Risk of Ruin
Audio documentaries about risk takers.
Risk of Ruin
Startup Sports League
Jake Hoselton is the CEO of Grass Clippings. Pete Wilson is the CMO of Grass Clippings. Howard Lindzon is the Managing Partner of Social Leverage.
The guests talk about trying to build a new high stakes par 3 golf league.
Links:
2024 Grass Clippings Open
https://www.youtube.com/watch?v=6cX0ktag2kA
2024 Good Good Desert Open
https://www.youtube.com/watch?v=PE7t7K173-U
Follow Grass Clippings on X (formerly Twitter):
https://x.com/GrassClippingsc
Follow Howard Lindzon on X (formerly Twitter):
https://x.com/howardlindzon
Follow the show on X (formerly Twitter):
https://x.com/halfkelly
Support the show links:
https://docs.google.com/document/d/1YTMUqap_Z0D9832cOl5wYxUs16Byr6xx-iAZzrRL3VU/edit
The grass clippings open gave us the idea to go down two routes that we've been running parallel for the last five years, which is let's go build the greatest entertainment based lighted par three golf course in the world. And then second, but third, not second, equally, Parallel Paths, is let's create the Grass League, which is the world's first high-stakes, competitive, par-three-based golf league.
SPEAKER_02:You're listening to Risk of Ruin. I'm Jon Reeder. This is Episode 40, Startup Sports League. This episode is about a business that is trying to do something which, on first impression, seems kind of impossible. They're building a par-3 golf league with the idea that one day it could be worth a lot, as in at least hundreds of millions of dollars. Now, I've been thinking about this as I've been making the show, and I will just walk you through my thinking so that you can know where my prejudices lie. My first thought was, how cute. This seems like something that would be on a regional Fox Sports station on a Tuesday afternoon. So, you know, good luck making that huge. But since then, I have migrated to probably a long shot, but there is definitely a path for this thing to become wildly successful. And if it becomes wildly successful, it will be because of the unique way that sports hits the human brain. I should also say that this episode is going to be a departure. You know, we're usually talking about something like card counting or beating sportsbooks or arbing credit card rewards. It's just find some small edge and then hammer it again and again. It's all very linear. And the concepts that will get you through most shows, i.e. a little math and a little logic, might not be that useful in this episode. Because human behavior is famously resistant. to being constrained by math or logic, especially when it comes to sports. Let me give you an example. Remember the good old days of college football when it was an open secret that college programs were just minor league pro teams and it was widely assumed that most schools were cheating NCAA rules, at least a little? There was a predictable rhythm that played out where some football team would get really good, win a bunch of games, and then in three years they'd be on probation. because the running back got a T-top Trans-AM just to show up to campus. That actually happened in the case of Eric Dickerson. I mean, this is crazy, but at one point, half of the Southwest Conference's football teams were on probation. And I don't think that stuff was really limited to just Texas or just football. The legendary basketball coach, Jerry Tarkanian, used to kind of joke that he liked transfer players because they'd already had their car paid for. So think about the people making the payments in these stories. Think about the relationship that the alumni boosters had with their college sports teams. The booster would be like a Dallas real estate developer paying tens of thousands of dollars, sometimes more, to support a team he didn't own. Keep in mind that when you pass an envelope of cash to a linebacker, the Board of Regents doesn't give you a wink and put your name up on the new medical school. to make you whole, and you don't get to hoist any trophies at the end of the season. If anything, your involvement only becomes known through an NCAA investigation, where you end up looking like a low-level dirtbag. I wanted to start with that example because it's the most preposterous. You know, paying the payroll for a team you don't own. But I could think of 100 people Adjacent examples. What about when taxpayers foot the bill for a new pro stadium? They know they're not really getting anything in return, except they get to keep rooting for their team. Or the complete homer that punts$100 every year on his 80-1 national championship bet, and it never comes close to cashing. So these acts are not motivated by economics or risk-reward. which are the building blocks for most of our episodes. No, the unique opportunity with sports is that they get at something more basic, which is that they allow us to express an identity. We use sports to signal inclusion in a group and also the way that we are distinct and special from the other group members. And sports businesses have a rare ability to tap into this thing where customers are making choices based not on dollars and cents, but based on how the customer sees themselves. We're going to come back to this idea, but first I want to get started with our guests. This is Jake Hoselton. He is the co-founder and CEO of Grass Clippings.
SPEAKER_00:We grew up with 250 golf courses within 50 miles of us, right? And people come to Scottsdale to play golf. And so the game was very near and dear to all of our hearts. At the time, Jimmy Hoselton, one of our co-founders, was trying to make it pro and And one of the three of us other guys were, you know, catting for him depending on all of ours availability. So we were really immersed in the golf scene. We were all creative guys and knew we wanted to contribute in some way to golf. For the longest time, we had sat on the name Grass Clippings. We just loved it. It sounded unconventional. It was, you know, we just loved the name. And then we also grew up being friends with one of the greens keepers of our home golf courses in Arizona and sort of got this behind the scenes view of golf and golf maintenance. And no one knew who this individual was at the course, but he was so important to the delivery of such a great product and the everyday performance of this golf course and just paired those two things together of this is a great idea and reason to create a golf brand is to, you know, sort of celebrate the grass beneath your feet and ultimately the silent hero of the game.
SPEAKER_02:There are five co-founders of Grass Clippings. In addition to Jake, the others are Pete Wilson, Connor Riley, Jimmy Hoselton, and TJ Forster. If you're a big Shark Tank fan, then Connor Riley's name might sound familiar. He was previously the CEO of Misto Box, which appeared on the show and made a deal with Mark Cuban. Here's Jake again, talking about the group's foray. into apparel sales?
SPEAKER_00:We really treated ourselves for the first two or three years as a full-bred apparel company where we were working with manufacturers in Los Angeles and overseas. We were working with people that do cut and sew for golf polos and t-shirts and shorts and stuff like that. We were working with hat manufacturers like Puka and Imperial and all of those hats, hat manufacturers to deliver And I think what we found, particularly on the cut and sew side of making clothes, is that when it's all said and done, it's pretty low margin. It takes a lot of time and capital to get to a point where... you have enough product to sort of have like a full offering of clothing. Because if you just have one thing, it's hard for people to be like, okay, yeah, I'm going to buy that. They kind of like having a shopping experience. And it's just really difficult. So it's like you're sort of bouncing back and forth in between things. like the drop game where you're dropping a new hoodie or you're dropping a new hat or something like that, or you're looking at collections for summer and then fall. And again, we were sort of bouncing in between those two things, trying to see what works, running Instagram ads, bouncing around from different agencies that can run ads or making hires of people that can run ads.
SPEAKER_02:We have had some other startup-y type guests on the show before. Burt Black and Betfair basically invented the modern sports betting exchange. Kyle Bode and Driveline launched the velocity revolution in baseball. In some ways, the startups are different from our typical guests, but there are still some things they have in common. Pretty much everyone has to come up with a hypothesis, go collect some data, and then start adjusting.
SPEAKER_00:I don't want to say it wasn't seriously at first but it was kind of it was like side hustle let's just have fun have a golf brand type of thing and just see where it goes and then Jimmy and Pete were both in commercial real estate and I don't want to say it's not the most fun business because half of my friends are in commercial real estate, but it's probably not the most fun business. And if you could work in golf or something that you enjoy doing on an everyday basis, then that would be interesting. And so that was what really drew them early on to being like, I want to have a creative outlet and be a part of something in an industry that I love. So It was side hustle for all of us for the first two years. It was coming out of our own pockets collectively to buy inventory from a merchandise standpoint and kind of grit and grind our way through the ads and stuff like that. And it was all like very low budget. It was low minimums manufacturers and it was low budget ad spend. And we were kind of just testing things, see how they went.
SPEAKER_02:All of the stuff I was talking about at the top of the show, i.e. the way that sports destroys ideas of rational economic actors and the way that sports allow us to be part of a group. Well, the other way to say that is that sports have a unique ability to support culture. The Grass Clippings guys were focused on this idea of culture from the start.
SPEAKER_00:From the start, we launched the Grass Clippings brand with... a golf tournament that was a two-person scramble on a par three course. The reason we did this is because we found ourselves more and more playing par three golf. And for all of the reasons of sort of like why people like alternative golf, because it's different from what the stereotypes of traditional golf are, where it takes a whole day from door to door. It's an eight-hour day. It's tucked in shirts and all of those things, which we ultimately love. We still don't stray away from those, but this sort of par three experience was missing. And so we found ourselves playing a great, well-maintained golf course called, par three golf course called Mountain Shadows. It's right in the heart of Paradise Valley. It's surrounded by very nice homes in a quiet residential town within the Phoenix Metro. And they treated Mountain Shadows like it was your traditional full length tucked in shirts golf course. And we just felt that that shouldn't be the case. You know, in par three world, it's a time where you should have music on and you should have a t-shirt and you don't need closed-toed shoes to go out and enjoy par three.
SPEAKER_02:We can put this next story in the category of things which are funny in hindsight, but only in hindsight.
SPEAKER_00:Our first tournament, we had a$50,000 insurance policy on a hole-in-one. And we did the insurance policy for like 164 yards. And the tee box was like two yards up for whatever reason. So it gunned at 162. So someone hits it, obviously, right? Goes nuts. They just won$50,000. So they pick up the entire bar tab after that. And there's like 600 people at the event at that time, like in the early stages. So he spends like$30,000 at the bar and he's wearing the receipt that's like two yards long. He's wearing it like the Miss Congeniality, whatever they're called, right? And we go to claim from the insurance policy and the head pro says, went and shot it and it was two yards short. And so the insurance policy is like, sorry guys, you know, can't help you out. You know, we signed that 164. And so going through that situation where, you know, it was one of our co-founders responsibility to cover that piece. It's like, oh my God, guys, we're just deep shit. How the hell are we going to get out of this?
SPEAKER_02:One of the ironclad rules of editing this podcast is that under no circumstances are you allowed to delete a story about a miscalculated insurance bet. But the really great part of the story is the guy blowing$30,000 of a$50,000 prize on a bar tab. He didn't go, sweet, here's where to send the check, see you later. From the very first tournament, there were signs that a culture was forming. The next voice you'll hear is Pete Wilson. He is the Chief Marketing Officer of of grass clippings.
SPEAKER_01:We have pictures and videos of him holding up the receipt that's literally from his head to his toe and everyone's going nuts and then he gets a call Monday and then he calls us. He's like, I got to call my wife, dude. Like, what are we going to do about it? And so we fought tooth and nail with the insurance company and eventually won that battle. The
SPEAKER_02:homes surrounding Mountain Shadows start at$2 million and go up from there, which, just to give you some idea, is like nothing. in Paradise Valley. But also, if you buy a nice house on a golf course, you don't really care about this tournament happening in your neighborhood. That's not even close to moving the needle. Here's Jake again.
SPEAKER_00:We broke Mountain Shadows' food and beverage records for golf tournaments. We had spectators out there. There was just this high-stakes, big event environment. And while... We had broken all of these food and beverage records and made them$100,000 in F&B over the weekend. They also had a list of reasons that they were upset with our tournament because we were too loud and the music we had on too late. And you couldn't have live music in Paradise Valley past 8 p.m. And neighbors were complaining that spectators were walking through their backyard and all of these things where we were like, we need to find a course that We can play under the lights that we can light. There's no sound ordinance and there's no neighbors. There's no residential around the property.
SPEAKER_02:The idea that they were going to get their own golf course sounds very sensible. And also, wait, what? How are you going to have your own golf course? It kind of sounds like you're struggling to sell polos, but Pete says it was obvious.
SPEAKER_01:I have a marketing background. It was just, I told the guys, We need to go find our own golf course. And for a few different reasons and lighting it, a lighted golf course in Arizona couldn't make more sense. And it's not as if we're coming up with a new invention or recreating the wheel. We're literally putting lights up on an existing golf course. So it shouldn't be that crazy. And then On top of that, too, the ability to host your own events and not have a private owner breathing down your neck and saying, no, I don't want that. The housing, the residents here are pissed about this, that, and the other really deters success when it comes to throwing golf tournaments. I wouldn't say a clear recipe to throwing a golf tournament, but there's a clear feeling, a clear environment for a golf tournament. And if you execute that, the upside is unbound. It's everything. So getting the golf course and being able to control certain things like, hey, putting grandstands here, putting this there, putting music on this hole and doing unique things was what was the real value.
SPEAKER_02:One reason my view of grass clippings went from neat to, wow, this is really interesting, is that if someone tries to do something that is nearly impossible, and then they succeed, you should probably pay attention to the other things they're doing. So let me try to explain how impossible it is to actually execute Pete's idea. First, there are a bunch of site selection constraints, some of which are in conflict with each other, like finding a course with no neighbors that also has a great location. Plus, it should be a par 3 course, which is a minority of all courses. And you have to figure out where to get the money. Don't be surprised if potential investors are sure you're going to bulldoze the fairways and put up condos. Then, when they find out that no, you actually want to operate a golf course, all you hear is, click. Well, despite the challenges, these guys found their Goldilocks site. The Rolling Hills Golf Course is a par 3. It's in Tempe on Mill Avenue. So if you've ever been to the row of bars at ASU, the course is just up the road. Actually, the location is pretty incredible all around. It's half a mile from the 202 freeway. It's three miles from the 101. The airport is a 10 minute drive and Old Town Scottsdale is probably 15 minutes. Then either the best part or the worst The good news is that if you want to make a deal with a government agency, they will have motivations that differ from a typical seller. The bad news is that the process will take years, and the ultimate decision will be some mix of rational selection and politics. This is Jake again.
SPEAKER_00:The first moves were the city manager and the seven council members of the city of Tempe, a casual meeting to say, you guys have the Rolling Hills Golf Course. It's located in Papago Park, which is basically the central park of Phoenix. And your numbers are public, so we can see that you've been losing an average of$230,000 on a trailing 10-year contract. basis, right? And we as golfers and as folks in the golf business know that this is a completely underutilized asset, right? You have 93 acres and you have 70,000 people that are coming to this beautiful 93 acres on an annual basis. Would you be open to us investing 10 to$20 million sort of spitballing like Let's make a sizable investment to redo the clubhouse and make this something that's attractive for golfers and non-golfers. And while we're at it, become Arizona's first lighted golf course. And so it sounds pretty good, right? At face value, they saw that. They were like, yeah, this sounds incredible. They had a concession agreement with a company that was... The contract was coming up and they were like, this is all kind of perfect timing. As you guys know, we have to do an RFP and we would love for obviously you guys to submit on it.
SPEAKER_01:Everyone's been pitching the city of Dempe about putting industrial properties, putting apartments, putting this, that, and the other. It's deed restricted by Congress to remain recreational. No one had the idea to pitch the city about a golf course on a golf course. redoing them. So when we approached them with all this energy and this, this brand new idea and how we're going to bring life to this property, they were like, wow, this is, this is much different than the other pitches we get. So.
SPEAKER_02:When you deal with a city, you're never quite sure how much of the work you do will matter and how much effort will be completely wasted. So I asked these guys, what did you have when you approached the city? Did you know how much money you would need? Did you even know where you'd get the money? Their approach was more just, if the city said yes, they'd figure out how to get the money.
SPEAKER_01:We put together a rough pro forma or a rough price on the entire project before we approached the city, did some minor due diligence on the lighting, It was a round number, something in this ballpark. So we're like, okay, yeah, this works. Now we should go approach the city. We wanted to make sure that this was actually feasible before we started talking to the mayor and city council and everything. And then once those discussions went well and they seemed to be in agreement, we really started to fine tune those details and those numbers. Yeah.
SPEAKER_02:I found this idea because I follow Howard Lindzen on Twitter. You may remember an early episode of this show about Howard. On his own, and through his fund, Social Leverage, he's invested in a bunch of companies, the most famous of which is Robinhood. But Robinhood is also emblematic of the companies Howard backs, because he is very focused on this idea of having skin in the game. For example, he invested in the stock and crypto platform eToro. He backed a company called Commonwealth, which fractionalized the ownership of a Kentucky Derby winner. Also, if you've ever seen the cash tag on Twitter, which is the dollar sign followed by a ticker like NVDA, so a very fundamental building block of FinTwit, well that was created by StockTwits, which Howard co-founded. Here's Howard Lindzen to explain how he got involved in a golf course.
SPEAKER_03:So I don't do real estate. So I said, real estate sounds interesting to me, but let me introduce you to some local friends who do real estate deals. So I was not going to do... I said, I'll participate, but I don't know how to structure a real estate deal. I know what I know. And I introduced him to my friend, Gary, who structures deals like this in Phoenix, and he loved it. So I let them work on the real estate side. And what we did is structured an investment to... participated in all the aspects of it, you know, a blended investment that gave our fund some real estate to protect potential high risk of the league. And it was just a weird, you know, that's what kind of seed investing is. It's not always, it doesn't always look the same. That's what's part of the risk.
SPEAKER_02:I have to say that I am still shocked that Tempe chose this group. City councils are generally trying to do a good job. for their constituents, but they tend not to be risk takers and are almost never described as innovative. Most of the time, they will do the thing with the least potential for blowback.
SPEAKER_00:There were other companies that responded. There were six total, so we were one of six. The other five were traditional golf course management companies. I think All credit to the city of Tempe. The reason that we won, honestly, was just the entrepreneurial spirit. I think a lot of the other bids were probably comparable to traditional golf course management companies. They're like, we'll come in, we'll put a couple of million dollars of upfront capital investment, and we'll be more efficient with our agronomy program, and we'll run this golf course and turn your$250,000 into$250,000 profit instead of a loss. And we just had a much bigger dream than that. We were like, no, we want to attract 400,000 people on an annual basis. We want to have a concert venue. We want to do farmer's markets and car shows. And we want to look at these 93 acres as not just something that golfers... view as a place they can go. But literally everyone in the city of Tempe and in the surrounding area looks at golfer or non-golfer as a place for them to go. And so credit to the city of Tempe and I guess credit to us for having and dreaming big, but we won that RFP, went into lease negotiations and now have a 50-year lease on the property and are currently about halfway through the the renovations to sort of do all of those things. First thing we did was deliver the lights so we could operate night golf and sell beers. And right now the clubhouse is under construction.
SPEAKER_02:Some of the plans for Rolling Hills are fresh and new, but these guys also don't try to recreate every wheel.
SPEAKER_00:We assembled a very strong team on the real estate side and on the food and beverage side. And we brought in Troon to manage the golf course. So they're able to provide insights and we can plug in to all of their national accounts to get our costs down. They're one of our most valuable assets. And so we put together a very compelling investment package on how we're going to operate this golf course and what we're going to do with the$15 million. That's where the number landed. And we raised all equity from people that are primarily local, love the game of golf, and want to be a part of a great place in the city.
SPEAKER_02:If you're looking for someone to help you put lights up for your sports field, the list isn't super long. Here's Pete.
SPEAKER_01:We had a connection through one of the golf designers and another guy in the golf industry was like, yeah, you got to talk to Musco Lighting out of Iowa. And we had a quick meeting. And after our first meeting with them, we were like, I don't know who else we'd go with because they're state-of-the-art. They're doing courses overseas. They're doing all the new professional stadiums, the lightings for that. I mean, it was a pretty easy decision. And when you walk out of the meeting with Musco Lighting, you're like, okay, This idea of lighting a golf course, isn't it crazy anymore? They're like, yeah, just it's going to be X, Y, and Z. Here's the price and it will take us this long.
SPEAKER_02:While I was making this episode, I was kind of going through the grass clipping social media to see what people were saying. I found a response to an Instagram story that said, hey, I used to play this course for 17 bucks. Now it's 55. So I asked Jake, how have things been going so far?
SPEAKER_00:at the golf course once the lights turned on, which was December 1st, 2023. And that was our first phase of development. First thing we did was let's get the lights permitted and let's put them in. That had an immediate effect on up and to the right. There are more golfers out there. There's more not even more. There's more corporate events like corporate events didn't exist at the old Rolling Hills golf course. Now there is like beyond entreat where If I'm going to have a corporate event, let's do it at night under the lights where we can have cocktails and music and make it fun because we strap speakers to the light poles as well. It's truly an awesome place to spend an evening. It's the only lighted golf course among 250 golf courses in the valley. Literally, every single night, we're looking at a sold-out tee sheet. There's that many golfers in the Valley that want to play night golf on any given night. We're booking two weeks in advance for night golf.
SPEAKER_02:The plan for Rolling Hills also isn't limited to just pray to God that people show up to golf at night. Pete says they have lots of ideas.
SPEAKER_01:The idea was we want people to come to the golf course and not have to golf. If you can attract me to somewhere where I have multiple things I can do and multiple places I can spend money, drink, eat, that was the idea. And I have three kids of my own. It is really tough to find places with grass and open air. Like going to a restaurant with our kids is a nightmare. An indoor restaurant is a nightmare. Going to a golf course with an event lawn, with a nice restaurant, an outdoor bar a jumbotron for sports games and a family atmosphere, I can go to that location and not even realize I'm at a golf course.
SPEAKER_02:I asked Pete about the jumbotron and whether you could do something like have a March Madness viewing party. He said, sure, but
SPEAKER_01:why stop there? To put that in perspective, we have a company that wants to do a live boxing match for 2,000 people on our event lawn next year with tables and everything and then in the center of it would be a boxing ring, uh, with the jumbotron on the back. Like in reality, like anything's possible and we love creativity and we want to throw unique events. So, um, yeah, the jumbotron is just kind of, it to us was, was mandatory. It's like, you gotta have a viewing experience and in the, in that, in that jumbotron can play, you know, March madness and let people bet on it. Or it could be our, one of our grass league events going on out there in the leaderboards up there.
SPEAKER_02:There's potential to recreate this model in other cities, although that idea runs into some of the same challenges that made the first course unlikely. I
SPEAKER_00:think other markets that are similar to Phoenix are the usual suspects. Southern California, great market for it. It's a little bit hard real estate-wise to find 60 acres in Southern California and make it pencil. But Las Vegas, Dallas, Austin... and kind of keep going down the sunbelt of the United States. And there's some spots where this can happen. And we're actually also not the only one building lighted par-3 golf courses. There's a whole wave of them. There's people that own existing par-3 golf courses that have seen what we're doing and are like, well, shit, I should probably light my golf course, right?
SPEAKER_02:I want to move on to the par three league now. And I think that because it does sound a little odd, the first thing we should cover is the fertile ground that could allow it to flourish. Here's Pete.
SPEAKER_01:Golf is like the most participated sport in the world. You know, not many of us have the ability to go play in the USFL or the XFL. I would break every bone in my body. I myself, my dad, who's 73, can go both hit a pitching wedge and talk smack to each other. That's very, very unique to be able to bring everyone there in an environment like that. Again, there are 117 lighted golf courses in South Korea. There's 20 in America. And then when you couple that with, we truly believe the property we're leasing is in the best location in America for what we're doing. When I talked to Jake, he mentioned alt-golf,
SPEAKER_02:which I think means any golf that doesn't happen on a traditional course. Probably the most famous example is Topgolf, but there are other golf entertainment venues. Actually, there's a 40,000 square foot putt-putt concept that's opening in Mandalay Bay. And Rory McIlroy has his own putt-putt company.
SPEAKER_00:Non-traditional golf, eclipsed traditional golf, the amount of non-traditional golfers eclipsed the amount of traditional ones. And that number is sort of hovering at the same, like 50-50. So there's this whole wave of alt-golf, like putting shack and the driving range stuff with top golf. People are playing alt-golf. People are playing traditional golf. People are consuming, from a media standpoint, consuming traditional golf. sort of like they have been. I think those numbers have kind of been going down. But what has skyrocketed is consuming alt-golf. Looking at the Instagram accounts and the YouTube golfers, we hosted at Grass Cookings Rolling Hills, we hosted the Good Good Desert Open, which brought in all the YouTubers in the golf world to come play the week of the Phoenix Open. That was broadcasted by NBC and Peacock. And it was like a raging success. It was sort of this alternative way to consume golf, much younger demographic than if you look at traditional golf when it's a standard tour stop on a Friday afternoon or Sunday morning.
SPEAKER_02:There's an alternate very short pitch for this league that would be something like, you know, the 16th hole at the Phoenix Open, i.e. ground zero for the biggest party on tour. What if we made an entire league based on that idea? Now, I don't think the guys would describe their league exactly that way. But if you listen to Pete, you can also tell they don't mind if people draw some connections to the Valley's much bigger tournament.
SPEAKER_01:We always like to reference the Phoenix Open here in Arizona, which is now the biggest golf tournament in the world. But not too distant time ago in the 90s, there were no grandstands out there. But there was a sense of understanding that there's energy behind it. There's a trend here. This tournament is picking up, picking up, picking up. When then Tiger Woods hits a hole in one and starts going like this, fist pumping, and there's one little tent behind 16, you could tell you're like, this is going to become some spectacle someday.
UNKNOWN:Yeah.
SPEAKER_02:The 16th at the Phoenix Open is an example of the way that sports can create non-linearities. Because there are other famous holes in golf, like the Road Hole at St. Andrews, or all of Amen Corner at Augusta, and probably half of Pebble Beach. But they're famous because of the actual course design. The 16th at the Phoenix Open is notorious for another reason.
UNKNOWN:Just moments ago...
SPEAKER_04:Sam Ryder is taking it right out.
SPEAKER_02:There are luxury boxes surrounding 16 built three stories high. Individual seats in these boxes go for a couple thousand dollars. The most expensive seats are actually on the tee box and they go for 6,000 a pop. So if you look at a list of the greatest holes in golf and the first nine are pretty much a golf architect's wet dream, But then the next one on the list is where you pay$2,000 to have the other fans shower you in beer. That is what I mean by nonlinear. And then talk about a shared culture. Spend a day at 16 and you'll see endless examples of people showing their inclusion in the group and also the ways they are special compared to other group members. There's kind of a uniform, which I will just describe as a very fresh golf outfit, which may or may not ever get worn to actually play. Imagine like the golf prom. And hats, lots of hats with logos to prove that you have golfed in a very rich place on a very rich course, like a members-only club in Jackson Hole. But this culture also took decades to form.
SPEAKER_01:There's a lot of rules and there's a lot of no's. We like to say we're the course in the team, in the league of yes. Like, yes, let's do that. Let's have fun. Let's get people excited to show up, play golf, and play. like you said, party, have fun around the amenities we're providing. So, you know, 16 was a, was it, was an inspiration, but there's multiple tournaments, multiple experiences that we all drew from that. Um, we're just trying to create a more lighthearted environment for people to come enjoy golf. And, you know, like everyone likes to say, hopefully grow the game at the end of the day.
SPEAKER_02:I am going to offend traditionalists here. So this is just a trigger warning. If you are the type of fan that, that likes four-hour baseball games, or if you tune into NFL games to watch a sequence that goes touchback, run, run, incompletion, punt. If that's you and you really like a defensive chess match, then just skip ahead 30 seconds. Okay, for the non-masochists, I think we can agree that we like sports because they are exciting. And what's the best viewing experience in all of sports? The full credit answer is the NFL red zone. It's just this very simple idea of giving the viewers exactly what they actually want to see scoring. Well, as Pete says in a par three league, every shot has at least some chance of going in the hole.
SPEAKER_01:If you look back historically in golf and you were to ask someone who knows a lot about golf, tell me the best 10 shots in the history of golf. I'd be hard pressed to believe someone would say, oh, that one time Tiger Woods hit a drive on hole 16 at the Masters. No, no, no. He's going to say it's when he chipped in or hit that hole in one at the 16th hole at Phoenix Open or the putty made or this. All of the action, all of the broadcast moments, the memorable moments happened within 175 yards and in. And we thought to ourselves, you know, and from a broadcast perspective, people love to see leaderboard changes, love to see birdies, love to see just drama opposed to someone pulling away winning by 10 strokes. So we thought to ourselves, if we condensed everything into a par three environment, you're going to get more excitement, more entertainment.
SPEAKER_02:You can go online today on YouTube and on HBO max and watch a replay of this year's grass clippings open. There are some things you'll notice right away that set it apart from other tournaments. For instance, one of the golfers was drinking a high noon while he was playing while his team was tied for the lead. Oh yeah. And Johnny Manziel was on a team. Yep, that Johnny Manziel. If you're wondering how good the golfers were, the best way I can explain it is, good enough. Most of them were former college players. They swing confidently, and they're surprised when they don't hit it well. But the thing I wasn't really expecting was how great the course looked. You get the dark night sky, the city lights in the background, and then the bright green grass. Also, however cool it looked at night, it looked 10 times better when the sun was going down and the desert sky was a mix of purple and orange. So this course is made for the era of TikTok and Instagram. Here's Jake again.
SPEAKER_00:In my opinion... And from a lot of feedback that we've got and survey work that we've done post-tournament was the most unique fan experience at a golf event ever. It was a combination of under the lights. So you're having your cocktails and beers and you're in the hospitality areas under the lights and at night, which is just fun. And the site was cool. We built out hospitality with Pro-M who builds out all the tents and we surrounded the tea boxes and greens for the final three holes. There were around 3,500 people on property each day, which is nowhere near what the Phoenix Open does, but in a very condensed environment, it definitely felt like it was fun. In all of the hospitality, we had music and DJs playing music, and that was while the golf was happening. So people were just, they were enjoying themselves. And then after the golf on both the Friday and Saturday, we had a full-blown gigantic stage that was country music both nights. We had Easton Corbin on Friday and then Lanco on Saturday play golf. They're both country acts. There's a lot of country fans in Phoenix. And so it was just a really cool environment to go from... All day long, it was golf and music and food experiences surrounding competitive golf with really good shots being hit. There was a million-dollar hole-in-one on the 18th hole. So people were spinning them back and the place was going crazy. The lights were on. And then after that last putt fell each night, it went straight into... you know, like a full production live music concert.
SPEAKER_02:At this point, we've heard about a clothing brand, a golf course, and a league. I mean, that's a lot. So it might help to hear how that all fits together.
SPEAKER_00:GC Mothership is what holds all of the IP and what holds the grass league, which is the primary focus of grass clippings at this point. And then the golf course sits in a more, not in a more, it's a real estate deal, right? It is, here's our financial model, money comes in, money goes out, para-pursue back to all of the investors in a waterfall format with a preferred return. And then there's a promote for the general partner on the real estate side once we've performed on the LP and the preferred return. And so that's set up exactly like a real estate deal, targeting a compelling IRR for the investors. And then the venture side is in the mothership, sort of in the IP holding company that owns the Grass League. And the relationship between those two is it's a branding agreement from Grass League to the golf course to call it Grass Clippings Rolling Hills and for us to ultimately manage and sort of be the rodeo clowns of the golf course where we bring in all the energy, we bring events and bring partnerships to the golf course. And the golf shop has a bunch of cool swag with collaborations of interesting and creative companies. So we're in the background working on making this the most unique and welcoming and engaging golf course from a brand standpoint and then operating the league as well.
SPEAKER_02:Jake says that they separated out the real estate from the league just to make sure that each asset would have the right investors.
SPEAKER_00:A lot of our LPs on the golf course aren't investing in startups where it's like, yeah, no, I don't know the IRR. I don't know if you'll ever get your money back type of investment. They felt a lot more comfortable with the real estate where it's like, no, these are actual assumptions that are comped from real life things. The idea for the
SPEAKER_02:league is basically to catch lightning in a bottle. It will require really stunning success at decently long odds. So it might be nice to have investors that have backed that kind of thing before. That's where social leverage came in.
SPEAKER_01:we only went to social leverage. Um, and they, they seemed like the right fit right off the bat because they were in our backyard. Um, you know, Howard and Tom, uh, had experience in golf with golf now. And, um, I don't know. It just, it just felt right to the point where it was like, why are we going to go on this, um, this road show trying to get money when, when the right partner sitting right across the table from us. So, um, you know, it was, it was love at first sight, I guess.
SPEAKER_02:I remember a website from back in the day called golf 602, where you could search for tee times by filtering stuff like Phoenix East Valley after one o'clock and under$20. Eventually that site became golf now. And one of the investors in that business was Howard Linson. If they could win that lease,
SPEAKER_03:they have a nice business. They deserve, you know, whatever riches they get from fighting with their, you know, not fighting, but like working through the city. for three years to try to win a golf course. That's how you make money in the world. You find an arbitrage or an idea that no one's willing to work hard on, and you make money by doing all that grunt work up front, like any founder would do, except this isn't a tech company. This was a lease. So instead of product market fit, there was guaranteed product market fit with their idea of building just a fun par three golf course. And so I said, if you win that, you got something. And they had a bigger vision around what if we created like a kind of a league around part three golf. And so that was kind of evolved over the next six months while they were still working through the lease. And then they won the lease. And then we had to make a decision, you know, do we. do something beyond the lease. And that's how we set up the separate company, which is the Grass League and Grass Clippings from the golf course. So it's a little more complicated than just a simple angel investment. There's kind of a few entities. The one is the golf course, which is a standard kind of boring, Risky real estate, you know, can we fill butts in seats and sell tea times and pay the rent and pay the staff? And I felt that was a no-brainer, but not a venture capital deal. And then what could we do that would make this more of an interesting media slash software company? And that's where we came up with the lead.
SPEAKER_02:Social leverage usually invests in 20 to 25 companies per fund, and they're all basically long shots.
SPEAKER_03:For example, if our fund is$100 million and we invest, we'd like to think each one of our investments could return the farm. That's how we kind of pencil it out. So it doesn't have to be a unicorn if we own enough of the company or even a venture company. If we own enough of the company and it's a good idea and an exit at$100 million or$200 million leads to returning our capital, great. I don't want to compete. There's no rule book. There is kind of a rule book for venture capital, which is, you know, what is the TAM and blah, blah, blah. And I never fell into that bucket. The luck of the Web2 era, 2009 to 2021, was everybody gets to be a millionaire and everybody is entitled to have lollipops and balloons and everybody should have a unicorn in their pocket. It was fun. I mean, everybody, it was, if you didn't have a unicorn, you're a shitty investor. So when we think about seed investing, we're thinking about RLPs and what makes sense on evaluation, what percentage ownership we have, and what would this look like if they were successful? And if we think it can return the fund and that we know who the potential next investors could be and how much capital they're going to need and yada, yada, yada, then we go through that process. I mean, try not to think about is this venture or not, but that is an important thing, but that's not the only thing.
SPEAKER_02:We can't talk about upstart golf leagues and not touch on the live tour. They're paying hundreds of millions of dollars to their players. And they're also kind of sucking wind in the viewership department. Some weeks they draw a quarter of the viewers of a PGA tournament. And even when the PGA doesn't have anything on live draws, just half, of a PGA audience. So if you know there's a league out there throwing money at any golfer with a name and they don't have a lot to show for their effort, that is like ringing the dinner bell for an arbitrageur.
SPEAKER_03:So part of the sexiness of doing things like this is that they're unsexy and that they're subscale. And that's how things change. Listen, Lim spent fortunes and years polishing and figuring this out with all, you know, with and fighting the media and fighting the world and getting Dubai money. God bless. Like they did it, but it wasn't an overnight success, like despite it at all. And it's still not a success. And who knows how much money they're burning? Our idea is to do the exact same thing with this little bit of money and make it very grassroots
SPEAKER_02:and far. I mean, this sounds pretty interesting, right? Get to create a sports league from the ground up. Here's Jake
SPEAKER_00:again. This encompasses looking at the major five sports leagues, looking at the NBA, the MLB, the NHL, looking at upstart sports leagues like Major League Pickleball or competitive sailing, right? And pulling the qualities that we love about those leagues and discarding the things that we didn't like so much and forming this league and ultimately what the team owners are buying when they buy a sports franchise in a par three golf league. We also spent a lot of money on the branding of the Grass League and what it looks like and the lettering and the brand guidelines around creating these teams. What do the Tampa Bay Swamp Dogs look like? What do the New York Bluebirds look like? What does Phoenix United look like? Because there were other leagues that we felt didn't do a good job with that. And we're not fans of a lot of these upstart leagues teams because the branding is just... so like vanilla and not interesting. And then ultimately spent a lot of money on the working capital to sell the teams and to get buy-in from media partners, right? Like that's not something that just happens.
SPEAKER_02:There's a bunch of interest in new sports leagues now, which is probably a direct result Sports is like the last wall of defense for broadcast television, but it's also a way to tap into niches that weren't really reachable before. Here's Pete.
SPEAKER_01:We had a partner for our first event and they said, yes, we worked with Warner Media or TNT Sports, more specifically Bleach Report and Golf Digest. They broadcasted it live on the Bleach Report streaming app. And then they did a VOD one hour recap on HBO Max that was different than the live broadcast. And then they broadcasted it, not live, but it still proved the point on TBS, a dumbed down version to an hour live broadcast, took four hours, shrunk it to one hour, all the good moments, and broadcasted it on TBS after the Astros-Yankees game.
SPEAKER_02:I'm sure you can imagine the potential that this format has when it comes to influencers. There's a YouTube golf channel called Good Good, which has six times as many subscribers as the actual NBC golf channel YouTube. And Good Good had an event at Rolling Hills. Well, just the replay of that tournament has 1.2 million views on YouTube. To put that in perspective, there are only a handful of videos in the golf channel's entire YouTube catalog with a million views. I think the most important point is that GoodGood connects with viewers through their personalities. And by coming up with interesting ideas for content, they're not reliant on having the best golfers to get views. Here's Howard again.
SPEAKER_03:On the internet and YouTube, you get to tell stories and people have followings, right? You know, in the day of the Olympics, way back before when it was only TV. It was up to the television to spend all their money and time promoting a figure skater or a speed skater, and they would spend weeks building up the personality of that person. Well, guess what? In the Web 2 era, a lot of these people have done that personality building and have their audiences themselves, right? And then TV doesn't want them because, like you just said, it's not sexy. But TV doesn't understand that this person may have 100,000 of their own followers on YouTube. You know, I don't know who the top 10 influencers on YouTube or TikTok are. I may know one of them if you mention them to me, but I wouldn't know. And they could have more followers than any pro golfer in the world.
SPEAKER_02:The Grass League is structured to raise very little money while also creating a very large valuation, which sounds kind of obvious, right? Except that is not the way that fundraising for startups happened over the past 15 years. During that era, most startups employed more of a burn the boats strategy, where they would raise huge war chests and then spend it all, trying to get big as fast as possible. We look
SPEAKER_03:at companies like, okay, everybody's doing it one way. The world's different. How little can we raise to build a big company? And I think that's the new hack. It doesn't mean the old model doesn't work. It just means Everybody's playing the way that the world was going and we're open-eyed to the idea of what if we did it this way? So more about the business model than it is about the software and the tech.
SPEAKER_02:Howard mentioned to me that the Drone Racing League had recently sold. So I went back and looked at the history of that league. They raised a few million in 2016 when the league formed, then raised maybe 75 million total in Over the next eight years, before the league was sold for$250 million.
SPEAKER_03:Drone League just sold for$250 million. To us, a league is worth whatever someone's willing to pay for the team and then what the revenue media rides. So it's too early to say it. What we figured is, you know, at this valuation, the math made sense that if you get to a$250 million valuation, it would probably be about$50 to$100 million in value. sales of like media uh and sponsorships we just didn't think it would be that hard meaning it's hard but we just thought that's possible and we had the other idea that you know and it was inspired a lot by nft era is that the teams would serve as a way to raise equity so you wouldn't have to keep raising money from venture capitalists so the the the trick to this idea is instead of going to a venture capitalist let's just increase the value of the team by having a tournament successfully and running the tournaments close to profitable and eventually profitable, the value of the league goes up, the value of the teams goes up, and instead of Raising$10 million from a Metrocoplos, you could sell a team for$10 million.
SPEAKER_02:The Grass League will succeed or fail on attention. Can they get people to watch? And more importantly, can they get people to care? There are other revenue sources beyond media deals, but first they need fans.
SPEAKER_01:Sponsorship revenue, media deals, beer sales at our events, ticket sales, and... Merchandise sales, obviously, you can tell we're at the infancy stage of this, but a year, two years, three years from now, we want to look, feel, and be packaged together like any other sports league that has a team shop and I'm going to go on there and buy$300 worth of Phoenix United or Minnesota Muskie gear and
SPEAKER_02:Probably by the time you hear this episode, the Grass League will have sold about 12 total franchises and raised a little over$2 million through those sales. So add that to the million they raised on the seed round and it's plus or minus$3 million. then you can think of those franchises as just taking a different tranche of the overall idea. It's like, do you want a piece of the league or do you want to manage your own team? It should all be pretty highly correlated anyway.
SPEAKER_00:When you buy a team in the, in the, in the grass league, you are buying a sports franchise. So you buy a new market. Let's, let's use an unsold market for us. Let's call it San Diego. Since I'm here right now, if you buy the San Diego franchise, you, uh, you, buy it for a considerable sum of money. The first 10 were sold at$160,000. Those prices have now gone up given, you know, this is, we're now after the launch and the media and all of that stuff. You go through a branding process that the new team owner is a big part of. You can influence the name of it and the colors and the logos and everything, but ultimately it's got to fit within the family of brands of the other teams. And then, you know, From there, you have the opportunity to participate in the revenue share and the opportunity to land sponsorships for your team and ultimately field players in grass league events.
SPEAKER_02:I sent Jake an email and asked him about the more recent team sales, and he said that the latest ones will be roughly a quarter of a million dollars. If you're not sure what to make of that number, let me give you some context. I had never heard of professional bull riding, and so I had no idea that bull riding teams have been valued at$22 million. I have heard of pickleball, unfortunately. So it blows my mind that teams in that sport have sold for$10 million. There's also a sailing league owned by Larry Ellison, and apparently they sold a team valued at$40 million. So what's the point of all this? Is the argument that because these leagues have sold teams for millions of dollars, then the grass league teams valued at$250,000 must be a steal? I don't think that's it. I mean, usually when you have a willing buyer and a willing seller, the price they come up with is a pretty good indicator of what the true value is. But I do think the valuations in these other sports probably made it much easier to sign up owners for this golf league. Pete says they didn't actually have to make that many calls. to find their group of owners.
SPEAKER_01:We went into that process talking about like taking a left turn. It was like, we're going to go dial, you know, it's going to be the boiler room, Vin Diesel and us. We're going to be ripping phone calls to everyone trying to sell these teams. And we found out fairly quickly that a golf league and teams and franchises is for golf is something that was very, very well received and people had a large appetite for. So yeah, I was quite frankly, a little bit surprised how quickly the interest came in.
SPEAKER_02:Let's go through a few of the team owners, because I think you'll start to see the strategy for selecting partners. One franchise owner, Ben Herman, also owns one of the most exclusive golf clubs in all of Scottsdale, Silverleaf. Memberships in this club are Bye. Bye. Bye. Roger Ehrenberg is a former Wall Street derivatives guy and now invests in companies like Matthew Barry's Fantasy Life, Darren Revell's Collectibles Business, Jake Paul's Sportsbook, and also the betting exchange Smarkets. So if I go through that list, I get owner of an exclusive club, a guy that built media companies, a guy that invests in sports media and invests in gambling, along with some YouTube folks that built a channel from zero to 100 million views. Jake mentions a few more highlights here.
SPEAKER_00:We have an incredible pool of team owners at this point. We have Dave Roberts, manager of the Dodgers, who owns the Los Angeles Roses. We have Marty Fish and Commonwealth, the crowdfunding platform that owns the Hollywood Hitters. We have Manor Phoenix, which is an awesome culture, sneakerhead, sportswear company. a company that owns the Phoenix team.
SPEAKER_02:For now, there's no salary cap for the grass league, but you know, the kinds of people that can take a flyer on a franchise are probably also on the more competitive side.
SPEAKER_01:That's the cool thing about these franchises is it's, it's kind of harps back to the old town, old time golf. You know, golfers used to come over on ships from Europe and play in these matches against Americans and guys would, you know, front the money, front the expenses, do that stuff to make this come together. And they did it because they thought he was the best player. They had some unique connection to that human being and were willing to go stand behind him during this match.
SPEAKER_02:Pete is talking about a relationship between owners and players that is something like patronage. Well, Howard Lindzen is a team owner. So here's what he had to say about his golfers.
SPEAKER_03:I mean, I had the time of my life rooting on my no-name teams that were within two shots. And if you were to talk to the golfers, and I can tell you because we manage the team, the golfers had the best time. They felt the pressure. It was stressful, but they had a ball. Because, you know, it wasn't going to change their life either way, but they liked to win. And they felt there was good competition. And so I think that was the
SPEAKER_02:win. I think you can hear in Howard's voice something that I will call the degenerate hook. I mean, he was so close, just two shots off the lead. And that is the thing that will get you and keep you coming back to a game where you min-cashed. Pete says there's an upper limit to the number of franchises that are possible, but they plan to stay well below that limit.
SPEAKER_01:We could technically go to 54 franchises because that's what a shotgun is, 54 tee times, but that's too many. We can look at other sports leagues and see how many franchises they have, but we really think golf is unique in the sense that the fewer the better. Um, like we're going to most likely sell two to three more to put us to 13 this summer and, and, and then reassess from there. And, and, and again, part of this thing, part of this process too, is when we sold to the first owners is we're not just looking at you guys as being franchise owners, your partners, you're part of this league. Your voice is, uh, is, is imperative to the success of the league. So, you know, if the group decision was let's sell a thousand teams, uh, I mean, we'd consider it, but obviously that would not be the outcome. So in a perfect world, it would be somewhere of capping it around 20 teams, a little over 20 over the course of 10, 20 years. We have a long-term vision with this. We see this league going on for the ages. But yes, there's a lot of consideration about the amount of franchises. And in my opinion, scarcity creates value.
SPEAKER_02:All of this is reliant on the ability of the Grass League to surprise viewers, right? If their tournaments look just like the PGA's, but with worse golfers, that doesn't seem very promising. So they have to be able to deliver something unexpected.
SPEAKER_00:Ultimately, the best par three golfer in the world is yet to be found, right? And that's something compelling because we don't think it's Scotty Scheffler either. We think that given the demographics that are able to be competitive. You could have, in our format, on a par three course, you could have Jon Rahm, Anna Nordquist, and Freddie Couples on the same tee box, and they are competitive. Not only is that unique in golf, but it's unique in sports as a whole, right? This wide-ranging demo.
SPEAKER_01:It's easy to look at statistics on the pgatour.com or any golf site that aggregates amateur golf statistics and all that stuff and look at the best wedge players, best potters, bunker saves, all that stuff and draw a conclusion that, hey, this should be the best player. And that's where the owner should be looking for their talent is people that have been forgotten. But because of longer courses, they can't hit the ball that far off the tee. And it plays into this thing, this narrative that there are so many golfers out there that could easily be playing on the PGA Tour that just can't hit the ball 370 yards like Bryson DeChambeau or a Scotty Shuffler or Victor Hovland.
SPEAKER_02:I have no idea what to think of this claim that the best par three golfer has yet to be found. I am not a golf quant, but it kind of seems like that player is probably on either the PGA Tour or or the live tour. But the most important point is that these guys know how great it would be if the best par-3 golfer is a completely unknown player. Actually, I was reading a blog post by one of the franchise owners, and he called the Grass League, quote, the world series of poker for golf. So everyone understands how powerful it would be if they had their own Chris Moneymaker. Here's Pete talking about some of the levers they could pull with the format.
SPEAKER_01:We had run this tournament, a similar tournament in the past, and we had always said protect the field and honor the past. So we had stipulated in prior tournaments that certain qualifications would get you into the qualifier or the main event. And so we honored that. And those people that weren't on a franchise came in as independent teams and owned themselves or someone else owned them, which created some good drama where you had, it kind of gave off this feel as anybody could do it against these teams. Franchise teams who had very world-class players or high-class amateur golfers. But the model going forward is the majority, or if not all, will be on franchise teams. How they get there is a different discussion. People can go into a qualifier. If they qualify into the tournament, we're going to create a draft. And then the team owners can then have a live draft of the new players entering in to create a great media opportunity and create this feeling of you might be 55 and you qualify and you're getting drafted by the Canadian hat tricks or the Canada hat tricks. That is something that is so unique to this league. Again, being on a par three course, the demographics are 21 year old, kids to 71 year old male or female anybody has a chance to win and that feeling is rare to find in golf
SPEAKER_02:while i was making this episode it was pretty much a constant temptation to start poking around the web looking for amateur golf data that I could scrape and analyze. And obviously I have no stake in this league, but it was still an almost irresistible urge. Every time I thought about it, I just had to remind myself that it would be hours, days, or God forbid, even weeks of just purely wasted effort with no chance to profit from it. And I'm already doing a dozen other things that fit that description, but I still almost did it anyway. I mean, I'm thinking about it right now. At the top of the show, I said that sports has a unique ability to get us to act beyond reason. And the way I know this is because I can feel my brain doing it right now. But this does seem like a fun format to analyze. I asked Howard if he tried to moneyball his team.
SPEAKER_03:Part of it eventually won't be moneyball. You can't moneyball something that has no data. So really, this is more art than science than maybe the first 10 years. It's like, like I just told you, you take the driver out of, there's so many plus four golfers in the world, tens of thousands, you know, versus the 200 that can win on any, you know, PGA Tour event. There's tens of thousands that could win any one of our tournaments, including the best player. So in a world where 10,000 people could win any one day, that's a lot of people that would want to be in this tournament. Right. So there's plenty to choose from. As we saw from the first year's tournament, we didn't do money ball like my team, our team. We had eight players and we came in third. We picked two local great golfers because we knew who they were and they were within two shots of winning. And they went on to win the USGA four ball, our team, the actual USGA four ball. No one's ever heard of them. So again, there's just tens of thousands of incredible golfers who just have regular jobs and they just didn't want to waste their life thinking that they would get there. Or they tried for five years to get on the tour. And once you get to that level, you don't lose your game. And so it's more about... you know, a lot of work by the owner. So long story short, the owners had to do a lot of work at the beginning. Everybody's chipping in and the owners are equity holders, right? Like it's in their interest for a team to go from 150,000 to 10 million. So it's in everybody's interest to chip in.
SPEAKER_02:Jake said one of the reasons they focused on par three is because as golfers, it was more fun to bet on, which makes sense. Gambling 101 is that games become more fun as surprises increase and the fewer strokes that exist for skill increases. to overwhelm luck, the more surprises there will be. Well, that could also make the Grass League attractive for sportsbooks, too.
SPEAKER_01:DraftKings makes a lot of sense. They have a presence here up at TBC Scottsdale, but there's obviously other platforms like FanDuel and MGM and things like that. But no, that is a primary focus for us. Again, we're golf purists. And if you look back in the history of golf, gambling has been a part of it since the beginning. There's amateur tournaments around the country that have Calcuttas that are so romantic and so epic in golf that we want to bring that into the league and capture that. And we're just looking for the right partner that's willing to put up market and stand behind us because I think it could be very lucrative for a partner like a DraftKings.
SPEAKER_02:Sports betting was legalized with the idea that people are going to do it anyway, so you may as well tax it. But I don't think anyone could have really predicted the full extent of what happened. Who would have guessed that you could go on your phone and take the over-under on points for the fourth leading scorer on a WNBA team? So these sports betting companies have a nearly insatiable appetite for new menu items. And remember, the Grass League has lights up. They can broadcast in primetime. That's when Mr. I'm bored and don't mind donking away 50 bucks on a hole-in-one bet really shines.
SPEAKER_03:In two or three years, you know, it's going to be worth a drafting of somebody to have this inventory because it differentiates why you would sign up for their product. So... We think in that world, much like AI is to companies that have data, it's very interesting. We think companies like grass clippings or the pickleball that create their own sports, if they can get over the hump, which is high risk, of course, that's why it's a seed investment and the highest risk you can do. But if you get over the hump, it can be very interesting because now you've created something that all the gambling companies want because They have a unique inventory to help them sign up customers.
SPEAKER_02:Almost all investors will pay lip service to the idea of being contrarian. And yet every public market investor piles into the same eight mega caps and every VC dumps money into the same startups working on large language models. True contrarians, it turns out, are hard to come by. So I actually appreciate that a guy who made money from tech investments looked at a golf course and figured out a way to pull the trigger. This is Howard again.
SPEAKER_03:It's not typical VC in that it's not about scaling to a million users. This is more about build a business, apply technology, build a big business, and maybe a media company or someone comes along and says, wow, we will pay a few hundred million for the rights to own this whole league. But this will take five to 10 years at least for the other brand. That's the other thing. These things take time. There's no rush.
SPEAKER_02:I once heard a very smart person point out an inherent problem with this podcast series, which is that it is wildly infected by survivor bias, right? The people who try and fail are never heard from. So I think that the most compelling part of this story is it's still early days. They have big dreams, but we don't know how it all will shake out.
SPEAKER_01:How much would you be willing to write a check to buy the Masters or buy Augusta or buy the two of them? And you can answer that, but I would tell you the answer is it's not for sale. It's priceless. There is no amount of money. That group of people will not sell it. I don't care how much money you show up with. They're not selling it. And so from our perspective is we want to create something that is truly spectacular in golf, something that is truly priceless to where the people showing up, the people playing or saying something like, They said this year, they're like, this is the greatest golf tournament I've ever been to, like ever played in. This is, I'm coming off a day, like everyone's like, I'm coming off a high, coming off the golf course, playing on this. Like this is like, what is the next event? Where do I sign up? Take my money. So it's like, if we take the approach of looking at it, how can we do our best to make something that's truly priceless? So if you take that perspective, yeah, we need to increase sponsorships year over year. We need to strike lucrative media deals out in the future. Not so much today, but we need to do everything that other leagues are doing and follow those blueprints and follow those models. And we should just be just fine. But we truly believe we have the recipe for golf to not only captivate players, but the audience. And we can convert that into live broadcasts that can be filmed or broadcasted in prime time, which golf hasn't been able to figure out.
SPEAKER_02:Pete admits that they have a long way to go, but five years ago, they were struggling to sell hats. Two years ago, they got their own golf course. This year, you can go on HBO Max and watch one of their events. I actually said to Pete, what do you think about the fact that you guys were spinning your wheels, doing something that sounds kind of easy, and now you're making progress on something that seems impossible?
SPEAKER_01:Selling clothes is a lot harder than you think. And we always had, while we were selling clothes, we always had this grand vision of this is where we're getting to, but there was multiple steps to get there. But yeah, that's a funny way to put it because that's pretty true. Yeah, clothing is tough. You got so many different sizes, returns, this, that, and the other inventory. It's a crazy beast. And now that we have the league, not to say that the league is easy in any way because it's very complicated, but there's definitely... milestones that we're hitting fairly quickly with, with, with the league. But, um, it's definitely helped out the, the e-commerce clothing side of things too. So no one likes banging their head against the wall and it's really fun to get out of bed in the morning and work on something that's, it's, it's complicated, but like you said, is gaining traction and it's something you truly love. Like I can't imagine doing anything else, building a golf league and, and creating all the dynamics within it is something that, you know, that collectively we've all been wanting to do since we were very young. So we feel very fortunate to be in the position we are.
SPEAKER_02:Risk of Ruin is written and produced by me. Special thanks to two-time guest Howard Lindzen for doing this interview and for putting me in touch with the Grasshoppings folks. I also owe a big thank you to Jake Hoselton and Pete Wilson. I knew almost nothing about this league when we started. I thought it was a real estate arb or something, and they were patient enough to walk me through it. I'm going to put some links in the show notes so that you can check out the various events we've mentioned in this episode. If you want to get in touch with the show, you can email me risk of ruin pod at gmail you can also follow me on twitter at half kelly