“I’m glad Larry Ellison didn’t get it. That proves you don’t have to be a dick to win.” The date was July 15, 2010, and the speaker was a radio host in San Francisco (I’m paraphrasing from memory, since I heard it almost eight years ago). Bidding had just concluded for potential buyers of the sale of the Golden State Warriors, one of the worst basketball franchises in the National Basketball Association (NBA). Many sports fans had been led to believe that Larry Ellison, CEO of Oracle, wanted the team badly and would win the bidding. After all, the team's arena was already named after his company.
Oracle Arena. Creative Commons via Flickr.com by May Wong.
But he didn’t. When the new majority owners of the Golden State Warriors were announced, they were two men whose names were not familiar to most sports fans: Joe Lacob and Peter Guber. Joe Lacob is a billionaire venture capitalist with deep connections in Silicon Valley. And as more NBA stars turn toward investing and gaining equity in technology companies, no one is better positioned than the athletes who play for Joe Lacob. He gives the Warriors an edge that few NBA owners can match.
From Boos to Championships
In early 2012, the Warriors held a celebration to retire the jersey number of one of the team’s few heroes of the past, Chris Mullin. This was a hapless team that had foundered for many years since its only championship, more than a generation earlier. Getting into the playoffs at all was a highlight for this team. When the new majority owner, Joe Lacob, took up the microphone in the arena that night, he was booed by the team’s fans.
It was unfair of the fans to boo Lacob in early 2012, since he had been in control of the team for less than two years at that point. But decades of fan frustration spilled over and he took some of the blame for past ineptitude. It seemed that nothing would change.
Then all of the sudden, under Lacob’s watch, everything did change. Past draft picks, including Steph Curry and Klay Thompson, began to mature into not just good NBA players, but bona fide stars. A dark horse hire in the front office, former agent Bob Myers, ascended to the General Manager role. He began to fill in holes and brought in key drafts picks such as Draymond Green and Harrison Barnes in 2012. Owner Joe Lacob landed his golden boy coach, Steve Kerr, in 2014 after few basketball experts predicted that Kerr would forgo other career opportunities to coach the Warriors, a team that always had trouble attracting the top people.
Later, the team attracted one of the NBA’s marquee stars, Kevin Durant, to join in free agency and then renew on a below-market contract extension.
Owner Joe Lacob (in the middle with arms raised) celebrating one of his championships. Source: USA Today.
And now in early 2018, how big has the change been? Looking back just a few short years later, the Warriors have won two NBA championships and appeared in the last three NBA Finals. They now enter the playoffs again this year with an injured squad and tougher competition around the league, but with the chance to go deep into the playoffs once again. That will be at least four straight years that the team has set up as one of the top forces in the NBA.
Kevin Durant, Andre Iguodala, and David West All Left Millions of Dollars on the Table to Sign With the Warriors
Many experts predict that, barring injuries (which is a big “if”), the Golden State Warriors will contend for more NBA titles in the years to come. Franchise player Steph Curry has been signed to a long term deal. And this week, we learned that the team’s other franchise player, Kevin Durant, will opt out of the second-year of his current below-market contract.
Why is he opting out? Does he want to test the market and make more money? No, rumor is that he will sign again with the Warriors on a restructured deal. Durant seems to have some behind-the-scenes understanding with Warriors’ ownership.
Last year, Durant signed a two-year deal for WELL below his market rate, now opting out of the second year with his option. As CBS Sports reported, “When Kevin Durant re-signed with the Warriors over the summer he did so at a massive discount. The expectation was that he would take less than the max, but nobody expected him to sign the two-year $53 million deal he agreed to.”
Durant and Curry. Source: Golden State Warriors.
Will he keep signing below-market deals (taking advantage of the increased salary cap each year, then opting out and re-signing again) to keep this group together and keep them contending? Super-bench player Andre Iguodala signed again with the Warriors in 2017 on a three-year extension, passing up on the chance to make more money elsewhere. Veteran David West did the same, passing up millions of dollars elsewhere to sign for the league minimum salary with the Warriors in 2016.
What on earth is going on here? On the surface, there are two possibilities: (1) This is a nice group of guys and they like playing with one another and for coach Steve Kerr (more than they like making millions of dollars more elsewhere). (2) These players want the chance to win championships with a loaded roster (which is worth more to them than the millions of dollars they might make playing on another non-contending team).
Conventional wisdom is that one or both of those are true. And yet, from Bob Myers to Steve Kerr to Kevin Durant to Andre Iguodala to David West to Kevin Durant again (and others I have not even mentioned), owner Joe Lacob seems to get the right deal done. In the end, he almost always gets his man, even when they seemingly had more lucrative options elsewhere. Basketball fans have begun to expect Lacob will be able to attract anyone he wants.
Source: Bloomberg.
The Silicon Valley Warriors
And that is the third reason top talent keeps signing with the Warriors: Joe Lacob.
Before buying the Warriors and helping steer them to two titles and three finals in the last three years, Joe Lacob was a partner at Kleiner Perkins Caufield & Byers (technically, he still is). That’s one of the top venture capital firms in Silicon Valley. How can Joe Lacob keep getting Kevin Durant on below-market contracts? Lacob doesn’t need to give Durant all that money himself. He’s a venture capitalist with every connection in Silicon Valley.
Last year, the New York Times posted a story entitled, How Kevin Durant Became Silicon Valley’s Hottest Startup, which included the following update:
“Asked if he is plugging into the Bay Area tech scene, Mr. Durant responded that he is eagerly following the lead of a Warriors teammate, Andre Iguodala, who is a noted investor in companies like Twitter, Facebook, and Tesla.”
Andre Iguodala of the Warriors, a big player in the world of tech investing. Source: TechCrunch.
Curry and Iguodala. Source: Bloomberg.
By the way, Durant also drives a Tesla. The same article went on to note that the Durant Company, his investment entity, has “a swirling portfolio of investments in tech companies like Postmates and Acorns,” aided by super Silicon Valley angel investor Ron Conway. (Conway is a friend of Warriors owner Joe Lacob who was a key public supporter of its new arena project and often can be seen sitting in the first row at games.) Steph Curry also invests in Silicon Valley companies like Brandless and Slyce (which he co-founded).
“Assisted by well-connected venture capitalists like Ron Conway and Ben Horowitz,” reported Barron’s, “more NBA stars are making a fast break for tech investments, partnerships, and start-up equity. Front and center are the Warriors, who are taking advantage of their proximity to Silicon Valley and ties to owner Joe Lacob.”
Lacob, Sports Executive of the Year in 2016. Source: PBS.
Lacob’s Edge
Owner Joe Lacob can introduce them to all the right people in Silicon Valley. Venture firms like Lacob’s Kleiner Perkins not only know how to select successful companies of the future; they have the power to help brand their trends, develop them, and mould them into winners. And what startup company wouldn’t want Steph Curry, Kevin Durant, Draymond Green, or Andre Iguodala on its board, shaking hands with investors and charming other star-struck board members?
Kevin Durant and his agent/partner announcing their venture capital work. Source: SF Chronicle.
“KD, you’re my guy. Stay here and help me win some titles. Even after you retire, you’ll be in the center of the action and earning even more. You can make a difference in the world. And I can make you a billionaire.”
Connecting the dots, that’s probably what owner Joe Lacob is able to tell these guys. If so, it’s a powerful pitch, and there’s every reason to believe he can deliver on it. That’s one more reason the Warriors players don’t mind giving up more lucrative offers to play here. Working with Uncle Joe and his buddies, they’ll make that money back many times over, not only now but for years after retiring from their playing careers. For now, they look like saints for signing on the cheap because they love their teammates, love the fans, and love contending for titles.
Warriors Owner Joe Lacob: What's the Secret to Success? From ESPN.
They also love Joe Lacob and his friends. And the rest of the league has very little answer to what this guy can do to attract and retain the top players. He appears to manage his team’s budget and stay beneath the salary cap. But his team’s payroll is only the beginning of the money that Lacob can help these players access and leverage. Off the field, their earning potential is much greater in the long run. With that additional income potential, the Warriors can afford to underpay and still score top players.
Screenshot from CNBC.com
Sources:
Joe Lacob Beats Larry Ellison to Become New Owner of Warriors: https://www.mercurynews.com/2010/07/15/joseph-lacob-beats-larry-ellison-to-become-new-owner-of-golden-state-warriors/
Durant Will Opt Out and Restructure Deal: https://www.cbssports.com/nba/news/kevin-durant-will-reportedly-opt-out-of-contract-to-restructure-deal-with-warriors/
David West Chose Warriors and a Minimum Salary: https://www.mercurynews.com/2016/07/05/report-david-west-will-join-warriors-for-minimum-salary/
Iguodala Turned Down Bigger Offers to Re-Sign with Warriors: http://bleacherreport.com/articles/2704611-andre-iguodala-warriors-reportedly-agree-to-3-year-48-million-contract
Startup Equity is New Off-Court Play for NBA Stars: https://www.bloomberg.com/news/features/2017-08-24/the-new-off-court-play-for-nba-stars-is-startup-equity
Why Steph Curry and Andre Iguodala Are Getting Into Tech: https://www.bloomberg.com/news/articles/2017-08-17/why-steph-curry-and-andre-iguodala-are-getting-into-tech
Kevin Durant, Silicon Valley’s Hottest Startup: https://www.nytimes.com/2017/02/18/style/kevin-durant-silicon-valley-golden-state-warriors.html
Warriors Bet on Tech Startups: https://www.barrons.com/articles/silicon-slam-dunk-golden-state-warriors-bet-on-tech-start-ups-1513263624
Golden State Warriors, Silicon Valley Enjoy Close Ties: https://www.cnbc.com/2017/02/11/golden-state-warriors-silicon-valley-tech-industry-enjoy-close-ties.html
Top image: Slyce, Warriors star Steph Curry's startup.