The Grammy Award-winning musician, who joined the Brooklyn Law startup class via Zoom on Nov. 22, discussed his work experience prior to his music career and shared his startup investment strategy.
Although Legend has been playing the piano since he was a child, he is also a 1999 University of Pennsylvania graduate who spent three years at Boston Consulting Group working as an associate (think spreadsheets and Power Point presentations), and as part of a team advising businesses on strategy.
Before my music career took off, I spent three years at Boston Consulting Group, working on spreadsheets and PowerPoint presentations, advising businesses on strategy.
John Legend
Now, as a celebrity investor, Legend uses a dashboard created by one of his advisors to evaluate startups. Celebrity investors are approached because they have the money to invest, he said, but also because they encourage other investors to join and can help with marketing. Some of the basic questions Legend asks, initially, relate to the business model of the startup.
- His initial questions for startups revolve around their business model, potential for disruption, unicorn status (reaching a billion-dollar valuation), and current stage and value. He explained, “Is the business model strong, is it disruptive, do we think the business model works, do we think they have potential to be unicorns and change the business that they’re in and in a really positive way?”
- Legend also considers other institutional and celebrity investors, alongside assessing the cultural significance and social impact of the brands he invests in, including environmental sustainability. He said, “What will people perceive about the brand when they see it out in public? Is there a social impact angle?”
- He acknowledges the impact of attaching his name to a company and assesses if his reputation and celebrity can enhance the brand. Legend added, “Will my reputation, and will my image be helpful? Can we leverage my celebrity, reputation, and my image to enhance the brand?”
- Legend and his business partner use the “mic test” to decide on projects and apply the same test to investment opportunities, ensuring they can confidently explain and endorse their involvement. He explained, “Every project we do has to pass 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 involvement?”
- When speaking to entrepreneurs, he values their expertise, honesty, forthrightness, and passion, looking for qualities expected from a leader. He mentioned, “They’ve thought about the challenges, and they speak to you in a way that’s honest and forthright and passionate… All the things you expect from a leader.”
- He relies on his experience with various companies to apply the “smell test,” gauging the realism of a company’s goals and assessing if they seem too good to be true, akin to the old adage on Wall Street. Legend concluded, “You have enough conversations with people about new companies, and you get a sense whether you think the goals that the company has are realistic, whether you think it’s too good to be true or not.”
It’s the oldest adage on Wall Street. If it’s too good to be true, it probably isn’t true. No question.
David Littman
Source: Brooklyn Law School, November 2022
