Mark Patricof has quite a story.
Athlete investment platform founder Patricof Co first got his idea for the investment vehicle while sitting on the set of Verizon’s Go90 streaming show “MVP” – think âShark Tankâ meets sports – alongside tight end NFL co-star Rob Gronkowski.
But before we dive into how âMVPâ spawned the idea of ââa full-service investment platform for athletes, let’s talk about the history.
Patricof started his career at the famous representative agency CAA, then moved to the Internet media industry before founding a media, entertainment and investment bank, Mesa Securities, in 2007.
Mesa, which would represent clients ranging from Viacom to Discovery, was acquired by prominent investment bank Houlihan Lokey in 2015 to develop its Telecommunications, Media & Technology (âTMTâ) group.
In 2018, Patricof launched Patricof Co.
The genesis of the platform
âMVPâ was based on entrepreneurs pitching athletes for their endorsement of a product, not for their direct capital. Although the road to approval was proven, Patricof believed that direct investment was an underutilized tool.
Patricof also noticed how engaged the athletes on the show were. Behind the scenes there was a constant conversation about investment theses, deal structuring and a whole host of topics that went beyond the usual scope of a sponsorship deal.
This is where Patricof saw an opportunity.
Simply put, if you pay an athlete for a few social media posts, they’ll fulfill their obligation and likely be done with the business. If you were to take that same check and get them to invest in the business, then the direct alignment with the incentives would get them to commit to getting the best possible outcome for the business.
The business model
To better understand how Patricof Co works, let’s explain what it is not.
Patricof Co is not an athlete influence fund. Athletes who register on the platform are fundamentally seen as investors and not influencers.
- Kevin Durant’s investment in Coinbase
- Klay Thompson’s investment in fantasy sports startup Sleeper
- Travis Kelce’s investment in home rowing company Hydrow
All of these investments represent investments at the earliest stage of the capital allocation process. Venture capital deals tend to be longer term investments with lower odds of success, but when they do they hit big. While there are certainly benefits to investing in venture capital type transactions, Patricof seeks to create value for clients further down the investment timeline.
Why not venture out? The idea for Patricof is that when athletes participate in investment trades at a later stage, they are able to get accelerated earnings against the business, collect the proceeds of the deal, and then flush. and repeat. The key here is the time to make money. For venture capital transactions, this delay can be up to a decade. For private equity (“PE”) – half of this time.
Athletes are used to the business model because it best reflects their own careers. Athletes invest physical and time capital and take huge risks in the hope of realizing a disproportionate return on investment in the long run, which makes him professional. Patricof seeks to help them reframe this mindset when it comes to investing. According to Patricof, when the company abandoned one of its initial investments, Cholula Hot Sauce, it was the first time that some of its sports investors saw a return on their investment.
Looking at the data, PE not only provides faster ROIs, but can also lead to better overall results.
By search performed by Cambridge Associates, the annual returns of PEs over the 20-year period ended June 30, 2020 were 10.48%. Over the same time period, the S&P 500 generated annual returns of 5.91%, while the US Cambridge Venture Capital Index returned 5.06%.
Private equity works and Patricof Co brings these returns to the athletes.
A full-service platform
The first step is to convince athletes that investing in PE deals ranging from trucking companies to eye care and optometry practices will likely yield more favorable results than trying to pick the next big tech company to. his beginnings.
While the main selling point is to participate in high-value PE deals, Patricof Co’s plan goes far beyond that.
As it stands, the company provides investment vehicles through PE and real estate. To date, the company has made 16 investments with two exits. Investments range from low-profile companies like the Car Wash Owners Network to Virgin Voyages and SpaceX.
In addition to the PE deals, the company also made a real estate investment in luxury condos in Jupiter, Florida. Real estate investing is the next immediate frontier for the platform. Similar to PE, real estate investing provides stable cash flow as opposed to lower probability flat rate returns.
The real estate fund is expected to be co-branded with the PE fund, giving athletes the opportunity to opt for all investments that match their risk and capital profiles.
As the list of 147 athletes grows and more investments are made, Patricof sees the opportunity to eventually expand the product offering to include liquidity products such as investments in hedge funds.
With a background in investment banking, Patricof also understands the world of customer service. While transaction execution is the big thing in banking, a disproportionate amount of time is spent on customer service activities (trust me).
Patricof took this same client-centric approach and applied it to his athletes.
Because the platform is actively seeking athletes who want to become better investors, education is at the heart of the platform. When athletes are on the road, they receive personalized booklets detailing company executives, potential encounters, and top investors they can strategically engage with on the go.
The platform also offers athletes access to exclusive dinners with top investors and executives, as well as time with four Harvard career coaches and a stream of educational material on various asset classes. An experience that almost makes the Patricof experience look like an MBA program.
Although Patricof Co provides a wide range of services, they do not charge anything on the service side. The fund currently derives its fees only from deferred interest – a predetermined portion of the earnings received by the PE fund – which for Patricof and Co. is 22%.
The fund recently added a new fee structure whereby athletes can commit to investing $ 1 million in any given year for a reduced carryover of 17.5%. Patricof also invests personally in each investment.
Put it all together
When asked how Patricof Co is different from what we see with investor duos like LeBron James and Maverick Carter or Kevin Durant and Rich Kleinman, Patricof’s response was simple: Patricof Co is supposed to be a bitch. – agnostic shape for athletes.
LeBron and KD have enjoyed immense financial success through personalization and investment strategies developed by their internal teams, but most other athletes have not.
If Patricof is successful in building the platform, it should become a plug-and-play strategy for any athlete. Whether you are Patrick Mahomes or the Second Channel bettor, building an investment portfolio and increasing investment sense can become automated.
With double the amount of capital deployed – $ 75 million – in 2021 compared to 2020, the fund is growing aggressively. We may soon see a new class of sports investors come out of the corporate game and enter the worlds of KKR and Blackstone.
This is only the start, but I can’t wait for more athletes to become investors.