Former MLB Stars See a Hit With Dugout Ventures
A group of players is combining their consumer know-how with outside investment expertise to make private equity deals
Former Boston Red Sox star, and probable first-ballot Hall of Famer, David “Big Papi” Ortiz, recently announced the creation of private equity firm Dugout Ventures. He and other former professional baseball All Stars Barry Larkin, Nolan Ryan, Torii Hunter, and Vernon Wells, have pooled their capital and are combining their market expertise as elite athletes with the know-how of professional investment advisors to invest in and support baseball-related consumer products and services.
The management group, which includes 40 GP slots, has already made two investments. The first, a bridge financing loan to EvoShield, the official protective gear of Major League Baseball (MLB), was completed in July 2016. Since then, the company was acquired by Amer Sports.
The second investment was made in Marucci Sports, the leading bat manufacturer for MLB. Whereas a financial expert could help structure the economics of a deal, it is the products and services expertise of the pro athletes that helps to inform Dugout’s decision-making process when completing transactions.
“These guys have Ph. D.’s in baseball products and services,” says Mark Walker, managing director of Dugout Ventures. “You are not going to argue effectively with David Ortiz about the quality of bats.”
Dugout is also in the process of raising a $50M sidecar vehicle with outside capital that allows accredited investors to put money to work alongside Dugout’s GP group. The fund is in the very nascent stages of being raised, but has already garnered significant attention from limited partners, Walker says. The initial plans include a minimum $250,000 investment, but Walker is open to much larger commitments. He expects to complete fundraising for the LP vehicle in early 2017.
“We are going to play it as it comes,” says Walker about capital raising, and even the possibility of co-investment opportunities.
The value of being a portfolio company of Dugout is two-fold. In addition to the capital infusion, there is the implied endorsement of the group of baseball stars— which can increase the value of the product or service. Financial and commercial support from Dugout can significantly move the needle in the sales and value of a portfolio company almost instantaneously.
“It is more than capital from us,” says Walker. “That authenticity is a stamp of approval.”
The response to the formation of Dugout Ventures has been strong. Walker estimates more than 100 investment opportunities have already come across his desk. He says the group will continue to be opportunistic in terms of types of deals and transaction size.
Current and former MLB players are also interested in joining the GP group at Dugout. While plans currently call for 40 slots in the management group, Walker says they could eventually have between 50 players and 100 players involved in the day-to-day management. All of the MLB players who invest will have varying degrees of skin in the game and hands-on investment management, depending on desire and the conflict-of-interest that may come for active players.
Including younger, current MLB players in the GP group and helping them to develop the investment and financial acumen needed to prepare for life after baseball is of interest to the five founding members of Dugout. They believe their private equity model can be a conduit for real-life education and the sharpening of skill sets for pro baseball players.
A group of players is combining their consumer know-how with outside investment expertise to make PE deals.