thanks for joining us.