Investors Are Now Backing: Sharktank for Athletes

Alternative Investing | Jan 29, 2024

Investing in Emerging Athletic Talent Like Startups

There’s an uncanny new trend on the rise: treating athletes like startups. This innovative concept merges the worlds of sports and entrepreneurship, and it’s capturing the attention of investors worldwide. A recent article on Business Insider titled “Moneyball Plus Shark Tank: Investors Treat Athletes Like Startups” explores how athletes are now receiving financial backing ahead of their projects.

Similarities with Patreon for Creators

The concept of investing in talent ahead of their projects isn’t limited to the world of sports. Patreon, originally a crowdfunding platform that connects creators with their supporters, operates on a similar premise. Creators on Patreon receive financial support from their fans and backers, enabling them to pursue their creative endeavors. This model emphasizes the value of the individual’s potential and allows for the monetization of talent before it fully blossoms.

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What’s In It For Athletes? 

Just like entrepreneurs seeking investors to bring their innovative ideas to life, athletes are now attracting financial support before they’ve fully realized their potential. This unique approach allows investors to get in on the ground floor, potentially reaping significant rewards as these athletes develop their skills and careers.  Young athletes may choose to seek external funding or investment in their athletic journey for several compelling reasons, rather than solely relying on self-funding. Here are some key motivations for young athletes to explore external funding options:

• Pursuing a career in sports can be expensive and a major financial constraint to an athlete reaching their full potential. Costs may include specialized training facility fees, equipment, travel expenses, high quality coaching fees for accelerated development, and competition fees. Many young athletes and their families may not have the financial resources to cover all these expenses on their own.
• Young athletes often need to balance their athletic pursuits with their education. Funding can provide the flexibility to manage both commitments effectively, such as hiring tutors or attending schools with flexible schedules.
• By securing external funding or sponsorship, young athletes can reduce the financial stress and pressure on themselves and their families. This can allow them to focus more on training and competition.

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• Funding from sponsors or investors can also provide athletes with valuable networking opportunities and exposure. Sponsors may have connections within the sports industry that can open doors to additional opportunities.
• External investors or sponsors may be willing to share the financial risks associated with pursuing a career in sports. This can be especially attractive for athletes who face uncertainty in their sports journey.

Is This The Same as an Agent?

Specific roles and responsibilities of agents, managers, investors, or sponsors can vary depending on individual agreements and arrangements.  The chart below is a general overview of the key differences between these approaches. Athletes often combine both agents/managers and external funding/sponsorship to address various aspects of their careers and financial needs.

Aspect	Agent or Manager	External Funding or Sponsorship
Primary Role	Career representation, negotiation, guidance	Financial support
Financial Partnership	Earns commission/fees from athlete’s earnings	Provides financial resources
Career Guidance	Offers strategic advice and career guidance	May offer mentorship and guidance
Legal and Contractual Support	Assists with contracts and legal matters	Focused on financial support
Ownership or Equity	Typically does not involve ownership or equity	May involve equity stake
Focus	Focuses on career management and earnings	Focuses on financial assistance

Potential for Profitability

• If an athlete’s career takes off and they achieve success on the field, in endorsements, or through other avenues like entrepreneurship, early investors could see substantial returns on their investments. This is especially true for athletes who become sports legends or cultural icons.
• For investors looking to diversify their portfolios, investments in athletes can provide an alternative asset class that is not directly tied to traditional financial markets. This diversification may help mitigate overall portfolio risk.
• Athletes with strong personal brands may attract lucrative partnerships and endorsement deals, which can contribute to the profitability of investments tied to their success.

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• Some athletes have careers that span many years, allowing for potential long-term returns on investments. Additionally, athletes who transition into coaching, broadcasting, or other roles after retirement may continue to generate income and returns for investors.

Risks and Challenges

• Athlete investments are inherently risky. Success in sports is unpredictable, and there are no guarantees that an athlete will achieve the expected level of success or maintain it over the long term.  The financial success of these investments is closely tied to the athlete’s performance and off-field activities. If an athlete’s career takes a downturn or is tarnished by controversies, investments may suffer.
• Investments in athletes can be illiquid, with capital tied up for extended periods. It may take years before an athlete’s career reaches its peak or attracts significant endorsements, making it challenging to access investment capital when needed.

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• Treating athletes like startups can raise ethical concerns, as it may commodify individuals and place undue pressure on them to perform. This approach may prioritize financial gains over the well-being of the athlete.  Athletes may face challenges in maintaining their privacy and managing the mental health pressures associated with high expectations and financial obligations.
• he lack of regulatory oversight in the athlete investment space can expose investors to potential scams or fraudulent schemes. Due diligence is critical in this environment.

Closing Thoughts

The outlook for investments in athletes treated like startups is one of potential opportunity, but it comes with significant risks and complexities. The market is expected to continue evolving, with both athletes and investors exploring new avenues. Those interested in this type of investment should approach it cautiously, conduct thorough due diligence, and consider seeking advice from financial professionals to make informed decisions. As with any investment, success will depend on a combination of factors, including the specific athlete’s career trajectory and the ability to navigate the unique challenges of this investment approach.

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