NEW YORK, NY December 6, 2022 (Law Firm Newswire) – Mitchell Littman, a professor at the Brooklyn Law School, gave an informative lecture in his Transactional Skills for Startups class. As he started his Zoom meeting, he welcomed singer-songwriter John Legend to speak about his investing experience.
Grammy Award-winning musician and a veteran investor for several business startups, Legend began to share how he compares startups through a dashboard software created by one of his advisors. His insights shed light on how people should effectively evaluate startups in their early stages.
John Legend shared four crucial factors to consider when evaluating the investment health of startups:
- Look at the business model. Is it strong? Is it disruptive? If so, how will it work? What potential is there, given the specific industry and its market?
- Consider the timing. “Sometimes you are brought in early when the company has a good valuation that can grow. Sometimes, they are already close to a high valuation, and you’re not going to see an opportunity for it to grow as much,” Legend stated.
- Who else is investing? Legend explained how he is always interested in learning what other institutional investors are interested in.
- What’s the public perception of the brand likely to be? As a celebrity used to being in the limelight, one’s public persona is integral to branding. As a potential investor, it is a valuable question to ask. Brands likely to be perceived well by a particular audience are expected to do better.
As a celebrity investor, Legend continued to share how he relies on the “mic test.”
“Can we put John on a mic and have him explain what he’s doing and why he’s doing it and have him be proud of his investment?” This test can be applied to nearly any startup: “If you can’t explain your decision and be proud of it, it may be time to look elsewhere.”
In addition to being a musician, Legend studied at the University of Pennsylvania. His early career includes time with Boston Consulting Group, where he worked as an associate focused on business strategy. As the lecture was drawn to a close, the key takeaway that Legend and Littman agreed on was: If it’s too good to be true, it probably is.
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