Recent years have demonstrated a remarkable rise in sports professionals investing in private ventures. As the influence of said professionals extends further and further beyond the immediate environment of their sport, the opportunities for private investments and the benefits that such investments offer their prospective business partners, have seen a similar expansion. As sports professionals increasingly find themselves as high net worth individuals, particularly seeing high financial rewards both on and off field over relatively short careers, an increased consideration for investment is a natural progression.
There are a number of models of equity investment that potentially lend themselves well to sports professionals, although the specifics of both the investor and the company will play a role in which route should be taken. While athlete investment is often more bespoke than traditional cash investment, there are some trends which highlight the most common investment routes taken: Some opt for a hybrid of financial investment and endorsement, some prefer to invest through sweat equity alone, perhaps providing endorsement or the granting of rights, in exchange for equity rather than a cash injection. A more straightforward model is the pure financial investment, typically resulting in a more passive participation in the company.
It should go without saying that regardless of the chosen model, all investments should be approached with a level of caution and you should make sure that you are aware of all the risks that are present. It is tempting to be drawn to the high-profile success stories, Kobe Bryant, for example, reportedly turned his six million dollar investment in sports drink BodyArmor in 2014 into something closer to 200 million dollars, following Coca-Cola’s purchase of a minority stake in the company in 2018. For every success story, however, you will find many more examples of sports professionals’ private business investments that turned sour. Investing in early stage companies is inherently high risk. In fact, a 2018 report into angel investment in the UK by the British Business Bank suggests, that nearly 50% of all early stage investments are written off.
There is certainly the potential for significant returns, but due diligence is essential and extra care should be taken when deciding whether an investment is right for you. It can be extraordinarily tempting to invest in your best friend’s latest venture. You may even feel a certain level of obligation. The bottom line, however, is that without proper risk assessment these investments can very easily go south and that would be of no benefit to either your finances or your friendship.
Having a post-retirement plan as a sports professional, is absolutely a smart decision, but your focus should be clear and all risks should be calculated. We are able to help you avoid the financial mismanagement to which previous generations of professionals in the sports industry may have been more regularly subjected. Thankfully, professional advice is available to you and so avoiding the pitfalls and seeing your investments turn a profit is more achievable for sports professionals than ever. If you are considering a private investment that has been offered to you then please make sure you discuss it with us first. We are always willing to help and advise.
Before making any decision, it is important to understand that the value of your investments can go down as well as up, so you could get back less than you invested.