Keith Bank: Venture Capital in Sports Technology (Full Transcript)

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Ronen Ainbinder 0:31

I'm pumped to introduce today's guest of the Halftime Snacks! This guest is a graduate of Wharton and Kellogg school of management. He grew up in St. Louis, started a business, and sold it to become an angel investor of companies in different sectors such as software, healthcare, and sports. For 26 years already, he's been the CEO of KB Partners – a venture capital and private equity firm that invests in early-stage sports technology companies with passionate entrepreneurs and strong management teams. Besides being involved with several sports technology companies – our guest is also the founder of Club Champion Golf – the nationwide leader in custom club fittings. I can guarantee this episode will be packed with interesting takeaways. So ladies and gentlemen, sit back and enjoy my conversation with MR. Keith Bank!

Keith Bank 1:22

Hey Ronen! Nice to be on the show.

Ronen Ainbinder 1:26

It's so great to have you on. Thank you for accepting our invitation to the show. I want to kick off our conversation with a quick icebreaker. a fun one. I want to know what the craziest thing that you have on your bucket list is? What's the craziest thing you're planning on doing?

Keith Bank 1:41

I don't know how crazy it is. But I am trying to play all of the US and world top 100 golf courses. And I'm getting very close to accomplishing that. I've got 99 of the top 100 in the US and 81 of the world's top 100. So hopefully, in the next year or two, I'm going to get the 100 marks with both, and I will be a very happy camper as well.

Ronen Ainbinder 1:59

Do you have a favorite one?

Keith Bank 2:02

No favorite but probably a top five. And it's always a very difficult question to ask. But I probably would say in the US, it's probably either Pine Valley or Cypress point, and in the world, probably royal Dornoch.

Ronen Ainbinder 2:26

Nice. I hope I get to play one day with you in one of those places. And man, I'm so happy to have you on the show. We will be talking about so many things regarding KB partners, early-stage investment sports technology years, and a couple of stories. So how about we kick it off with one of the things that you think about when you know when you're recruiting people when you're hiring people to work with you either in KB partners or any other of the other companies that you work in? What is the required character, the required skill set, traits that you look for in people who want to work with you and want to collaborate on the projects, different projects that you're running?

Keith Bank 3:14

That's interesting; we'd look for similar traits for our own internal employees. And then also members of management teams of the portfolio companies we support and have been an entrepreneur most of my life. Our tagline for our company is entrepreneurs. For entrepreneurs, we'd like to provide that mindset. So we look for things like grit, figuring things out, not taking no for an answer, cast-iron stomach, people who are coachable, malleable, people who have the charisma that can attract and maintain talent, people who have passion for what they're doing. There's nothing worse than hiring people who hate getting up and going to work every day. We like people who can't wait to get at it and are disappointed when they have to go to bed. Stop the day's activities. Integrity is foremost. There's no substitute for integrity in life or in business. And then lastly, an entrepreneurial mindset, we back entrepreneurs, so you have to know how they think and hopefully, be able to relate to them. So I'd say those are some of the key traits we look for.

Ronen Ainbinder 4:23

If you guys want to work for Keith, you better have those traits and skills. And that is great. Keith, thank you so much for sharing that. You've been managing and being the board member of many, many companies. You've been in front of so many projects and different types of investments. So I want to know if there's anything you wished you'd known before taking your first management role. Is there anything that you could probably advise yourself if you find yourself if you'd meet Keith from 18 years old, Keith? Would there be any advisor you'd give him in terms of management? One thing that you would advise him or something that you wished when you were just beginning?

Keith Bank 5:13

I would think that you learn as you go. But I think managing people, managing companies, managing situations comes with a huge responsibility. And I think if you're not prepared to take on that responsibility, people's livelihoods rely on you. People's mental state relies on you; their families rely on you. So it's a big responsibility. And I would say if you're not up to the task to deal with a lot of the challenges that come with being responsible for other people and other people's lives work in the corporate world work for other people, but being at being a manager, being a leader, being a principal in a firm comes with, with a lot of responsibilities.

Ronen Ainbinder 5:57

Yeah, I agree. I agree with you, Keith. Managing people is a whole different universe. And as you said, or as spiderman said, With great power comes great responsibility. Uncle Ben said that. So yeah, I think I think that you're right. Let's talk a little bit about KB partners, 26 years already existing and happening. What do you think about it from a macro perspective? And or what are you focusing your time on? I just guide us through or work through a little bit of what goes on in your mind when you're thinking about strategy for KB? Or how do you go about organizing what's more important for it? And how are you focusing your time on it?

Keith Bank 6:46

So it's evolved over the years; I started out as a glorified angel investor, for lack of a better term, and kind of turned into more of maybe a super angel investor writing bigger checks, doing bigger deals. And that morphed into having a traditional early-stage technology-focused venture capital firm. We had no sports focus. Originally, when we started, we invested in industrial technology, computer hardware and software, medical devices, internet products, and services. And over time, after having raised and invested a couple of funds in that area, I went back to my entrepreneurial roots and went back to becoming an angel investor and just looked for interesting opportunities and entrepreneurs. A handful of which happened to be in this intersection of sports and technology, and I was a passionate sports person my whole life as an athlete. And when I looked at the landscape, going back six, seven years, what I saw was a lot of innovation occurring in sports and technology, probably more in the last five years than in the 100 years before that. And very few people focused on investing, especially at the early stage; you had a few team owners, dabbling a few athletes, smattering firms, but nobody doing it the way I wanted to do it. So about five years ago, I decided to look into the space deeply. And so, a lot of macro trends that were very interesting look like sports betting was going to become legalized in the US and more relevant around the world. The emergence of Esports, something that 567 years ago, no one would have even known what you're talking about or heard of, the crazy rights fees being paid by all these media companies for sports. And then the necessary need to figure out ways to monetize and pay for those huge rights v. So further fan engagement platforms, everybody wanting to train like a professional athlete, monitor their sleep, and their heart rate and all these other things. And said, Boy, if you could systematically attack this space and use the network that I had cultivated over the years, it would be a pretty interesting recipe for potential success. So I decided to get back into the fund business. And we've now raised early-stage sports tech funds. We see about 1500 deals a year, probably meet with two to 250 companies a year, get into serious due diligence on 20 to 25 and make 5678 investments a year. So massive funnel, massive weeding out process. To process that much deal flow, you have to put systems in place, and you have to have the people in place. And we respond to every single one of those 1500 inbound inquiries. So we don't just ignore the ones we're not interested in. We tried to treat people with the golden rule, the way we would like to be treated, and you just never know how that's gonna come back to you. So it's a big responsibility. It's a lot to do, but it's also a ton of fun trying to figure out who to back what to back and then hopefully see the results at the end of the day is very, very rewarding.

Ronen Ainbinder 10:04

I wonder how you think about your portfolio as an investor, especially as an angel investor? How do you see this type of investment in your portfolio? How much does it make in terms of the percentage of your portfolio? What kind of risk? Is this like high risk, high reward, and then you put like a smaller location of your money towards that? Or is it most of your portfolio are allocated towards angel investments and or how you've been thinking about optimizing that side, that element for us, specifically, Keith?

Keith Bank 10:45

Yeah, we're not doing any angel investing; everything we're doing is out of our two funds. So we are a traditional VC, early-stage, probably 80%, seed and 20% Series A, so we get in very early. We are definitely at the highest risk end of the continuum and hopefully at the highest return end because those go hand in hand. But we like getting in early. We have built an incredible network of advisers and LPs that help us with sourcing due diligence, opening up their networks to introductions to potential customers and suppliers for our portfolio companies helping to recruit missing links, the management team board members. So our whole model is super hands-on where many venture investors place a lot of bets, they're passive, they hope they work, they don't want to lead deals, we lead 90 plus percent of the deals we do, we take board seats 90 plus percent of the time. And we always, always, always roll up our sleeves, bring our network there, and try to help create those key unlocks that will create value for our companies and our limited partners' investors. So our model is entrepreneurial, hands-on. And we think that gives you an extra chance to have those huge returns, which is what we're shooting for. And what is the most challenging part of investing in early-stage companies? It's all about who I mean, we have a saying that has to be interesting and exciting, but without them, you don't stand a fighting chance. So we spend an awful lot of time evaluating the management teams that were considering backing, and it's not just looking at the resume or bio on a piece of paper; it's delving deep and understanding their psyche, understanding their ability, again, to attract and maintain talent. Do they have a cast-iron stomach? Can they pivot when things aren't going so well? Are they able to take coaching and advice? are they creative, entrepreneurial, all the things that, again, you can't measure other than what you know when you see it. So pattern recognition is a big part of this business. And over my career, I've probably seen 40,000 in business plans, management teams. And hopefully, after you do it enough times, you start to know what right looks like and what good looks like. You're gonna make mistakes like we all do. And no one's infallible, but I think you increase your odds for success by having that big data set for which to compare. That is very interesting.

Ronen Ainbinder 13:23

I think it goes back to the first question of what required character traits you're looking for. As you mentioned at the beginning having that grit having that leadership spirit, and being that intrapreneur probably, that's, that's also what you look for, in companies that you invest in, in the management team, not only the founders, so I guess that it's, important. On the human side, as you mentioned, you invest in the who, not on the what. So it speaks a lot; also, I guess, for companies and startups that are thinking about collecting some funding investments or anything like that. Just think about who you are, who you want to become, who you are, what you stand for, what your values are, your integrity. Work on that because that's important. That's what Keith and his partners are looking for when it comes to investment. Keith, what are some of the sports trends that you like right now at the moment? What is a technology that if I bring you to two KB partners, you would be super interested in listening to one or two in mind?

Keith Bank 14:40

I wouldn't say one or two. We have five primary buckets in which we invest. The first is sports betting. We tend to play that more from the infrastructure side, so it's unlikely we're going to back the next Fanduel or DraftKings. But we do like the picks and shovels side of the business. There's a lot of infrastructures that go into the betting ecosystem.

Similarly, in eSports, we've stayed away from the team side of things. Still, we like the infrastructure side payment systems, tournament platforms, and all the plumbing that goes into creating a successful ecosystem. The third area we call health, fitness, and wellness, it's obviously a very broad category. But that includes all of the connected fitness opportunities, AR VR and AI stuff, and many interesting things going on there. The fourth area is Ott and media streaming. We've made quite a few investments in that space. We know a lot about it. And the fifth we call the live experience. And that's everything from youth sports recruiting platforms. You manage whether it be ticketing, parking, concessions, security, and also include new sports concepts. We're backing a new three on three Ice Hockey League that we're crazy excited about that has some novel; it's kind of part hockey party sports betting, part social media and, and digital media and, and an amazing team. We've passed on every other league that's coming our way cuz none of them had made any economic sense. But this one is one we're excited about.

Ronen Ainbinder 16:13

Is there anything that you think the sports industry is not doing right now or not thinking about right now that you think it should be thinking about or doing?

Keith Bank 16:24

I think it's, they're thinking about it. But I think diversity is a huge issue in the sports world and in society. In general, when you look at the numbers of participants, at least in most of the team sports, people of color, and their representation on the management side, the coaching side, even the VC side, the investing side, we have a big internal initiative, which is started with the formation of our advisory board. And it's going to filter down to interns and employees, which I think it's a big thing that has to happen for societal reasons. And it's the right thing to do. So I think that's a big issue. It's talked about a lot. It's acted upon, maybe not as much as it's talked about. So we're trying to come up with a strategy in that area for our firm.

Ronen Ainbinder 17:17

That is a great point. Keith, I agree with you. Diversity is such an important topic in the industry. Inclusion, gender equality are also important. But that's another conversation for another Halftime Snack, which you're, Of course, definitely invited for in the future, man, and time has gone so fast. We've learned so many things from you and your timing in KB partners, early-stage investments, and a couple of your stories. So I can't leave without asking you more personal questions. Before we go. I want to know if there was a time that you remember that you messed up, and you felt like you've failed? And how did you bounce back? What is your mentality towards it? Can you share with us may be a story or something similar?

Keith Bank 18:08

I think probably being swayed by the crowd or buying into the headlines, we have a very, very distinct way of doing things and method of doing things we don't believe in, being attracted to the next shiny object and paying silly prices for things hoping someone's gonna pay two or three times a silly price down the road. The music does that playing at some point in time, so, so stick to discipline. There have been occasions or two in my career where I got swept up in the headlines or swept up in that frenzy around a particular space. And, when we raised our first and second venture funds, not the sports-related ones, the internet was just exploding. The hottest thing and people thought they would become a billionaire by selling whatever on the internet. And it's hard when the world around you is doing all that. So we co-invested in a deal with two top-named tier firms in the history of venture capital from Silicon Valley. And we were the lead investor who identified the deal and ended up taking capital from two of these titans of the industry. And they kind of were like, this is the way we do it in Silicon Valley. Go bigger, go home. And let's pour all this money into this deal. And let's and it was against my better judgment, everything was saying to me, no, let's walk before we run. Let's figure it out before we pour gas on the fire, and we end up having a big, big disaster on our hands. It was a great lesson. It was a good lesson to learn early on in my venture investing career. I go to very great lengths to try not to repeat that again. So I think that's probably the best example without giving names and companies. That's one that I learned a lot from.

Ronen Ainbinder 20:02

Not everything that shines is gold. I think that's a wonderful takeaway, Keith. Man, I want to thank you so much for taking the time to be on the Halftime Snack show. I enjoyed hosting you and enjoyed listening to all your stories and your lessons from your past. I think they're very valuable and our listeners are going to enjoy them a lot. So thank you so much, and I wish nothing but the best for you and KB partners in the future.