Kim Kardashian/buyouts: TV star swaps social capital for the real thing

TV star, influencer, entrepreneur, and now capital allocator. Kim Kardashian, who is famous for being famous, has co-founded private equity firm SKKY Partners.

Kardashian owes her celebrity to a starring role in reality TV shows. These provide undemanding escapism via fashion shoots, partying and family conflicts. But investment professionals would be unwise to dismiss her involvement as a mere stunt. She already has a record of transmuting her social capital into financial capital.

Co-founder Jay Sammons is an accomplished investor formerly of the Carlyle Group. SKKY Partners will focus on deals in such areas as digital commerce, consumer media and luxury.

Kardashian is unlikely to build financial models or solve supply chain challenges herself. But those skills can be provided by a plentiful supply of Harvard MBAs, like Sammons himself.

Kardashian’s own business chops should not be underestimated. A women’s undergarments business she co-founded, Skims, was valued earlier this year at $3.2bn, according to data provider PitchBook. Another venture, cosmetics maker KKW, has a recent mark of $1bn.

Kardashian has a massive social media following. A mere post on Twitter or Instagram to her tens of millions of followers can turn a new brand into a household name.

Once established, private capital businesses can enjoy long lives. Striking a few good deals is an essential starting point. Among hundreds of investment groups offering a commodity product, namely cash, SKKY will stand out thanks to Kardashian’s involvement.

Television stars, singers and athletes have typically become rich through fees and salaries. But capital creates the most consequential wealth. Private equity is particularly attractive because investment managers typically get to keep 20 per cent of deal profit, without having to put up much cash themselves.

When Sammons left Carlyle to hang his own shingle he could have started a firm with colleagues just like him. Instead he has made an unconventional bet. Creativity is a key skill in investing. It applies not just to the way deals are picked and structured, but also to the people making those decisions.