The Benefits of Sports Figures Coming into Silicon Valley
Over the past few years, an increasing number of athletes and team owners have begun to invest time and money into Silicon Valley. Athletes have stopped spending money on status symbols like cars and houses, and begun parking their money in the hottest tech startups. While the price tags on both of these expenditures are high, the possible benefit from tech investing far outweighs even the flashiest of jewelry. This has both drawn stars like Andre Iguodala and Steph Curry to host a tech conference, as well as inspired legends Joe Montana and David Ortiz to start their own venture funds. However, these athletes are determined not to simply be sources of funding for growing companies, but valuable partners for product growth and marketing that have been underutilized. While some successes can be pointed to in the space, like Michael Phelp’s deal with Sol Republic following the 2012 Olympic Games, I believe there are unrealized opportunities in this growing relationship between sports and venture capital.
The Players
Before diving into the benefits of the sport industry’s newfound interest in tech, I want to describe the current landscape. Players range from individual athletes angel investing in companies, to raising LP money to start a firm, to even founding their own companies.
The Durant Company: The Durant Company: Kevin Durant and Rich Klieman started The Durant Company in order to better manage his investment portfolio. He has invested in both the food delivery app Postmates as well as millennial-focused investing platform Acorns. Durant has been one of the most active endorsers of athletes getting into technology, even taking stage at this year’s TechCrunch Disrupt in San Francisco.
Andre Iguodala and his investing partner Rudy Cline-Thomas have “led the league” when it comes to becoming a significant part of Silicon Valley. Iggy has not only invested in companies such as Maven, Walker & Company, Stance, and TeeSpring, but he has also taken it upon himself to educate others around him. Earlier this year Fast Company wrote an article describing Andre’s handpicked dinner that brought together leaders in finance and tech, as well as the entirety of the Golden State Warriors.
HGCC: Ever since 2007, Steve Young has been a partner at private equity firm HGCC. HGCC has had over $4.3B in capital commitments since its founding, and has made over 75 investments. This is one of the largest and most established firms in the valley that has an athlete in the partnership.
Next Play Capital: NPC is a fund of funds launched in 2015 by Ryan Nece (former Superbowl Champion as well as Ronnie Lott’s son) and Eric Valle. The firm’s goal is to give athletes and teams access to the top firms and companies in Silicon Valley. Not only does Next Play Capital try to provide returns for these athletes, but also looks to educate players by providing unique learning experience in the valley. Trips include meetings with top companies, as well as educational sessions on the newest technologies from top partners and experts in the specific field.
Liquid 2 Ventures: L2 is a $40M fund founded in 2015 by Hall of Fame QB Joe Montana, Harvard MBA and former YC Founder Michael Ma, and Ph. D Physicist and also former YC founder Mike Miller. The firm invests in almost exclusively seed deals, and works closely with companies that come out of Y Combinator. Investments this year include (among many other) blood testing startup Athelas, learn to code platform Py, and Justin Kan’s latest Atrium LTS.
Bow Capital: Owner of the Sacramento Kings Vivek Randive is the managing partner at Bow Capital, a $300M fund founded in 2016 with close ties to the University of California system.
Bryant Stibel: One of the most public sports figures to jump into venture is Kobe Bryant, who, with his business partner Jeff Stibel, launched a $100M fund in 2013. To date they have 15 announced investments including The Players Tribune and LegalZoom.
Dugout Ventures: Dugout Ventures is structured as a part venture capital firm and part private equity firm that focuses on sports industry specific investments that the LP base of athletes can use their own experiences on and help grow. The group of involved athletes include Nolan Ryan, David Ortiz, and Barry Larkin.
Causeway Media Partners: Causeway is a sports media and entertainment focused venture fund that has raised $332.8M across two funds. Managing partner Wyc Grousbeck is part of the ownership group that purchased the Boston Celtics in 2003.
Melo7 Ventures: Carmelo Anthony and Stuart Goldfarb teamed up in 2013 to form Melo7 Ventures, a venture firm focused on early stage digital and media companies. Some notable investments to date are ticket platform SeatGeek and sports gambling site DraftKings.
The Win Column
Even though tech investing by athletes is relatively new there have been some notable wins. These are examples of individuals using their brand and relying on their own experiences as professional athletes to find unmet needs and opportunities in the market. As more athletes begin to dabble in investing, both during their career and in retirement, I believe there will be more and more success stories like these mentioned below.
Lebron James: When Beats by Dre was just starting up they inked a deal with The King to help promote their product. Lebron was featured in the now famous commercials, and in return received equity in the company. Fast forward to 2014 when Apple acquired the headphone makers for a reported $3Bn. While the terms were never officially released, it was said that LBJ raked in around $30M from the deal. While not every product can land LBJ, or a $3Bn offer from Apple, this is a clear example of how brands can utilize the marketing power of athletes.
Derek Jeter: Shortly after The Captain retired from the Yankees, he co-founded The Players Tribune with Jaymee Messler. This company’s mission focused on allowing athletes to tell their story outside of the pressures of traditional media. Since its founding The Players Tribune has racked up $58M in venture funding from top investors like NEA and GV, as well as brought on 1500 athlete contributors to the site. This example shows that athletes are not just a source of capital for new companies, but can be the source of inspiration as well. As more and more athletes familiarize themselves with entrepreneurship and technology, their day to day perception of the world will change. The pain points in their lives that are invisible to the 99% will no longer be simply problems, but solvable challenges that the athletic community can change.
Steph Curry: While not as big as the previous two wins, Curry has dipped into the entrepreneurial spirit of Silicon Valley when he co-founded Slyce, a marketing automation platform for brand sponsorship and partnerships, with his former Davidson teammate Bryant Barr. The company has raised just over $1.5M and is working with brands such as Muscle Milk, Krave Jerky, and Under Armour.
What’s On Deck?
So now that the field is full of athletes waiting to make their mark in Silicon Valley, what comes next? The first step is better brand endorsement by athletes. Back in the day it was Jordan advertising his own shoe, or Shaq selling his infamous Shaq Attack from McDonalds, but the products of today require much more finesse when it comes to marketing. Take the Beats commercials for instance. Athletes like Lebron, Serena Williams, Tom Brady, and Cam Newton not only appeared in commercials, but wore the headphones before and after every game. In every nationally televised game an athlete could be scene with colorful Beats headphones. This took the headphones beyond simply taking up ad space on television to a cultural movement. Eventually Beats were the must have accessory for kids and young adults. The price tag didn’t matter. The large over the eye appearance that flew in the face of sleek white Apple headphones didn’t matter. What mattered was that Lil Wayne had Beats on in his last music video and whenever you were wearing them your life felt like a music video. As more consumer brands embrace athletes for their marketing power there will be an increase in this almost “organic” marketing scheme. Brands will skip the commercials and billboards and spend time figuring out way to place their products at every major sporting event and music performance.
The next step is for athletes to interact with the product and provide everyday users unique experiences. Removing athletes from idolization and seeing them go through life normally gives brands an approachable feel. After seeing Shaq driving around undercover in Lyft, everyday riders will pause ever so slightly the next time they decide between Uber and Lyft, just in the hope that it will happen to them. While the chances of it happening to a user areclose to none, the connection with the brand and hope for the experience is already a success for the marketing team.
Finally, where I believe the most value will be created as the tech and sports world continue to merge is in new opportunity recognition by the athletes themselves. We got a taste of what this could be with Jeter and The Players Tribune, however, I foresee much bigger companies and opportunities to come. Professional athletes see the part of life that 99% of the population will never see. Not only does this make them extremely blessed, but also makes them the only portion of the population than can identify and fix these niche problems. Some people may say that building a company based on the problems of the 1% is ridiculous, but there are already huge companies capitalizing on it right now. Take JetSmarter for example. This startup provides a members-only marketplace for private flights. To date it has raised over $130M and even received investment from Jay-Z. Outside of the opportunity recognition, athletes tend to have the built in network that many startup founders strive to build their entire lives. Athletes brush shoulders with billionaire owners, have dinners with movie stars, and attend the biggest concerts backstage. This network of powerful individuals lowers the barriers to entry for any company they decide to start. I’m not saying that the startup world won’t continue to be dominated by scrappy college kids and young adults trying to make it big, but what I am saying is to not sleep on this nascent market. Money will be made by the individuals who identify these niche problems and completely monopolize the market.
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S/o to everyone who inspired my interest in the space as well as helped clean up my awful grammar!
