1/n Similarities between early-stage VC and the creation of professional footballers – a (random) thread.

2/n Both have extremely low odds of success. Of the kids who enter UK academies at the age of 9, <1% make it to professional football, and 180 out of 1.5M make it as Premier League footballers.

3/n Both have a power-law when it comes to size of outcomes. Estimates for average salary for a professional footballer in English leagues are as below

EPL: 51000
Championship: 11000
League One: 2300

(all in pounds per week)

4/n Even within the elite tier, individuals stand out. Consider the wages of a Neymar / Messi / Ronaldo / Bale / Alexis Sanchez (pains me to write this as an MU fan) – easily >10X the average; similar to how there are blockbusters even within the rare set of venture successes.

5/n Agents, who have two streams of revenue - % of client’s earnings, and % of transfer fees - are the equivalent of financial investors; clubs are the equivalent of strategics. These are not strictly like-to-like comparisons, though.

6/n As an agent, what matters is representing an elite footballer. Take a player who is transferred for 50M Euros on weekly wages of 100k Euros for a five-year contract. Assume 15% of the transfer fee as agent fees – EPL clubs paid GBP 263M on total transfer spend of 1.4B last..

..year – and maybe 5% of the player’s wages as retainer fees. That totals to just shy of 9M over 5 years. Then also factor in endorsement income, the fact that players are often transferred multiple times, and most have longer careers than 5 years.

7/n In countries where rules make it possible, agents often juice up their earnings by identifying promising players early, and taking an ownership stake in the player’s economic rights. Imagine another 30% of the transfer fee in the above example to see why its so lucrative.

8/n From an economic outcome perspective, as with venture, so for agents – you need to work with winners, and the earlier one identifies the winners higher the outcome size.

9/n Strategics (clubs) derive value by using the underlying ‘asset’ i.e. the player, for their core business – which is (hopefully) winning games / trophies. They have existing business models to monetize said business outcomes – gate receipts, sponsorship money, prize money etc.

10/n Interestingly, within strategics, there are some that behave more as financial investors on a relative basis. Essentially, we have ‘buying’ clubs (true elites) and ‘selling’ clubs (think Ajax / Southampton / Sporting)...

... This is different from more regular businesses, as a player is a much more transferable asset – much easier to integrate / remove from your business – than, say, a workflow software.

11/n Transferability also means that players may not always take the most lucrative offer in the short-term. Youngsters often choose ‘lower-profile’ clubs – with promises of game time and an environment more forgiving of mistakes – as stepping stones to their ultimate dream.

12/n Not everything in life has an immediately apparent purpose, and I did say this was a random thread. Clearly, I spend a healthy - @nupurmangla2 says disproportionate - amount of my time on football. Fin.