Technology investing is gaining more and more traction amongst professional athletes.
Together with his business partner, five-time National Basketball Association champion Kobe Bryant of the Los Angeles Lakers stood up a $100-million venture capital fund to invest in tech using their own money.
Stephen Curry and Andre Iguodala of the Golden State Warriors partnered with Bloomberg LP to put together the Players Technology Summit.
Retired pro-basketball player Shaquille O’Neal held pre-IPO stock in Google. The list continues to grow.
As more athletes put skin in the tech-investing game, I find myself conflicted about the future of this trend. On one hand, I’m hopeful that tech investments make billionaires out of as many pro athletes as possible. On the other hand, I’m worried they’re all going to lose their shirts in the wake of bad investments and the sector not being able to sustain inflated prices any longer.
When I first started on this piece, I had a measured sense of optimism. Investing always involves some form of risk, especially venture capital, where you are stuck waiting for a liquidity event which could take seven-to-10 years or longer to arrive. This risk is outsized for professional athletes for a number of reasons:
My measured optimism in professional athletes investing in technology comes out of my observation of athletes taking the time to educate themselves about the deals they are getting into. These include Kobe Bryant, who told Bloomberg he often cold-calls industry leaders for advice. This includes meeting up with Apple’s lead designer Jony Ive, and texting venture capitalist Chris Sacca in the middle of the night with questions. Iguodala and now-Dallas Mavericks player Harrison Barnes plugged in with venture capital firm Andreessen Horowitz.
Further, athletes are participating in condensed business school programs at The Wharton School and Harvard University to get a better grip on how to leverage the opportunities presented to them. This all makes me optimistic about professional athletes notching wins with their investments.
What has me nervous is the current venture capital environment. Startup valuations are sky-high and there’s a lot of nervousness that the VC industry could be reaching a peak, leading to a bursting bubble with lots of investors and entrepreneurs losing their shirts. It would be shame see this wave of professional athletes lose their shirts in the fallout.
A further point of concern came out of a conversation with a friend about professional athletes getting into the tech space.
He pointed out that a lot of the deals in which athletes are investing are follow-on deals — later-stage investments in comparison to the initial investment.
I’ve held that this is a good thing due to athletes having guidance from VCs like Ben Horowitz, co-founder and general partner along with Marc Andreessen of the VC firm Andreessen Horowitz. The problem is that there is an unintended consequence here.
There has been a lot of conversation around lack of diversity in the VC industry, and how few startups with minority founders get funding. If these athletes are depending on the advice of the old guard of venture capital, how is that going to shift the exposure they have to a more diverse deal flow?
Hopefully, as these athletes get more experience investing, they are able to open their purview to folks that come from the black community.
Events like Afrotech — the largest black tech conference in Silicon Valley — could close the gap between these two communities. Athletes are making billions of dollars each year. Imagine if that played a part in creating an ecosystem around black founders that is independent of trying to get investment dollars from the old guard of venture capital.