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He dribbles down the court, fakes a pass left and drives through the lane to dunk. The crowd goes wild...but you simply smile while visions of dividends dance in your head.
Are you an agent? A sports franchise owner? An advertising executive? Nope, you're one of the people taking advantage of a hot new investment deal: securitization bonds.
Simply put, securitization bonds are assets, such as small-business loans, mortgages, credit card accounts and, yes, even athletes' contracts, bundled together into a bond and sold to investors, explains David Pullman. The New York financier pioneered this technique in the entertainment industry with rock legend David Bowie in 1997, creating what is now popularly called the Bowie Bond.
"Investors in these bonds [currently only institutional entities such as insurance companies] get a higher return than from treasuries, and they're single A-grade bonds," says Pullman of the bonds he's issued for entertainers such as Bowie and James Brown.
Although you can't yet directly invest in your favorite athlete, Pullman says the opportunity should open up by year-end for institutional investors. And soon after, enterprising entrepreneurs can become more than armchair quarterbacks when they watch their favorite athlete play.
Wanted . . .
Low-tech entrepreneurs with high-tech futures
Looking for funding but don't have the high-tech credentials so many venture capitalists require these days? Now owners of low-tech and no-tech firms have a place to turn for funding and help harnessing the power of e-commerce.
Entrex Equity Partners, a Washington state venture fund, aims to fill the investment gap for firms seeking $250,000 to $1 million. "We're looking for low-tech and no-tech companies that have gone through the seed level of funding, have [a proven] concept and may be having trouble raising money from venture capitalists," says Colin Wallace, who created the fund with Rourke O'Brien.
The pair are also looking for firms they can groom to do business via the Internet.
"We're interested in taking companies using traditional brick-and-mortar methods and bringing them a different way of finding customers using e-commerce and Internet strategies," says Wallace. To do this, Wallace and O'Brien will offer strategic planning and management consulting services as part of the deals.
The venture capitalist expects to acquire a 25 to 35 percent ownership stake in each company and exit the deal in three to five years. Entrex also requires a seat on the board and active involvement in implementing the firm's new direction.
Once Entrex achieves full capitalization of $5 million, fund managers expect to close seven to nine transactions annually for companies within a two-hour flight of Seattle.
"There are too many venture capitalists chasing too few deals with too much money. When that cools off, they're going to have to look for traditional companies that have positioned themselves in e-commerce," says Wallace. "We're working in advance of the curve."
Show Us The Money
Looking for potential investments? Following were the top-paid athletes in 1998, according to Forbes magazine. The total includes salary and endorsements.
Basketball (Chicago Bulls)
Formula one racing
Hockey (Detroit Red Wings)
Basketball (Detroit Pistons)
Oscar de la Hoya
*Retired--investment potential may be misleading.
Wallace O'Brien LLC, (206) 447-1390, http://www.wallaceobrien.com