Sports Analytics Predicts Earnings

A company called Big League Advance uses analytics to invest in minor league baseball players by offering upfront cash for a percentage of future earnings. Here's how it works:

Core Business Model

• Offers minor league players upfront cash in exchange for % of future earnings
• Example: $100k for 1% of future earnings or $350k for 8% of future earnings
• Targets inefficient market where minor league players make very little money
• Similar to income share agreements used by companies like Lambda School

Investment Strategy

• Uses analytics to value and predict player success
• Expects to lose money on ~80% of deals
• Aims for huge returns on the 20% that succeed
• Example success: Made $30M from Fernando Tatis Jr.'s $340M contract

Risk Management

• Focuses on baseball due to allowed income share agreements
• NBA blocked similar arrangements (e.g., Spencer Dinwiddie case)
• Guaranteed contracts in NBA would make it less risky
• Baseball teams and player associations generally disapprove

Key Success Factors

• Access to extensive player data and scouting reports
• Ability to accurately predict player success
• Operating in an inefficient market with minimal competition
• Players' need for immediate cash flow

Potential Failure Points

• Poor player predictions leading to bad investments
• Similar to VC funds that underperform the stock market
• Requires strong ability to value players accurately
• Risk of going underwater if too many players don't succeed

Market Dynamics

• Company intentionally flies under the radar
• Limited public information available
• Operates despite disapproval from MLB and players association
• Faces occasional legal challenges from players
• Example: Player sued over $360k for 10% deal but dropped case when career earnings only reached $1.2M