Any Given Start-Up
In years past, only a Super Bowl ring could light up the eyes of a burly football player. But now he's just as likely to perk up over a hot new dot-com
On a cool, wet evening in mid-February the Fairmont Hotel in San Jose, Calif., played host to a summit of venture-capital luminaries. Star deal makers from the Bay Area's best firms were there swilling cocktails and schmoozing, as they often do. What made the event remarkable, however, was that Joe Montana and his wife, Jennifer, were also present -- along with NFL stars Keyshawn Johnson, Warren Moon, and Drew Bledsoe; and a bevy of Montana's former teammates, including Bill Romanowski, Brent Jones, and Jerry Rice. "You don't often get that kind of crowd in the same room together," says attendee Mark Griege, a financial adviser whose client list reads like a Pro Bowl roster. "It was like a highly placed corporate event at a Super Bowl."
Surprisingly, the company that drew that eclectic crowd was not a big conglomerate like Nike or Coca-Cola. Rather, it was a start-up named Champion Ventures, a year-old VC firm that aims to create the perfect nexus between sports and business. The fact that Champion is succeeding in making that connection reveals the pervasiveness of the new-economy ethos -- it extends from the boardroom to the locker room, from the computer nerd to the home-run slugger.
The event at the Fairmont was a coming out of sorts for Champion. At a series of meetings the next day, athletes and venture capitalists got together to chart the rookie firm's future. Several well-known VCs presented their investment strategies to three dozen attentive pro athletes, most of them football players. Then, select CEOs introduced themselves and their business models. Finally, a bigwig from Goldman Sachs presented a keynote address. (For his honorarium, he passed around a football, which all the athletes autographed with a felt-tip marker.) "It was a phenomenal meeting," says Romanowski, the Denver Broncos' six-foot-four, 245-pound linebacker. "A lot of times when we go to an event, everyone wants to talk to us. But in this situation I wanted to talk to the people we've invested money in. They are some of the best in the country as far as venture capital goes."
Likewise, the Champion fund's organizers are some of the best in the country as far as football goes. Harris Barton and Ronnie Lott are two beefy veterans of the San Francisco 49ers. Barton has three Super Bowl rings; Lott owns four. As they have designed it, Champion raises money almost exclusively from athletes like the guys who attended the conference -- their former teammates and peers. In its first outing, for example, Champion pooled more than $36 million from about 80 athletes and about $4 million from other individuals. But rather than investing directly in companies itself, Champion gives its money to more experienced VC firms -- making it a so-called fund of funds -- at which point it relinquishes any control over how the money is invested. The professional VCs decide which companies receive money, although Barton and Lott have met with some fund-raising CEOs.
The VCs that Barton and Lott have brought under the Champion umbrella are stellar, and gaining access to them "took a lot of legwork," Barton says. There's so much capital -- and so much capital targeting the tech space right now -- that the top-tier venture firms can pick and choose investors. A lot of people have tried in vain to organize funds of funds in Silicon Valley, including some who could have raised much more than $40 million. For Barton and Lott the key was to package their fund as adding value that transcended mere dollars. For Champion that value was celebrity.
"When a venture capitalist is deciding between this deal or that deal, he may believe that added marketing value comes automatically with having an athlete tacked on," explains Kenneth Shropshire, a Wharton professor who studies the sports industry. "Plus, it's not a bad thing for a venture capitalist to have to go to basketball games as opposed to a conference of CEOs."
Barton and Lott began insinuating themselves into the financial world back when they were still playing for the 49ers in the late 1980s and early 1990s. Barton, a graduate of the University of North Carolina, befriended partners at Sequoia Capital and Technology Crossover Ventures (TCV), and they let him into some of their funds as an individual investor. Sequoia is famous for having backed Apple Computer, Oracle, Cisco Systems, and Yahoo; TCV has funded Viant, c/net, and iVillage.
Lott also has made a name for himself as an avid individual investor by backing two private sports-marketing agencies. After retiring from football, in 1994, Lott focused on branding his name and persona. He maintains a packed schedule of personal appearances and a lucrative roster of endorsement deals from Nike, Coors, and Direct TV. He also provides color commentary for Fox Sports.
In designing Champion Ventures, Barton and Lott have taken advantage of overlapping value propositions. They figure that athletes want a way to take the quick money they're making today and preserve it for the long term to protect their families. "Ex-athletes have seen a lot of guys burned," Barton explains.
VCs, for their part, work with Champion perhaps because, among other reasons, they're looking for intangible rewards like fun and fame. VCs are willing to invest a share of Champion's $40 million if they get to spend the day with Dan Marino or John Elway or Steve Young, who are all investors. "I think it's fun for the VCs," says Katherine Lintz, a St. Louisbased financial planner who handles $300 million in pro athletes' assets. "When they go to a game with their sons or daughters, they can go greet one of the players and have something in common with them." Jay Hoag, a Champion board member and managing general partner at TCV, agrees. "Part of the reason we take their money is that they are who they are," he says.
Champion's athlete-investors and its VC partners share several traits, which may explain the manly camaraderie that has developed between them. The athletes who can actually pony up $250,000 in cash to invest in Champion are typically at or near the end of their playing careers. That makes them about the same age as many hot-shot VCs -- in their thirties or maybe early forties. Plus, both venture capital and professional sports are male-dominated milieus. "I was talking to Joe Montana," says Hoag, "and we agreed that in a sense our worlds had similar characteristics. I think the athletes are part of an overall trend in America of trying to get good investments in the Internet."
Indeed, today's sports-page profilees are more Motley Fool, less Mean Joe Green. Financial planners Lintz and Griege describe their athlete-clients as lovers of laptops, cell phones, dot-com IPOs, and day trading. "I often get calls from clients asking about certain stocks, and you can hear the clinking of weights in the background," Lintz says.
Even more striking -- and amusing -- is that the athletes themselves sound like a pack of yuppies. "When a new cell phone comes out, all of us have got to have it," confesses Broncos cornerback Ray Crockett, a Champion investor.
There are other reasons why the two groups can come together and commit to Champion. For starters, the VCs buy Barton's claim that "our guys can help brand tech firms." The idea, not yet tested, is this: a company backed by a Champion venture-capital partner like the Mayfield Fund or New Enterprise Associates could arrange to get a prominent Champion investor to endorse it in return for equity or maybe even a board seat. "A lot of businesses are real consumer focused, and someone like Joe Montana would be a great spokesman," says Hoag. (Top pro athletes can normally charge six figures or more for appearing in a commercial.) Barton predicts that companies backed by Champion's venture partners could represent some athletes' endorsement "deal flow" for the next "10 or 15 years."
Another possibility: athletes could partner with start-ups and then, through Champion, help those start-ups get funding. For instance, when Champion backers Wayne Gretzky and John Elway teamed up with basketball great Michael Jordan to start MVP.com, Elway called Harris Barton. Barton arranged for Elway to meet with several Bay Area VCs to discuss MVP.com. Benchmark Capital, a Champion-backed venture-capital firm, ultimately financed Elway's start-up.
A third idea -- hold onto your helmets for this one -- is that Champion-backed companies could recruit Champion investors for management-track jobs both during the off-season and after their sports careers end. Though the notion may seem far-fetched, Champion's founders swear that it's feasible. "We're always looking for smart people, and we'd love to leverage the talents of a group of 20- to 25-year-olds, who are by their nature achievement oriented," says Sukhinder Singh, cofounder of Champion-backed Yodlee.com Inc., a hot start-up in Sunnyvale, Calif.
No, Singh is not kidding, and perhaps that should come as no surprise. This is the new economy, after all. If Martha Stewart, Dr. C. Everett Koop, and even Punky Brewster can take companies public, why can't a three-point shooter reposition himself as a dot-com doyen? Hasn't one of the lessons of the past 10 years been that the market can turn anyone into a billionaire? "Michael Dell -- he was at the University of Texas when I was at Baylor," notes the Broncos' Crockett, as if to say, "I could have been that guy."
Barton and Lott have been able to get Champion up and running precisely because they understand Crockett and other athletes like him. "When a guy retires from football due to injury or whatever, he doesn't want to sit and play golf all day," Barton explains. "It's just not very fun." But doing big deals and making big money -- that's as much fun as winning a Super Bowl.
Mike Hofman is a staff writer at Inc.
Company: Champion Ventures
First fund: $40 million
Management fee: 1% per annum
Minimum individual contribution: $250,000
Managers' take: 5% of every dollar earned after each investor has earned back his or her investment plus 6%
Complete list of participating venture-capital firms: Accel Partners; Benchmark Capital; ComVentures; Crosspoint Venture Partners; Greylock; Highland Capital Partners; Mayfield Fund; Mohr, Davidow Ventures; New Enterprise Associates; Redpoint Ventures; Sequoia Capital; and Technology Crossover Ventures
Number of investors: 99
Big-league investors: Baseball players Barry Bonds, Ryne Sandberg, and Eric Karros; hockey icon Wayne Gretzky; quarterbacks Joe Montana, John Elway, Dan Marino, Steve Young, and Drew Bledsoe; sportscaster Bob Costas; golfer Hale Irwin; basketball player Steve Kerr; and executives from Visa and Charles Schwab.
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