In just eight years, a small startup formed in a college dorm turned into an Internet powerhouse valued at over $100 billion. Yes, everyone knows the story of Facebook and how a couple college dropouts turned into billionaires seemingly overnight.
Since the Internet boom of the late 90’s and early 2000’s, hundreds of thousands of entrepreneurs have attempted to create “the next big thing” online. While some have succeeded and made millions (even billions), a large majority fails to turn a profit.
What are Tech Startups?
Tech startups usually come in the form of mobile apps. Today, there are over one million apps in the Apple app store. A tech startup’s value is based on its technology, rather than an actual product the company produces. Twitter, for example, has no real product, yet the unique technology of Twitter gives the company value. Because most tech startups have value only in the intellectual property behind the idea, it is imperative that these companies protect their intellectual property rights. Once these rights are lost, tech startups can lose their idea to competitors and bigger firms.
Since tech startups are not producing any tangible products, initial costs are rather low. However, as the company continues to grow, investments are needed to continue expansion. These investments usually come from venture capital firms or angel investors (an individual who provides financial backing). Angel investors come in many forms such as celebrities, politicians, and athletes—who have all put their money towards startups hoping to be the next winners of the Internet Age.
Which Athletes Have Invested in Tech Startups?
When athlete’s careers end some choose to become a media personality, some are hired as assistant coaches, and some decide to exit the limelight all together. A less common route to take is investing in startups.
Steve Nash, current Los Angeles Lakers point guard and two-time NBA MVP, and future Hall of Famer, has put some of his salary towards an investment firm by the name of Consigliere. As a co-founder of the company, Nash and his team specialize in marketing consultancy and investment funding. Nash and Consigliere have an impressive list of clients including Nike, Under Armour, and Vitamin Water. In addition to these large corporations, Consigliere also invests in many tech startups. As their website states, “Great ideas die if they are malnourished.” Nash’s funding helps grow these startups, while also offering consulting and marketing strategies. Consigliere has been in business since 2010 and is still strongly operating today, as Nash’s NBA salary is just a fraction of his annual income.
Another future Hall of Famer, former pitcher Curt Schilling, is the founder of 38 Studios. Schilling, a 3 time World Series champion, started 38 Studios back in 2006, while he was still playing for the Boston Red Sox. The company focuses on entertainment and intellectual property development. In 2012, the company’s video game “Kingdoms of Amalur: Reckoning” sold over a million copies. However, that same year, the Rhode Island governor forced 38 Studios into bankruptcy after the company was unable to get out of debt. After the company shut down, the state of Rhode Island was still liable for $90 million of debt.
Less notable than Nash and Schilling, is former Chicago Bears linebacker, Hunter Hillenmeyer, who is taking a much smaller approach to tech startups. Hillenmeyer went back to school to create the mobile app OverDog, which allows users to play video games against their favorite athletes. Hillenmeyer’s app, which is still in development, lacks funding to become fully functional. OverDog is using Kickstarter as a form of investment, but received just under $40,000 of their $100,000 goal. On March 29, 2013, Kickstarter declared OverDog’s funding unsuccessful.
Even some athletes who had unsuccessful playing careers have decided to start their own tech startup. Few NFL fans have heard of Alex Bernstein, but the 38-year-old was an offensive lineman for four seasons back in the late 90s. After his marginal playing career, Bernstein co-founded North Social, a startup that allows Facebook users to make their own fan pages. North Social creates apps that help grow the popularity of a fan page. Vocus, a publicly listed provider of cloud-based marketing and PR software, bought North Social, who has worked with Coca-Cola and Sony, back in 2011. Vocus paid $7 million for North Social and offered the company $18 million of achievement-based bonuses.
Why Athletes Should Stay Away from Tech Startups
As stated before, a majority of tech startups fail. With computer science and software engineering becoming more and more popular by the day, the number of people looking to start the next Facebook or Google is only increasing. While some of these people will find success in tech startups, many will see their idea come crashing to the ground.
For athletes, a vast majority of them with no background in computer science or programming should not invest in tech startups. While a tech startup may sound enticing to invest in, the reality for athletes is that they know little about the technology and science that goes into each one. Without proper knowledge of the field, athletes could be throwing their money at companies doomed to fail from the beginning, just because of faulty software and programming.
In addition, it is not hard for athletes to find less risky and more stable ways to make a living after their playing careers. Many organizations are open to rehiring former players after they have retired. Also, local broadcasting channels are always looking for new analysts and newscasters who used to be former athletes. While ESPN, FOX, CBS, and other major networks snag the A-list athletes, those who were not all-stars can still find broadcasting jobs. In Detroit alone, those who had average playing careers, like Craig Monroe (Detroit Tigers) and Darvin Ham (Pistons), are employed by the city’s television stations. It is not uncommon, too, for athletes to continue sponsorships long after their playing careers. Larry Bird still does ad campaigns for McDonald’s and Deion Sanders still appears in more television commercials than most current athletes.
Yes, tech startups have the ability to make millions of dollars. With high reward, though, comes high risk and failure is more often than not the outcome of tech startups. Athletes have a small shelf life on the field and one injury can end a career. With the uncertainty of salary next year, athletes should not be putting their income in risky investments. With many safe alternatives, athletes can make comfortable livings long after their playing days without the risk of a failed investment.