Investor and former NFL player Kerry Carter joins the pod to talk about why his athletes-first investment philosophy is key to making money in sports tech.

Listen to the full episode here

Despite some of the biggest revenue organisations in the world being sports teams or other sporting organisations, venture capital arms in that sector are few and far between. That may be changing now, according to Kerry Carter, a sports tech investor, executive and former professional football player.

With much of sports tech being increasingly technology and digital-focused, companies can get off the ground much faster than they have been in the past and can get to seed or series A rounds quicker, meaning investors could see results – or failures – earlier than in the past.

“If it’s able to show a path to profitability at an earlier point, I think that gives a lot of folks on the CVC side, the venture side, specifically on sports teams, the ability to do a little bit more,” says Carter on the CVC Unplugged podcast.

While we weren’t able to get too far into the specifics of the plans that Carter, chief operating officer of sports coaching company Atavus, has to dive deeper into the venture space, the cornerstone of his philosophy is a simple one: put the athlete at the centre of your thesis and the dollars will follow.

Athletes first

“I’ve been an athlete my whole life – so how do you put the athlete at the centre and think about all the different ways that you can support the athlete, develop the athlete? And not just on the field,” says Carter.

But what does that mean in practice? It’s not just about advances in equipment but in the very techniques themselves, the behaviour modification and visualisation practice that athletes need to be successful. That doesn’t limit itself to what happens on the field or court. Psychology, as Carter explains, has always been a big component in sports, but the importance of mental health is now also acknowledged more.

Youth sports, in which a large number of young athletes quit early because of financial or other constraints such as lack of coaching or measurable progress, is also a sector that Carter is interested in looking into.

“Growing up in Canada, the reason I stopped playing hockey was because it got too expensive. Single mom, three kids, I couldn’t afford all that equipment and to drive to all these places.”

Tools for financial education and literacy are also increasingly important, as pro athletes in sports like American football average three-year careers, after which most actually end up in financial hardship. Recent law changes for collegiate athletes in the US, which allow athletes to benefit financially from the use of their name, image and likeness, are changing the landscape.

But, if a strategy is tailored to put athletes first, does that translate to mass-market appeal? Yes, says Carter.

“Just because you put the athlete at the centre doesn’t mean that every product will just be for athletes,” he says.

“A lot of things start off in high performance and then trickle down to the everyday athlete, everyday person, who just wants to track what they’re doing, track what they’re eating. Things like Fitbit and other things focused on that same model. First, athletes are the ones using it, but then it trickles down to the general public.”

Whether it’s mental health, financial services or personalised training solutions, it all translates to larger audiences. Athletes who start businesses tend to come with pre-existing audiences and latent customer bases that help a business gain scale and distribution faster.

The studio

So what would be the most effective way of centring the athlete and building something for – and around – them? According to Carter, it is the venture studio model.

Direct minority investment, the bread and butter of most VCs, is fine but requires a commercial product or service. A venture studio’s job is to take something from an idea to a workable business.

The aim, as with any startup studio, will be to put a support system around what a friend of Carter calls the entrepreneurs’ “sphere of genius” –  the areas they excel at, and buttress the weaker points to help them accomplish a larger goal.

He gave the example of Lofa Tatupu – a friend and former teammate from his time at the Seattle Seahawks – whose accumulated concussions throughout a successful career in the NFL manifested themselves both physically and mentally in retirement, including in what Tatupu has previously described as chronic pain, lethargy and mental fogginess.

Then Tatupu discovered the therapeutic benefits of CBD, leading him to want to build a business around it. He could leverage his skill and image but also needed a support structure built around him to build out the business. The result was ZoneIn CBD, the company that launched in 2019.

When startups have achieved a viable business model, partnerships with corporates and large organisations come in handy. While innovation outside its core business may not be a corporate’s strong suit, distribution and scaling are.

Developing partnerships with corporates is an important part of the kind of venture studio Carter has in mind. Working with them to establish or determine the kind of roadmap they have; for example, finding out what kind of companies they would want to acquire in the sports sector. If those potential acquisition and investment targets aren’t already out there, then the question is how can a venture studio go ahead and build them?

More encouraging is the fact that corporates, especially over the past couple of years, have gone into deals at earlier stages.

Shift in sports

One of the biggest shifts Carter has seen in sports technology is the personalisation of training and care. Even in a sport like American football, where the differences in training requirements between position groups are large, there has been a notable rise in how equipment and regimes are customised for each player.

“You’ve been able to introduce a lot of products and services that help the individual athlete because you realise it’s not one-size-fits-all,” says Carter. “Boxers – two people can get punched the same way, but someone has a stronger chin, the other one doesn’t. The other one gets knocked out.”

It’s been the driving force behind the growth of many wearable products and has given rise to more widespread use of bespoke footwear and other equipment.

Similarly, players have become increasingly savvy about business relationships and collaborations with brands. Sponsorships are not new in any way, but it has long been difficult for athletes to replicate the Jordan model with Nike. That is now changing, something that Carter believes may correlate with higher athlete compensation. When they are not reliant on sponsorship money to supplement wages, they are freer to seek more from those industry connections.

“Athletes have gotten much more bold on that side, to be able to say: ‘No, my brand and my equity is worth more than just a sponsorship. I want partnership, I want equity. I want a piece and a place at the table,’” says Carter.

Fernando Moncada Rivera

Fernando Moncada Rivera is a reporter at Global Corporate Venturing and also host of the CVC Unplugged podcast.