Elite athletes are met with the challenge of short careers and long retirements, which leaves plenty of room for misused finances. Within the four major American sports leagues (NBA, MLB, NFL, and NHL), the average career length is 3.5 years, but this number is difficult to estimate since it varies significantly on the sport. According to Craig Brown, an NKSFB Sports Business Division partner, 78% of professional athletes will go broke after just 3 years of retirement.
3 Major Reasons Athletes Go Broke:
- Short Earning Window. Most people will work somewhere between 30 and 50 years, while athletes are earning large paychecks in a relatively short period of time. After retirement comes the job of managing their savings to last a lifetime.
- Lack of Financial Knowledge. Professional athletes spend their 20s focused on the game, so there’s minimal time for building financial literacy. Therefore, it’s unsurprising that many struggle to make wise monetary decisions.
- Overspending. Spending relative to the big paycheck is often the main culprit for athletes that eventually go broke. Whether it’s luxury purchases or supporting friends and family, there’s a limit to how far any budget can stretch.
Historically, athletes that have successfully built a path to financial security have done so through pure endorsements or building real estate portfolios. Now we are seeing a shift towards tech that can be linked to the fact that many of today’s athletes have grown up as digital natives. Not to mention the growing role of social media on an athlete's brand means they are interconnected not only to fans but to tech entrepreneurs and investors.
According to Sequel, a community of the world's best athletes investing in the world's best startups, the path into the venture is quite promising. Within the Premier League, 40% of players are bankrupt after just five years of retirement. However, if an average Premier League player invests 10% of their salary over 5 years, here’s what they would have after 10 years (PitchBook data, assuming £1.5m of invested capital):
Stock Market: £4.7m
Real Estate: £3.8m
Average Venture Fund: £6.8m
Top Performing Venture Fund: £45m
Besides the growing concerns for athletes to maintain their wealth, making investments also provides an opportunity to build an identity outside of sports. Supporting companies that align with their interests and passions can bring a renewed sense of purpose post-retirement. They are making a change by investing in companies looking to make the world a better place, not just those pushing the latest tech craze.
Why are VC Funds & Startups teaming up with Athletes?
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Personal Brand. It’s not uncommon for athletes to become the face of a company they invest in. For customers, this often acts as a stamp of approval to try the product or service themselves when they see someone they trust backing the company. Regardless if an athlete chooses to have a forward-facing role, the investment itself becomes a part of their personal brand.
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Audience. Thanks to the power of social media, professional athletes have access to millions of people worldwide. With a few clicks, they can share their thoughts and ideas with their followers. For VC funds, this is quite appealing as they can attract top tech companies and investors. For portfolio companies, this means value add as their product or service can be broadcasted directly to potential customers and early adopters.
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Expertise. Especially for funds & startups investing in areas of fitness, health, and media, having an athlete on board elevates the fund's intellectual value. The perspective they can bring to the table not only supports fruitful investments but is also a bonus for portfolio companies looking for advice on their product or service.
When asked about the value add he can provide to portfolio companies, Mario Götze described it in the following way:
"Reach of course brings a benefit for the companies, whether it’s about consumer products or software. While the trust that comes with reach can be a door opener to start the conversation, there's more than athletes and founders have in common - for example, learnings from aspects such as team culture and a resilient mindset. In the end, it’s that besides funding that makes an investor valuable.
In terms of value add, I try to support in the best way possible. Due to my main profession being an athlete, the time I am able to invest in my investment portfolio is limited. I still keep the founders close and tell them to always get in touch if they need anything. Often times I can connect them to people in my network to support them on various challenges."
Players & Top Investments
- Mario Götze
- Founded Companion-M, a media and venture company to support early-stage founders building in areas such as tech, SaaS, climate tech, health tech and web3. He has supported 40+ startups and multiple VC funds.
- Lebron James
- Invested in Blaze Pizza and owns 19 franchises, his original $1 million investment has now grown to $25 million. James also held a stake in Beats Electronics before Apple ultimately bought the company for $3 billion.
- Shaquille O’Neal
- An early investor in Apple and Google’s Series A in 1999 when it was at a $100 million valuation. O’Neal bought a stake in Ring video doorbell, later bought by Amazon for $1 billion. He also invested in the ride-sharing app Lyft in 2013, which went public in 2019 with a $22 billion valuation.
- Roger Federer
- Injected $54 million into Swiss running shoe and apparel brand On in 2019 and participated in product development of THE ROGER collection. The company went public in 2021 at a valuation of $6.5 billion. Federer is believed to have a 3% stake in On, valued at around $180 million.
- On has since added tennis pros Iga Świątek and Ben Shelton to the team as of last week.
- Raheem Sterling
- Participated in the pre-seed extension round as an angel investor for Oja, an online digital grocer specializing in African and Caribbean goods. Sterling will also serve as the platform's first brand ambassador.
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