- Ex-banker Mark Patricof is urging professional athletes to bet on private equity rather than flashy tech startups.
- Three years later, his company has already scored a big hit with an $800 million release for Cholula Hot Sauce.
- Mark Patricof told Insider how he got an A-list which is a fund manager’s dream.
One of Mark Patricof’s favorite parts of introducing professional athletes to the world of private equity is watching the titans of finance become amazed when they meet stars.
“It’s fun to see partners from KKR and Silver Lake and Carlyle interacting with Todd Gurley,” Patricof said, referring to the star running back. “You watch for the first 15 minutes how nervous and shy these PE guys are, and it takes a while to get used to the conversations.”
“They’re not nervous talking to Elon Musk. But put them in a room with Blake Griffin and they turn to mush,” Patricof continued, referring to the Brooklyn Nets player.
The former investment banker, known for advising Gawker on its $135 million sale to Univision in 2016, founded Patricof Co. in 2018. The firm advises athletes on how to co-invest in deals of private equity on a limited partner basis. The client list of 85 top athletes includes tennis legend Venus Williams and Arizona Cardinals defensive end JJ Watt. Athletes invest an average of $500,000 to $750,000 per year.
Patricof Co. has access to 20 private equity growth funds, including some managed by L Catterton and Providence Equity Partners, and can get allocation when the funds seek outside capital. This allocation is available to athletes, who can invest on a sponsor basis without having to meet a minimum (usually $2-5 million).
Patricof personally invests – in addition to the company, which has capital backing from JPMorgan – in every investment, including Bombas and TheRealReal. Patricof Co. receives 22% of the interests carried by the athletes, or a share of the profits made, he told Insider. Thirteen investments have been made to date.
With too many dollars for too few deals, the athlete cachet gives the company a competitive edge over other investors, Patricof said.
“There’s a kind of magical allure of association with athletes. Nobody’s going to admit it, but it’s just plain true,” he said.
But he also insists they treat athletes like investors first, celebrities second.
“My biggest fear in life is if someone writes that we’re an influencer fund or a celebrity platform,” Patricof said. “Athletes are just differentiated professional investors, and because we’re able to bring them together and create this team approach, we come up with off-market and oversubscribed trades.”
The virtues of the sports shareholder
Patricof Co. is a natural high point for 56-year-old Patricof’s interests. He grew up playing football and was a huge sports fan. “I like anything that has a ball or a puck,” he said.
After graduating from Emory University, Patricof worked at CAA, the famed artist and athlete agency, for five years before moving into the media business. In 2007, he ventured into finance by launching his own entertainment and media investment bank, Mesa Securities. Patricof’s father, Alan Patricof, is a successful venture capitalist and co-founder of private equity firm Apax Partners.
In 2015, Patricof sold Mesa Securities to global investment giant Houlihan Lokey. He spent three years at Houlihan as managing director before leaving to welcome a new
series for Verizon with then-New England Patriots tight end Rob Gronkowski.
During each episode of “Most Valued Partner,” the entrepreneurs would pitch to a panel of four athletes who would endorse their products if they liked the pitch. Over the course of the show’s 36 episodes, Patricof realized that athletes could provide more value as investors than as endorsers.
“My thesis was that if you pay, say, Dwyane Wade $50,000 for three social media posts, he will do what he is paid to do. But emotionally, if he were to write a check for $100,000 to the business, even though you might not be able to quantify what you are going to get from him, he would lean in so much harder because he would understand that the outcome of this case would actually benefit him in many ways,” said said Patrick.
After the show ended, he bought a pitch deck evangelizing the benefits of a shareholder athlete. In 2018, he launched Patricof Co. with one of his Mesa co-founders, Daniel Magliocco, and with JPMorgan Asset Management’s private equity group as a backer. He tapped Matt Siegel, a former senior executive at Jay-Z’s Roc Nation entertainment company, to handle athlete relations.
Patricof relied on the friendships he made with athletes on the show, as well as team owners he met during his time in finance, to recruit athletes. The first client to sign was Cliff Avril, a defensive end for the Seattle Seahawks at the time. NBA superstars Dwyane Wade and Carmelo Anthony also arrived during the company’s first year.
Safer bets than “roulette spins”
One of the biggest hurdles for Patricof Co. is explaining the virtues of investing in more mature but sometimes less sexy companies like AEG Vision, an owner-operator of eye care and optometry practices, rather than bet on young technology startups.
“The idea here is to get athletes to understand what later-stage investing might look like in terms of building a portfolio, getting earnings, recycling earnings, and building that way rather than taking those roulette shots with startups,” Patricof mentioned. “You can take eight to ten years to get out of a seed investment. The beauty of the private equity world is that you cut it at least in half.”
He said that while athletes are now in the headlines for venture capital and tech investment, that’s not necessarily the route to riches. For example, former NBA star Junior Bridgeman made more money with his fast food empire than he ever did playing professional basketball. Michael Jordan, the only former professional athlete to become a billionaire, has most of his fortune locked away in his stake in the Charlotte Hornets.
“Athletes who were making money in the 70s and 80s weren’t investing in venture capital. They were investing in restaurant franchises or real estate, real businesses,” Patricof said.
“We treat them like professional investors, not like celebrities”
Athletes can choose whether or not to invest in each transaction. “It’s not a fund,” Patricof said. An athlete turned down hot sauce company Cholula, which gave Patricof Co. its biggest release yet, because he preferred Tabasco sauce.
Although Patricof espoused the virtue of the shareholder athlete, he made no promises to portfolio companies regarding athlete involvement.
“We treat them like individuals, professional investors, not like celebrities,” he said. “There is no guaranteed marketing relationship.”
CJ McCollum, a player for the Portland Trail Blazers, told Insider that he appreciates there being no commitment to approving investments because he prefers to “go silent” when it comes to investing.
“Historically, most businesses want you to vouch for them. They want you to put your name and your face alongside their business,” he said. “I think they’ve done a great job of keeping some athletes’ personal affairs private, which is important, and continuing to help people grow their business in their investment portfolio behind the scenes.”
That said, some athlete clients have gone the extra mile for their portfolio companies, and it has paid off. On last year’s Cinco de Mayo, former Miami Heat stars Dwyane Wade and Victor Oladipo hosted Instagram Live cooking classes to raise money for struggling restaurants and awareness in Cholula. In November, food giant McCormick bought Cholula for $800 million in cash. The return was just over three times the investment, Patricof said.
“We will never run out of athletes”
The pandemic has put some investments on hold, but Patricof Co. is running full steam ahead. She recently launched a real estate vertical that pays quarterly dividends. The company also appeals to clients who are not athletes but wealthy individuals through its “PCO Club” – whose members pay an annual membership fee for the same capital investment initiation service. -investment. So far, 30 clients have signed up, ranging from heart surgeons to executives of publicly traded companies to family offices. Further afield is venture capital and building a pool to support athlete capital so the company can secure larger allocations.
“At the end of the day, if you’re KKR and you’re asked to do a deal, you don’t care if Venus and JJ write a $100,000 check or a branded outgoing check. You just want them in the deal, Patrick said. “So we have this power to say, ‘If you want it, we want a bigger allocation.'”
It’s difficult to grow athlete capital while keeping the roster selective, he said, but the pool of potential clients is growing every year.
“The beauty of the athlete model is that there may not be another Pat Mahomes every year, but there are 32 NFL first-round picks and 30 NBA first-round picks. will have new stars in every league every calendar year,” he said. “We will never run out of athletes.”