Investment firms boon to minor league players
Growing up in Atlanta in the early 2000s, virtually every boy my age had the same hero: Braves third baseman Chipper Jones. I wanted to be just like him. And I nearly pulled it off, thanks to some God-given athletic talent, thousands of hours of practice, and — counterintuitively — a new type of venture capital firm.
In 2016, the Texas Rangers drafted me in the third round, and I quickly joined one of their minor league teams. I was beyond excited — but I knew the hard work was far from over.
Competition in the minor leagues is intense, and the vast majority of players never make it to the majors. The typical minor league player has just a few years to impress coaches and graduate through the “farm system” to the MLB. Otherwise, they get cut in favor of younger prospects.
I wanted to make the most of that short window of opportunity. But while I was fortunate to have pocketed a $675,000 signing bonus, I was hardly rich enough to afford the extra support — like hiring a personal hitting coach, fitness trainer, or dietician, or installing a backyard batting cage — that’d maximize my chances of making the majors.
When people think of “professional baseball players,” they envision millionaires, even megamillionaires. And that’s certainly true for the athletes lucky and talented enough to earn a roster spot on one of the 30 MLB teams. The MLB league minimum salary is a hefty $740,000 this year, and superstars like Shohei Ohtani, Max Scherzer, and Justin Verlander bring home tens of millions annually.
But the 120 minor league teams that constitute the MLB’s “farm system” typically pay modest wages. The minimum salary on AAA teams — just one rung below the majors — is less than $36,000.
Many of my teammates had to get side jobs just to cover normal living expenses. Hiring extra support was out of the question.
But I found a creative way to do so. In recent years, a number of investment firms have started offering minor league athletes, in baseball as well as other sports, lump-sum payments in return for a cut of their future earnings if they ultimately make it to the big leagues.
It’s essentially a venture capital model, but for investing in promising players instead of startup companies.
I inked one of these deals with a firm called Big League Advantage, which was founded by a former Philadelphia Phillies pitcher who pioneered the business model after a shoulder injury ended his brief major league career.
BLA uses intricate statistical analysis to identify promising players — similar to the sabermetric method made famous by the film “Moneyball.” BLA then approaches those players to see if they’d be interested in guaranteed lump sum payments, typically several hundred thousand dollars, that can help them cover living expenses, support their families, and afford the equipment and expert help that can maximize their chances of reaching the majors and scoring a huge contract.
It’s an enticing proposition for both sides.
If BLA and similar sports investment firms like X10 Capital and Finlete successfully identify and support a player who becomes a superstar and signs a multimillion-dollar contract, they make a handsome return on their investment.
Players, meanwhile, get upfront cash to purchase the additional support that can make or break their careers. Giving up a 5, 10, or 15% stake in their potential future earnings to maximize their chances of landing an MLB contract — which pays $4.2 million annually, on average — is a no-brainer.
Of course, the majority of players never make it to the big leagues, just as the majority of promising startups ultimately fail. In these cases, the athletes walk away free and clear, hundreds of thousands of dollars richer, while the investment firms eat the loss.
I was one of those players who didn’t make it. After five years of bouncing around the farm systems of the Texas Rangers and Miami Marlins, I realized it was time to hang up my cleats.
Naturally, I felt a lot of emotions — but regret wasn’t one of them. The resources from BLA allowed me to walk away from the game with my head held high, and even invest in and join a startup, CB Supplements.
Unfortunately, BLA and firms like it are being unfairly attacked by critics who don’t understand the challenges, and opportunities, facing minor league players. State and federal lawmakers are even thinking of restricting what sorts of deals athletes can sign with these firms. They’d never admit it, but these critics evidently think athletes are too stupid to make their own financial decisions.
This paternalism is wrong. Inking that deal empowered me to devote my full attention to my baseball career — and provided the seed funding for my post-baseball career, once I realized that I wasn’t going to become the next Chipper Jones after all. I’d hate to see the athletes of today and tomorrow deprived of that opportunity.
Kole Enright, a former professional athlete, is co-founder of the Enright Group, a talent advisory firm, and a partner at CB Supplements, a collagen supplemental brand.