Business of Speed

The Money Behind the Motorsports Industry

By: Tim Frost

Date: April 1, 2019

We know how hard motorsports professionals work at the track, but this month we will examine the off-track business activities of motorsports industry professionals.

Life as a driver, crew chief, and team owner can be a lucrative endeavor. However, similar to time between races a substantial time is spent working away from the track.

The length of a career can also vary widely. Many will stay in the sport for years, but factors such as funding, sponsorship, performance, management, and manufacturer support will play a big role. The development and importance of safety has contributed to the longevity of driver’s time behind the wheel.

Many are taking a proactive approach to the next stage of their careers. Traditional paths lead to the broadcast booths, studio shows, team ownership, or driving coach. The racing family receives the familiar face and voice warmly.

Motorsports requires being resourceful. Define the problem and develop a solution. To be competitive, stay motivated and take calculated risks and most importantly be passionate.

The importance of teamwork cannot be underestimated. Working with engineers and mechanics requires cooperation and specific understanding of strengths and weaknesses. Staying focused is key to taking the checkered flag.

These are qualities that it takes to be successful as an entrepreneur.

The transition from the track to the business world can be challenging. Developing and maintaining an identity away from the car requires a commitment.

The status of being a former professional driver can have its advantages. The ability to network and leverage relationships may be enhanced by the celebrity status. Demonstrating humility and grace will get you beyond the open door.

The typical model has companies utilizes drivers at brand ambassadors. Brands will leverage the power of stars to market products and reach consumers. These relationships remain central to marketing strategies, but equity-based partnerships are emerging.

Since retiring, Jeff Gordon has taken a multi-directional path. It has primarily focused on motorsports and automotive sector. His on-track performance served as the basis for a unique relationship with Rick Hendrick. Post-driving ventures include car dealerships, team ownership, broadcasting, vineyard and his charitable foundation.

Brad Keselowski has recently launched an advanced contract manufacturing company. The goal is to utilize 3-D printing to develop products for the aerospace, military, and other industries. Along with his father, they had experience in the design, engineering and manufacturing of race car parts. They would rapid prototype parts in a shortened product-development cycle.

Many drivers have off the track business ventures. Fernando Alonso has taken an ownership stake and board position in a motorsports gaming company. Kevin Harvick a sports management agency, Sarah Fisher a karting entertainment center, Max Papis owns a steering wheel manufacturer, Bobby and Terry Labonte started a chassis business and Dale Earnhardt Jr. has entertainment venues.

Another trend we are seeing is athletes as tech investors. They are becoming early stage investors in start-up companies.

The ability to engage directly with fans and develop a personal brand is a driving the influence of individual athletes. Access to investment opportunities with venture capital fueled by technology and transparency is lowering barriers to entry.

Professional sports creates high-net worth individuals. This allows for deal consideration and the ability to invest and deploy capital. Leagues are doing a better job of educating their athletes for life after sports with tools for responsible financial management.

The ability to invest in a familiar industry aligns with the personal affiliation and experience creates natural synergies.

Sports tech offers many opportunities. Wearables, data, and safety are only a few of the areas that are ripe for investment. Technology, venture capital, and sports are coming together for funding rounds resulting in higher valuations.

Motorsports and investing in start-ups can be high risk and return, but following this line around the track may result in a successful performance.