For the last 20 years, I’ve been helping athletes and entertainers avoid bad business deals. If you want to avoid bad deals, ask the person sending you the deals these 3 questions. 98% wont make it through this filter, but forward the 2% that do to me.
1) Are they putting skin in the game? I often see the “this is gonna be the next billion dollar deal” from people but they won’t put a dollar in. You want “alignment” with folks you invest with. That’s why athletes love co-investing with VCs. They are usually the smallest checks in the deal.
2) Have they performed due diligence and can you review it? Product, legal, financial. Usually they would let you see their investment memo, legal review or redlines, product diligence and save yourself $10-20k doing it yourself. You still want to review diligence just not lead diligence. If they haven’t done this, maybe they can connect you to the source that has. Otherwise it’s the blind leading the blind.
3) Do they have a track record in making money investing in this? This is SUPER IMPORTANT. Stop letting people with no skin in the game, no diligence process and absolutely no track record lead you down these dead ends because they know 2% more than you on a deal. That doesn’t make them experts.
For example I have no track record investing in cannabis, real estate, franchises or forex and my 12 years on wallstreet and 8 years investing in tech don’t transfer. Different industries. Just because someone worked in finance does not mean they’re experts at everything in finance. Think about it like this: someone who’s a GM for a basketball team wouldn’t be qualified to be the manager of a baseball team. Ask point blank: WHAT IS YOUR TRACK RECORD IN INVESTING IN THESE TYPES OF DEALS. ⠀⠀⠀⠀⠀⠀⠀⠀⠀
Once you eliminate 98%, then you can focus on the good deals and decide:
* Right deal wrong terms (Valuation too high or common. Vs preferred shares )
* Celebrity deals with no diligence where a company wants your money but won’t send you financials or anything. Avoid those.
* Stock options and strike prices, warrants or founders shares.
No more bad deals people, especially under my watch! ✊🏾