College Baseball, Venture Capital, and the Long Maybe

My son is a college baseball player. One of the singular aspects of having kids is that they open your eyes to facets of humanity that you might not have seen otherwise. I was not a college athlete (and knew little of even baseball until he got the bug at age seven), so I have learned much along the way. You — perhaps like me several years ago — may have an idea of how college athletics proceeds: that a kid plays well in high school; that it informs the schools to which they apply; that they have some conversations with coaches when considering where to matriculate; that they go to a school; that they play for four years.

But this is naive to the point of fantasia.

In fact, college athletics is a parallel universe that may share some of the same classes and physical plant as a non-athletic experience, but is wholly different in who matriculates and how: in order to play on an NCAA varsity team, one has necessarily dedicated their young lives to their sport — and the sport is almost assuredly the lens through which school decisions have been made. (As an aside, this is what makes the Varsity Blues scandal ever the more revolting: not only was it crooked and fraudulent, but it made a mockery of the athletes that worked so hard to earn a spot that was in fact sold to a non-athlete.)

This parallel universe has been true for all NCAA sports for a long time, but for the revenue sports (football, basketball, hockey, baseball), the higher stakes for both the institution (for whom these sports represent revenue) and for the athlete (who dreams for a shot to play professionally) have made for an even more tumultuous recruiting process. To this dry tinder, the spark of Name, Image, and Likeness (NIL) money and the explosion of the NCAA transfer portal lit a conflagration that has permanently altered college sports — and the path of the student-athlete today looks simply nothing like their non-athlete peers.

So what does it look like? Early on in my own son’s journey — as he was navigating different junior college options in the spring of 2022 — it struck me that the experience of the college athlete does have a clear analogue, and it is in fact one in which I do have recent and germane experience: becoming a college athlete (especially for revenue sports at the highest levels of play) looks uncannily like raising a round of venture capital.

Raising venture capital

Raising venture capital, it should be said, has been an absolutely wild experience that (for me) had no real life precedent: an emotional roller coaster in which highest-highs and lowest-lows seem to happen simultaneously. The further my son went into his baseball career — and especially as he finished up at JUCO and went through the process of finding an NCAA home at which to play — the clearer this analogy became to me.

I want to explore the parallels in some depth. While I suspect that there is some applicability here to all NCAA varsity sports, I’ll stick to NCAA baseball. If you have raised venture capital but don’t know the first thing about college baseball, you’ll find that you’re a very quick study; if you know a bunch about college baseball and don’t know anything about venture capital, you might be interested to know that your experience has a clear analogue in another domain. (And if you know neither of these things, I am going to try to introduce you to both a bit!)

Why the parallels?

Raising a round of venture capital and landing a college roster spot are, in the abstract, both a kind of asymmetric, non-linear coupling. In both cases, you have an institution that is placing a bet on the future. (And the future is — as baseball player Yogi Berra famously quipped — especially tough to make predictions about!) The bet, once placed, can’t be taken back: once the money is wired or the roster slot is given, a die is cast. The decision isn’t forever, of course (you can choose not fund subsequent rounds and you can make future roster adjustments) but in both cases there is an opportunity cost associated with the decision that is irreversible.

And the stakes are high. In both cases, the institution is results-oriented: venture capital firms need to deliver for their limited partners and have a constant eye on raising their next fund; coaches need to win and constantly fear for their job security. For the counterparty, the stakes are differently high: the athlete — like the entrepreneur — is trying to manage their own fate rather than a portfolio; they don’t get to apply portfolio theory to the one career they get to live.

The relationship with risk is also tricky with both. On the one hand, the institutions can use portfolio theory to mitigate their downside risk (a company that has no return for investors, a player that doesn’t work out), but the greater risk is arguably passing on someone that would have been a difference maker — the fear of missing out (FOMO).

The parallels

Here are a few VC’isms — and how they map to the experience of college baseball players:

  • The Pitch Deck. The deck is often the introduction of a venture capitalist to a company, sent after a warm intro. For the athlete, the pitch deck consists of video and some metrics, posted on Twitter (the LinkedIn of college baseball). In both cases, the best story is (naturally) being told: they aren’t dishonest, but they also aren’t going to emphasize flaws or risks. In my experience, pitch decks are important, but not as important as the underlying business; similarly, terrific video of a bullpen or batting practice can’t turn a baseball player into someone they aren’t.

  • The Long Maybe. VCs need to invest out of a fund (that is, they need to put their capital to work), and FOMO leaves them nervous about turning down companies prematurely — they become reluctant to tell a company "no", even if it’s plain that they will never summon the conviction to invest. VCs call this "preserving optionality", but it is in fact a "long maybe" — and it leads to long paths-to-nowhere with VCs that seemingly always want something else to prolong the conversation, with desultory requests for a new conversation about how the recent quarter went, or perhaps an introduction to just one more customer. (Often with long periods of ghosting in between!)

    Just as VCs need to invest, coaches need to fill a roster, and baseball players will immediately recognize the coaches that are in and out of their DMs — with slow-moving, swirling processes. Often, coaches will blame external events for their inaction ("we need to wait until the House ruling", "we need to wait until the portal opens", etc.); VCs, too, will blame other events ("we have been busy raising a new fund", "we’ve been in Europe the past month"). The truth in both cases is that the institution just isn’t that interested; both startup and athlete would be well-advised to pencil them in as a "no" and move on.

  • The Term Sheet. When a VC chooses to lead a round, they will write a term sheet that contains their desired structure. Getting to a term sheet is a huge milestone, but the round isn’t closed yet: it needs to be negotiated (and signed!), long-form docs needs to be drafted, diligence needs to be done, and then the investment wired to actually close the round. (To say nothing of follow-on capital that often needs to be raised!) Term sheets are (broadly) non-binding, and many things can go wrong between a term sheet and a round closing.

    Offers in college baseball are similarly complicated. What feels like an offer may evaporate — and even what feels like the surely binding elements of an offer (e.g., a roster spot?!) are not in fact binding at all. So how does one know the veracity of an offer? As with VCs, one is ultimately dependent upon the integrity of a coach. Fortunately, most coaches — like most VCs! — have high integrity. But it is not all of them, and there certainly exist unscrupulous coaches (and VCs!) who are able to hide their misbehavior, dependent on the fact that there is no transparency in their actions. These coaches routinely overrecruit (i.e., offer commitments for more roster slots than they in fact have) or otherwise rescind offers. These coaches become infamous to players over their careers, and the athletes that they have wronged live for the opportunity to face these coaches and win. (Having seen a dramatic walk-off under exactly these conditions, I can tell you that it was electric to watch mass vindication, a literal dogpile of spurned players who had just proved they were the better team.)

  • The Preempt. An outgrowth of FOMO and preserving optionality are VC firms that want to "preempt" a fundraise — to write a term sheet for a company that isn’t raising. On the one hand, this seems great: it’s really distracting to raise, and if a particularly interested firm wants to frontrun everyone by getting ahead of your next round, why not let them? And while it certainly can be great, it can also be a hot mess: if the preempting firm drags their feet, they may end up distorting the process that a company would have run otherwise — which can be calamitous if the preemption deal falls apart after having implicitly denied the company of runway by wasting their time.

    For high school ballplayers in particular, the preemption takes the form of coaches making "verbal commitments" to high school students who are not seniors. These really shouldn’t have "commitment" in the name as they are entirely non-binding; coaches walk away from these so-called commitments all the time. Meanwhile, the kid (and they are kids — tautologically under 18!), believing that they have found a home, has stopped their own recruiting process as a junior (or even a sophomore!), depriving themselves of getting the best possible post-high school opportunity.

    While this didn’t (exactly) happen to my son, I have seen it happen too many times to not channel my inner parent: the NCAA needs to forbid and punish this diabolical practice. (As for VCs that preempt and then walk away from a signed term sheet, the NCAA may not be coming for you — but karma will.)

  • The Exploding Offer. When a VC firm writes a startup a term sheet, it wants it signed as soon as possible. Term sheets therefore often have exploding terms where they are only valid for a short period of time. Offers for ballplayers can be exploding too, and in fact it might be more common: teams have a finite amount of time to put their roster together. In both cases, this is a term that can be easily negotiated away — and it can become a red flag if (say) a VC won’t allow you to reference check their portfolio or a coach won’t allow you to visit a campus (both emanately reasonable justifications to extend the deadline on an offer).

  • Multiple Term Sheets. The fantasy for every startup is multiple term sheets, as it represents leverage to get terms adjusted or to otherwise get the best possible deal. For startups, this certainly happens, but it’s not as common as one might think: getting a term sheet from one VC with the intent of forcing the hand of others may in fact just get others to decide that they can’t get there. (Or worse: slowly decide that they can’t get there!) For college baseball players, this feels more common, but still may be broadly rare. In both cases: it’s a great problem to have, and it’s worth really sitting down to think about the rubric for making a decision. Why would you not just take the economically better deal always? An excellent segue…​

  • The Valuation Overhang. When you raise a round of venture capital, you do so at a valuation. For founders, a mistake is optimizing exclusively for the best deal economics, which can result in either raising too much money or raising money at too high a valuation. On the one hand, this is a good problem to have: if the valuation for a startup is being driven up, it may indicate a frothy market that an entrepreneur wants to take advantage of. On the other, though, raising at too high a valuation is perilous: the high valuation can create expectations that the company can’t possibly live up to — and the valuation itself serves to deprive a company of options. (As it has in so many other ways, HBO’s Silicon Valley absolutely nails the peril of raising too much.)

    For college baseball, the valuation overhang would be going to a Power Four conference school straight out of high school. Some extraordinary high schoolers can compete at that highest of levels, but for others, it’s just too big a step: they end up redshirting and then with limited playing time (or none) their second year, they realize that they aren’t going to play — and they enter the transfer portal. Despite being a standout high school athlete, these players can find that their limited college careers may result in them being perceived as much riskier than a known JUCO or NAIA player.

  • The Down Round. In venture capital, raising at a valuation less than your previous valuation is called a down round. In college baseball, the down round analogy is entering the transfer portal with a destination that is a lower division. (To give perspective on the madness that is the transfer portal, as I write this there are 5,700 baseball players in the transfer portal — and there are ~10,000 total Division 1 baseball players.) While a down round is undesirable for many reasons, it means that a company is at least finding a path to survival; for a player going backwards in the portal, they are trying to find a path to play — and that year in JUCO as a bounceback may be exactly what they need to rebuild and return to the highest levels of play.

  • The IPO. The dream for every startup is an initial public offering — and the dream for every ballplayer is to play Major League Baseball. At some level, both dreams are ludicrous, but they also surely seemed outlandish many times over to the people who realized them. The romance of both VC and college baseball is that these things can and do happen!

Navigating it all

To the degree that the analogy is helpful or instructive, it may be to anyone engaged in either of these two insane processes — that there might be something to learn from the other. My advice to entrepreneurs and athletes alike:

  1. Figure out what you want. For most startups, it’s to be a big, successful, public company; for most college baseball players, it’s to be the best player they can possibly be — and to get a shot at getting paid to do it. But this isn’t everyone, and if your goals are different, you should figure out what they in fact are!

  2. Keep your goals in mind when making decisions. If your goal is to make the company successful, it may drive you to an investor or a structure that isn’t obvious; if your goal is to improve as a player, it may drive you to a program or a coach that others have overlooked. Know your own goals, and know that you don’t owe anyone an explanation for your decision.

  3. Go where you’re wanted. It feels tautological that anyone getting across the line with an offer wants you — but not all offers are the same. Be wary of where you are not really wanted, and note that conviction and praise are not the same thing: anyone wanting to get you over the line will tell you what you want to hear. Find the real conviction, and you will find an institution that is with you not just on sunny days but stormy ones too.

Finally, just because I’m penning this on Father’s Day, let me add a personal note. To all of the college baseball players out there, from the JUCO bandits and the D1 bouncebacks to the mid-major grinders and the Power 4 phenoms: you are getting an education far beyond the classroom. Sometimes you have had to endure bad behavior by adults that others won’t have to suffer until they are much older — and you certainly face a level of pressure that most of your collegiate peers don’t and won’t know. We, your parents, see it, and we are proud as hell of your grit and resolve; go get 'em, kid!