The New Off-Court Play for NBA Stars Is Startup Equity
About three years ago, in February 2014, Andre Iguodala spent an off-day during the NBA season at the offices of venture capital firm Andreessen Horowitz in Menlo Park, Calif. Over the course of four hours in a conference room, the Golden State Warriors small forward heard pitches from a handful of startups in Andreessen’s portfolio. One shared its plan to disrupt the hair extensions business by selling directly to salons. Another explained how a mobile platform could help the secondhand clothing market move upscale. A third showed how an on-demand business model could transform the phone-screen-repair business. “We just banged them out in one day,” Iguodala says.
On a late July afternoon, he’s sitting on a patio at the St. Regis Deer Valley resort in Park City, Utah. Iguodala has come to this ski town for the NextGen Software CEO Summit hosted by Morgan Stanley. A couple of hours earlier, he sat in front of roughly 100 founders, venture capitalists, and tech bankers and talked about leadership (“I’ve learned to speak when necessary, not just speak to speak”), free agency negotiations (he read Chris Voss’s Never Split the Difference to prepare), and his approach to tech investing (“Where are we going to be in 20 years, and how can we do something no one ever thought of?”). At dinner that evening, he’ll sit at the head table with Adobe Systems Inc. Chief Executive Officer Shantanu Narayen.
For the moment, he’s folded his 6-foot-6 superhero frame into a white-pillowed love seat and is leaning over a small plate of chips and guacamole. “Ten or 15 years ago, what did all athletes invest in? Car dealerships, franchising, and real estate,” he says. “They couldn’t get outside that scope.”
Since joining the Warriors in 2013, Iguodala, 33, has quickly become part of the vanguard of NBA players and other athletes making financial forays into Silicon Valley. He and his business partner, Rudy Cline-Thomas, own stakes ranging from $25,000 to $150,000 in about 25 startups, including the health and beauty brand Walker & Co.; mattress online retailer Casper; personal-finance app NerdWallet; Derek Jeter’s digital publishing company, the Players’ Tribune; and Mayvenn, the hair extensions supplier they met at Andreessen. (Bloomberg LP, which owns Bloomberg Businessweek, is an investor in Andreessen Horowitz.)
The Warriors—winners of two NBA championships in the past three years—are Silicon Valley darlings. Joe Lacob, a partner at venture capital company Kleiner Perkins Caufield & Byers, and Peter Guber, chairman of Mandalay Entertainment Group, bought the team in 2010 with a group of tech heavyweights including YouTube co-founder Chad Hurley, former Facebook executive Chamath Palihapitiya, and Zappos.com founder Nick Swinmurn. They see the team as an extension of their business—another proving ground for the Silicon Valley way. For players, the franchise offers unparalleled access to the Valley’s elite. This proximity is part of what drew Iguodala to the Warriors and why he decided to stay this summer, spurning offers from the Houston Rockets, San Antonio Spurs, Sacramento Kings, Los Angeles Lakers, and Philadelphia 76ers to re-sign with the team for $48 million over three years. With the Warriors widely expected to dominate the league during that span, Iguodala is determined to take advantage while his star is shining brightest.
Cline-Thomas is a constant presence at Iguodala’s side. The two sat together for the Menlo Park pitches and shared the dais at the St. Regis. They invest jointly in everything through a company called F9 Strategies LLC, splitting the equity according to each one’s contribution. Cline-Thomas serves as Iguodala’s advance man in Silicon Valley, searching out leads, making introductions, and lining up meetings. He isn’t Iguodala’s agent, but he has a hand in every move the player makes, including his free agency negotiations. “I ran the process, all of the strategy,” Cline-Thomas says. “There’s nothing that we don’t do together.”
Cline-Thomas’s ambition now is to expand what he’s built with Iguodala into a pipeline between Silicon Valley and professional athletes. “I’m going to give the players the power to create partnerships and to have access to the companies of the next generation,” he says, demonstrating quick mastery of Valley speak. On the patio in Utah, Iguodala says: “This is the next step for athletes. The scene for endorsements is going to change drastically. It’s not just take a check and put your face and name on something.”
Getting a piece of a tech startup is fast becoming standard in the NBA. Like wearing designer watches, being name-checked in a hip-hop lyric, and appearing on the cover of GQ, it’s a status symbol. “When I first came into the league,” says Iguodala, who’s played in the NBA since 2004, “you just had to have a certain car, or two or three or four or five, and you had certain clothes, certain shoes, to let everybody know you were a basketball player.” These days, guys also need a cut of the latest wearable gadget or media platform to show they’re not just basketball players. Kevin Durant, for instance, who joined the Warriors as a free agent in 2016, holds a startup portfolio that includes the delivery service Postmates, micro-investing platform Acorns, and the Players’ Tribune.
What separates Iguodala and Cline-Thomas from the crowd, say the people in the Valley who’ve dealt with them, is the time they’ve spent doing their homework. “Most of the people think the celebrities and athletes are kind of dabbling here and there. Tech is hot, so they’re jumping in, and it’s the fad of the day,” says Paul Kwan, Morgan Stanley’s head of West Coast tech banking. “But people don’t realize how long these guys Rudy and Andre have been thinking about tech, working on tech, building connections, getting smart.”
As a player with Golden State, Iguodala has built a reputation as a Swiss army knife. Once a go-to scorer for the 76ers, he now supplies defense, rebounding, and hustle plays off the bench. In the locker room, his off-court interest in tech investing hasn’t gone unnoticed. “He’s a little bit more experienced than a lot of us, so if you need to ask questions, he’s learned the do’s and don’ts,” says teammate Stephen Curry.
Curry, a two-time league MVP, has joined Iguodala in exploring the Valley. On Aug. 15 the teammates hosted the Players Technology Summit in San Francisco; Bloomberg LP presented the event, which took place at its offices. During a day of panels, the two sit like star pupils at the front of a room of about 90 people—investors, founders, marketers, media members, and athletes, including their former Warriors teammate Harrison Barnes and the newest one, Nick Young.
They listen as football legend Joe Montana and tennis great Andre Agassi talk about life after sports; as fund managers Kirsten Green of Forerunner Ventures and Phin Barnes of First Round Capital discuss early-stage investment strategies; and as Omar Johnson, former chief marketing officer for Beats by Dre, and Rohan Oza, the marketer who signed 50 Cent at Vitaminwater, explain when to take equity and when to take cash. To close the day, Cline-Thomas takes the dais for a conversation with Troy Carter, the hip-hop promoter, talent manager, and tech investor. “Be owners,” Carter says. “Don’t just have a seat at the table.”
The night before, after posing for pictures in a dark blazer, Curry talked to Bloomberg Businessweek about his ongoing education in the Valley. “I am trying to grow in the right way for me, and I don’t know what that is right now,” he said, his trademark calm demeanor on display. “I want to have a hand in everything that I do and not have things just thrown at me.”
At the moment, Curry owns a small stake in Pinterest. His biggest move in the Valley has been to co-found a marketing startup called Slyce. As we speak in San Francisco, the company’s CEO and co-founder, Bryant Barr, sits across the table. Barr, who played basketball with Curry at Davidson College, conceived of Slyce while in business school at Stanford. Founded in 2015, the company makes software to help brands manage and measure the social media output of their endorsers. Under Armour Inc., which has a long-term shoe deal with Curry, is a client.
Barr and Curry, who’ve raised about $2 million and hired seven employees at Slyce, have the typical ambitions for the company: to grow quickly and perhaps get acquired. They also see it as a way to learn about Silicon Valley from the inside. Curry takes part in every aspect of managing the company. “He is learning what it’s like from a sales perspective, what it’s like from a product development perspective, what it’s like from a fundraising perspective, from a hiring perspective,” Barr says. When Slyce makes offers to potential employees, they get personalized video messages from Curry. “We have a pretty high acceptance rate,” Barr adds.
Cline-Thomas and Iguodala met 10 years ago in Philadelphia. Iguodala was the leading scorer for the 76ers and on the brink of signing a six-year, $80 million contract with the team. Cline-Thomas was running a business management company for a handful of lesser-known NFL and NBA players, including 76ers rookie Herbert Hill. Iguodala took Hill under his wing, hoping to show him how to make a career in the league, but it wasn’t to be: Hill never played in an NBA game. “I was with Herb a lot, and I would see Rudy from time to time,” says Iguodala. “I started listening to a lot of things he was saying and was like, ‘Let’s exchange numbers. I got some questions.’ ”
During the following year, Iguodala and Cline-Thomas bonded over shared interests in fashion, business, technology, and basketball. Cline-Thomas began acting as an informal adviser and sounding board. He persuaded Iguodala not to buy a multimillion-dollar condominium in downtown Philadelphia and sent him articles about the housing market and the rise of the tech giants. In 2010 they decided to try their hands in the stock market. Iguodala opened an ETrade account, seeded it with $2 million, and drew up a simple contract with Cline-Thomas, giving him a year to see what he could do. “The only way Rudy got paid was if he made a whole lot of money,” Iguodala says, which Cline-Thomas did by investing exclusively in tech stocks.
“That’s when everything changed,” Cline-Thomas says, retelling the story in late June at an Italian restaurant in Brooklyn, N.Y., near his apartment. He’s 39 and speaks softly, often punctuating his sentences with a low laugh. Born in Washington, he grew up nearby in Maryland, the son of immigrants from Freetown, Sierra Leone. His parents met while working at the Watergate Hotel; his father, who went on to become an executive at Marriott International Inc., was a porter, and his mother, who later worked as an executive assistant at the World Bank, was a receptionist.
As a child, Cline-Thomas played chess and idolized Larry Bird. In junior high, he read The Art of the Deal by Donald Trump and was inspired. “I wanted to be a businessman ever since that day,” he says, although his admiration for Trump hasn’t survived along with his ambition to be an entrepreneur. Cline-Thomas earned a degree in finance at Providence College and spent the summer before his senior year working as an intern with the NBA.
While there, he wrote letters to every league agent on official stationery, hoping to find work after college. Lon Babby, who ran the sports practice at the Washington law firm Williams & Connolly and represented stars Grant Hill and Tim Duncan, hired Cline-Thomas in 2000. Five years later he opened his own company, the Blueprint. In those days, he was one of a crowd of advisers who managed player investments and budgets in exchange for retainer fees. His roster of about a dozen clients included Roger Mason Jr. of the Washington Wizards and San Francisco 49ers tight end Vernon Davis. “He definitely got me started transitioning from a basketball player to a businessman and entrepreneur,” says Mason, now the commissioner of Big 3 LLC, a three-on-three pro basketball league started this summer.
Not all of Cline-Thomas’s clients were so happy. In 2010, Madieu Williams of the Minnesota Vikings sued over a $200,000 loan that Cline-Thomas failed to repay. According to court documents, Cline-Thomas spent four days in a Washington jail after ignoring a judge’s demands for payment. Cline-Thomas says he made the loan on Williams’s behalf to an NFL agent to help them circumvent a league rule against players loaning to agents. When the agent failed to repay, Williams had no legal remedy but to come after Cline-Thomas. “I didn’t want to pay for something I received no money from,” says Cline-Thomas, who later successfully sued the agent over a separate matter and recouped his losses.
By that point, Cline-Thomas had seen the possibilities in Silicon Valley and was looking to sell the Blueprint, which he did two years ago for an undisclosed price. In the summer of 2013, Iguodala had just finished a season with the Denver Nuggets and was a free agent. The Warriors were at the top of his wish list. They’d made the playoffs for the first time in six years and were in the place where he wanted to be. At first, the Warriors didn’t seem to have room for him. He was ready to settle for the Dallas Mavericks when Golden State made a last-minute offer. When it came through, he called Cline-Thomas. “I just started screaming,” Cline-Thomas says.
About a month later, when Jeff Jordan, a general partner at Andreessen, got a letter from Cline-Thomas asking for a meeting with Iguodala, he was skeptical. Jordan runs a weekly pickup basketball game where Warriors owner Lacob is a regular. When he next saw Lacob on the court, he asked about Cline-Thomas. Lacob had never heard of him. Curious, Jordan agreed to meet Cline-Thomas and Iguodala for dinner at Morton’s steakhouse. Jordan quickly saw that Iguodala was sincere and curious. He didn’t need to worry that he would show up unprepared to meetings with startups. Iguodala was trying to figure out how to go from buying stock in public companies to venture investing. “He wanted to understand the early stage,” Jordan says.
The first thing an athlete arriving in Silicon Valley needs to know is that startups are a great way to lose money. In this way, they’re not so different from a friend’s record label or can’t-miss restaurant concept. A handful of tech startups, so-called unicorns, become public companies with valuations in the billions of dollars. Some of them get acquired by larger companies. Most evaporate, leaving investors nothing. “It’s got to be money you are willing to lose,” Jordan says. “Even in the best-performing venture funds, over half of the companies don’t return capital.”
Iguodala has already been through it. “Two weeks ago, I get an email,” he says in Utah. “ ‘Dear All Investors, Sorry to inform you we’re closing the shop.’ Out of nowhere.” Long-shot odds, he says, are familiar to a professional athlete: “It’s the same journey we’ve taken as basketball players. How many are there in the NCAA? In high school? And we’ve stayed on this path. It’s all or nothing.”
The second thing for athletes to know is that startups don’t give out money; they take it. Athletes and their agents, say several investors and founders, often approach private tech companies expecting to do endorsement deals as they would with Nike, Coca-Cola, or State Farm. Others have heard the legend of LeBron James, who’s said to have made $30 million from his share of Beats by Dre when Apple Inc. bought the headphones brand for $3 billion in 2014, and expect large chunks of equity for lending their name to a company. Tristan Walker, the founder of Walker & Co., the health and beauty startup in Palo Alto that markets to people of color, counts Iguodala, Harrison Barnes, Magic Johnson, and rapper Nas as investors. Walker turns away celebrities almost daily looking for a piece of his company, he says. Iguodala and Cline-Thomas stood out for their thoughtfulness. “They are all in on this, and it’s on a different level than a lot of other celebrity entertainers,” Walker says.
In Silicon Valley, celebrity provides access. And because the richest rewards are usually reserved for the earliest investors, access is key. Venture capitalists wait for years or decades to see returns, and so they need volume: Rare hits pay for frequent misses. Iguodala can get “deal flow” because Andreessen vouches for him and because he’s a Golden State Warrior.
Players and startups alike have begun to look to Iguodala and Cline-Thomas to make connections in the Valley. “There was no bridge, nobody bringing it together,” Cline-Thomas tells the audience of CEOs and VCs in Utah. “We ran into the perfect opportunity to do that.” A month later, at the Bloomberg event in San Francisco, during a break between panels, Curry chats with Forerunner’s Green while Barr, nearby, trades business cards with former NFL linebacker and now TV host Dhani Jones.
Iguodala and Cline-Thomas aren’t sure where it goes from here—open-endedness is another Silicon Valley trademark. Cline-Thomas has begun offering his services to tech companies looking to work with athletes and leagues via a company called Mastry. He says he may also go the route of former NFL player Ryan Nece, the founder of Next Play Capital; the company raises money from athletes and other wealthy people and invests it with top venture funds, creating a fund of funds. Cline-Thomas and Iguodala are also expanding into media. In July their production company, the Freetown Project, made a deal with startup online financial network Cheddar to create a talk show starring Iguodala called Evenings With Andre, on which he’ll chat with startup founders, VCs, athletes, fashion designers, and chefs.
Throughout the day during the San Francisco summit, Iguodala scribbles in his notebook. He and Curry raise their hands frequently to ask questions. After Tina Sharkey, co-founder of Brandless, finishes explaining her new company’s model for selling consumer goods online for $3 each, Iguodala has a simple one: Can he invest?