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How To Invest In Startups: A Lesson From Professional Athletes

July 28, 2016

Read Time: 5 minutes

Successful entrepreneurs know that a solid strategy is the foundation for success. When putting together our last piece on what a successful invesment strategy may look like, I also saw the ugly side of investing. Reading through an abundance of horror stories, I started to notice something. Athletes seem to have an amazing penchant for bad investments.

Check out our list of some of the best and worst athlete investments, and make sure to check out our tips for how to invest in startups.

 

Champion Ventures

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Harris Barton/Ronnie Lott - (Super Bowl Champs)

Outcome: -$69,000,000

This two man team started Champion Ventures, raising $40 million from 99 pro athletes. When Joe Montana joined the group in 2003, the name changed to HRJ Capital. At one point, the firm handled 2.4 billion in investments. What ended up sinking them was a rather unusual investment strategy. The group leveraged their connections to gain entry into a very unique group of funds, and had their investment decisions based on what top 10 VCs were putting money into. They publicly stated that they did not plan on reviewing business plans, or directly investing into hot startups. That strategy caught up with them in 2008, and the company went bankrupt after having $69 million in assets seized from the bank. They also faced a lawsuit in 2013, which saw an out of court settlement.

 


38 Studios

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Curt Schilling - (World Series Champion)

Outcome: -$50,000,000 

Curt Schilling amassed $90 million during his baseball career, excluding endorsements. Being a diehard gamer, Schilling founded a gaming company with $50 million of his own money. Under the creative leadership of Todd McFarlane and R.A. Salvatore, 38 Studios set out to build a MMO that could compete with the World of Warcraft. After successfully launching Kingdoms of Amalur: Reckoning, which sold over 1 million copies, 38 Studios was forced into bankruptcy by the state of Rhode Island after defaulting on their loan payments. The whirlwind of destruction was best captured in a personal interview with Boston Magazine, which summed up the company's failure on a complete lack of business 101.

 


 Walker Ventures

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(photo by Jesse D Garrabrant/NBA/Getty Images)

Antoine Walker - (NBA Champion)

Outcome: -$20,000,000

After finishing his NBA career, Walker became a household name for all of the wrong reasons. Filing for bankruptcy in 2008, Walker later went on to tell the story of how he lost the 108 million dollars he earned over his NBA career. Aside from his lavish lifestyle, gambling problem, and friendly donations to friends, Walker puts most of his financial failure on his real estate venture. When the credit crunch of 2008 hit, Walkers’ company had a large amount of undeveloped land, and the bank soon came knocking. It wouldn’t have been terrible if Walker did not put up his own portfolio as collateral. At the end of it all, Walker had to pony up $20 million to the banks.

 


Electronic Bingo

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Terrell Owens - Super Bowl Champion

Outcome: -$2,000,000

 Terrell Owens, one of the more decorated receivers of all time, is probably best known for what he’s done off the field. From the “That’s My Quarterback” meltdown, to his reality TV appearances, T.O. has seen his fair share of cringe worthy moments. One of his lesser known blunders was losing $2 million dollars investing in an Alabama electronic bingo operation. Along with a slew of other bad investments, it seems like the $80 million he made over the course of his career may be close to running out.

 


The Players Tribune 

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(photo by The Players Tribune)

Derek Jeter - World Series Champion

Outcome: 1 Acquisition, $9.5 Million in funding

As his baseball career came to a close, Derek Jeter focused his energy on building his own empire. From 2006-2008 Jeter invested a little over $9 Million into WePlay, which was acquired for an undisclosed amount in 2013. 2 years later, Jeter invested over $75 million in the Blue Jean video conferencing network. The company was valued at $100 million in 2013, and now hosts one billion minutes of video conferencing a year. Jeter also started The Players Tribune, which combines traditional digital publishing with a team of decorated retired professional athletes. Even with a crowded market of online publishers, The Players Tribune has raised $15 million in Series B funding, and provides a unique point of view that no other publication has been able to deliver.

 


Twice Fashion Brand

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(photo by Twice)

Andre Iguodala - NBA Champion

Outcome: Acquired by Ebay for undisclosed amount

Signing with the Warriors in 2013, winning a NBA championship in 2014, and seeing your company get acquired by eBay months later sounds like a good run. But Andre Iguodala can tell you that his success doesn’t come from dumb luck. He had joined online retail company Twice just months before its acquisition. As a Menswear Style Director, Iguodala added an entirely new menswear collection to the store. He attributes his success to the team’s ownership group, led by seasoned venture capitalists Joe Lacob and Peter Gruber, and the wisdom bestowed to him by Warren Buffett. When talking about his next investment he said, “knowing what you’re getting into, having good intentions, and not being emotional in your investment will make life much smoother”.

 


UNINTERRUPTED

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(photo by Uninterrupted)

Lebron James - NBA Champion

Outcome: $30 million from Beats by Dre, $15.8 million in funding

James befriended investment guru Warren Buffett in 2007. Soon after, James formed LRMR Marketing using a smart investment strategy. One investment that helped catapult his first marketing company was an estimated $30 million windfall from the Beats By Dre purchase by Apple. In December 2015, James received a $15.8 million dollar investment from Warner Brothers for his new media company UNINTERRUPTED.

 


Seedrs

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Andy Murray - Wimbledon Champion

Outcome: Unknown


Currently touting the 2nd spot in all of tennis, Andy Murray recently joined the board of UK equity crowdfunding platform Seedrs. Seedrs has not only reported a 15% month over month growth, but equity crowdfunding in the UK had seen it’s deal numbers rise by 45% between 2014 and 2015. Don’t think of Murray as a pretty face on the board of directors either. Murray has actively invested in companies on the platform, with 3 of his publicized investments already surpassing their funding goals and going into a second round of funding. While we wait to see if Murray will actually see success in these investments, it’s good to see that professional athletes are endorsing the growing equity crowdfunding market.

 


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