Investing in start-ups is a way for athletes to diversify their portfolio of investments. Because their sports careers are unpredictable and short on average, athletes need to have a cautious approach to investing — like any 60-year-old approaching retirement would. Prudence often guides cautious investors towards real estate assets. But athletes can and should allocate a small portion of their portfolio to alternative asset classes, like venture capital. Which, particularly for them, is a comprehensive value proposition whose benefits go beyond immediate monetary rewards: mixing up with and learning from the crème de la crème of business, taking part in developing products and brands they love, and raising their own brand profile beyond the pitch. Let’s take those benefits in turn.
First, venture capital is an asset class that can offer very attractive returns. It is certainly riskier than more traditional asset classes (e.g. real estate, public markets or bonds), but that is often handsomely rewarded. VC top performers generate higher returns that their counterparts in more mainstream asset classes.
Second, venture capital is one of the very rare asset classes allowing high-profile athletes to leverage their private and public networks to de-risk investments and add value to investee start-ups. When an athlete buys a flat, a house or a building her return on investment will primarily depend on the evolution of the underlying real-estate market (provided they purchase and sell in line with market benchmarks, which is not always the case due to intermediation). Ronaldo’s house is not worth more because it is Ronaldo’s house. Same with bonds and public equities.
By contrast, when athletes invest in start-ups, they can use their connexions to open doors (for B2B businesses) or promote the companies they back to their extremely large social media audiences (for B2C businesses). This can help the company grow and create value for them as investors. How about having Tony Parker as an investor — connected to the C-suites of most apparel brands — when you are a young marketplace trying to secure commercial deals with these brands? Or having Andre Schürrle as a proud investor in Sorare — a blockchain-based fantasy football game — keen to spread the word to his 1.9 million followers on Twitter?
True, star athletes can also lend some of their star appeal to other “cool” investment opportunities, like restaurants, bars and clubs. But contrary to start-ups, that is not really scalable.
Third, by investing in start-ups athletes can widen their horizons by meeting with successful entrepreneurs and investors: exceptional people in their own domains who can inspire and help them — by sharing learnings or introducing them to their networks — in their off-the-field careers.
Inherited from its very unique college sports system — Barack Obama would always keep his agenda free to watch the NCAA basketball finals — sports is deeply entrenched in the US culture. Young athletes get scholarships to top colleges and universities, where they receive academic education while mingling with tomorrow’s leaders in other fields. More than just athletes, they are considered over-achievers who can talk peer to peer to uber-talented individuals in other domains, whether that be investing or entrepreneurship.
In Europe athletes are more isolated from the business world, and more often than not stigmatised for their lack of academic education. That creates additional hurdles for them to network outside of sports and to change careers.
By investing in start-ups, athletes have a unique opportunity to grow their network and learn from the best entrepreneurs and investors. A sort of MBA-on-the-job, it is an alternative to the limited number of executive education programmes open to athletes. It provides them with a stronger and more diverse experience, allowing them to consider opportunities beyond the traditional pundit or coaching careers.
Rio Ferdinand is a great example of this. Although he did become an acclaimed pundit on BT Sports, he also befriended Saul Klein, a founding partner at Localglobe, a London-based seed fund, that he consults on various topics including start-up investments.
Athletes can even learn from top entrepreneurs and use their wisdom to enrich their on-court performances, as Andy Murray told Seedrs in 2015, referring to his investments in Tossed, Trillenium and Fuel Ventures Fund: “I’m hoping I can learn something from how they are edging ahead of the competition and take that vision onto the court with me”.
Fourth, by investing in start-ups, athletes can extend to investing what they have done as athletes: make a living out of their passion. They can get involved with what they are passionate about off the pitch, bringing entertainment and balance to their extremely challenging “train-hard-to-win” routine. Whether they are fans of gaming, fashion, media, lifestyle, education, nutrition or environment, investing in start-ups is a way for them to become active in a field they love and to transfer some of their exceptional skills — such as focus and resilience — to the business world. For instance, a few star athletes have launched their eSports team, like Antoine Griezmann with Grizi.
They can even go one step further by promoting societal changes via their investments, helping to advance values they would usually endorse via their charity involvements. Lebron James raised $100m to form SpringHill Co., “a maker and distributor of all kinds of content that will give a voice to creators and consumers who’ve been pandered to, ignored, or underserved”. Serena Williams launched Serena Ventures “to give opportunities to a diverse set of founders, particularly women and people of color”. This is probably even more important in Europe, where the charity system is less developed. Great examples are starting to pop-up: feeling strongly about environmental issues, Mathieu Flamini has invested in various sustainability projects such as GF Biochemicals — aiming to end the world’s dependence on oil — or Unity — an organic skincare brand — launched with Mesut Ozil.
Eventually, by becoming savvy start-up investors, athletes can build their brand, which will help them thrive over the long term. Via their investments, some of them highly visible, athletes can add new facets to their profile, raising their attractiveness and helping to create additional business, investment or endorsement opportunities. Even more so if they focus on impact investing, with purpose marketing becoming a key area of focus for large mainstream brands.
From an average 3.3 years in the NFL to a maximum of 20 years in golf or tennis, athletes have short sports careers. Long-term financial planning, early retirement and career change are three critical challenges for them. Whether they retire rich or not, at 22 or 45, they all need to prepare for a drop in revenues and reinvent themselves, probably feeling disoriented, especially when compared to their sports days when everything was structured and prepared to perform on the pitch.
Venture investing cannot be a strategy to generate steady returns and athletes cannot plan their retirement around successful start-up investments. But venture investing, if addressed strategically and in reasonable proportions, can generate attractive returns and provide many more benefits — including business experience and networking, a passion-centred occupation and personal branding — along the way. Time to get the ball rolling.
Should you want to discuss further about athlete investing, please feel free to reach out at: arthur [at] athletioco [dot] vc
