What Snoop Dogg, Aaron Rodgers, And Jay-Z Have In Common...And Need To Know!
Updated: Jan 6
Wayne Gretzky famously once said, “I skate to where the puck is going to be, not where it has been.” Replace the puck with technology and this statement echoes the mentality that venture capitalists aim for with every pitch meeting they take.
In recent years, celebrities and athletes like Snoop Dogg, Aaron Rodgers, and Jay-Z have flocked to venture capital while others like Nas and Ashton Kutcher have already made their presence widely felt. With the allure that fast-growing startups radiate and the chance to be part of an exciting upstart story like we’ve seen with now household names like Uber, Airbnb, and Twitter, it’s no wonder new investors are looking to get involved.
Like the entrepreneurs they’re now funding, athletes, actors, and musical artists are also no stranger to the hard work, discipline, and challenges in building something from scratch. And with their influence, network (beyond the traditional tech-sphere), and capital, celebrities and athletes have a lot to offer and a lot to gain from the opportunities in startup investing.
However, their status doesn’t make them in any way immune to the same challenges and pitfalls that traditional venture capitalists (and their corporate counterparts) face. Here are five practical things celebrity VCs and traditional VCs alike need to know!
Check your docs: like the number of players on the starting line-up of an NBA team, you should be getting five standard documents for a typical equity investment: the Certificate of Incorporation, Investor Rights Agreement, ROFR & Co-Sale Agreement, Stock Purchase Agreement, and Voting Agreement. Make sure you get all of them once the deal is done.
Know your investments: you are placing a calculated bet on an ever-evolving entity. To minimize risk, aim to understand exactly what you own when you make an investment from a financial, legal, and economic standpoint. This precise information lives inside your venture deal documents that you should get when you make an investment. Save yourself the headache and heartache and get to knowing it now. Learn about how you can gain deeper access and insights into your data. <-link to Product Page?
Be accurate: mistakes happen. Odds are roughly 1 out of 3 venture investment documents (the same documents that inform you of exactly what you own in an investment) are incomplete or contain a mistake. In some cases, these mistakes could severely impact your investment. Don’t let it happen to you. Make sure what’s in those documents live up to what you negotiated. Learn about the most common mistakes and issues found in venture deal documents. *link to article ( 5 Common Issues to Look Out For In Your Venture Deal Documents)
Keep track: new rounds of capital bring on more opportunity for growth for both the startup and its investors. But it also presents more complexities. After each round of financing, your ownership, economics, and rights in that startup can change dramatically. You want to continue being part of that story that got you to invest in the first place, but you also want to make sure that it nets out the way you’re hoping it would. Track your investments from the first day you write a check until the day you’re ready to cash out.
Know your network: you’re now joining a team with your startup. They’re relying on you and you’re relying on them. Go above and beyond and deliver for the team, but stay out of the lane when they need to operate independently. Further to that, your co-investors are now part of that team too. Get to know who they are as they can be your most trusted and valuable source of information and future opportunities. But here’s the big part that most miss is this - beyond just your starting lineup (i.e., your biggest or top co-investors), you should also strongly consider knowing and understanding who most, if not, all your co-investors are. Co-investors are tracked in deal documents and can be an overlooked, but valuable resource when monitoring the success of a new investment. As they say, it’s not what you know, it’s who you know.