The college sports industry is worth billions of dollars, yet student-athletes have only been able to receive payments for their names, images and likenesses (NIL) since a 2021 Supreme Court ruling.
Student-athletes stand to gain more financially than ever before: In some cases, they’ll see higher earnings than they might at any other point in their careers. However, a few all-too-common mistakes could set them back to square one, an issue that professional athletes have grappled with for years.
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It’s a reality that Michael Haddix Jr., founder of Scout, a financial management company for athletes and school administrators, knows all too well.
Image Credit: Courtesy of Scout. Michael Haddix Jr.
His father, Mike Haddix, played in the NFL for eight years and faced financial difficulties after his football career ended.
“ I lived through it and saw why it happened,” Haddix Jr. tells Entrepreneur. “And it wasn’t because he had 10 cars: It was because by the time he figured out how money worked and had a little bit of financial experience and education, his career was over.”
After scoring more than 1,000 points as a basketball player at Siena College, Haddix Jr. went on to receive his MBA from Columbia Business School, where he saw firsthand how people who had money set themselves up for financial success.
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Then, he gained more insight as an investment banker at Goldman Sachs and a financial advisor at Octagon, where he worked with athletes like Chris Paul, Steph Curry, Derrick White, Devin Booker, Aly Raisman and Michael Phelps, among others.
College should be the start of everybody’s financial journey, not the end.
With NIL underway, Haddix Jr. realized the potential of helping college athletes, most of whom wouldn’t go pro after graduation, manage their money effectively in the context of their unique situations.
Because, unlike a typical worker who might work a 9-5 and increase their income every year until they hit retirement around age 60, student-athletes often make the most money they’ll ever earn in the first five to 10 years of their working lives, Haddix Jr. explains.
Additionally, many student-athletes, who are classified as independent contractors and therefore not subject to withholdings, end up in a high tax bracket and owe substantial amounts each year.
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It’s also common for college athletes to “quickly become the breadwinner” for both older and younger family members because they’ve “reached a stratosphere that nobody else has ever reached,” Haddix Jr. says.
There’s an opportunity here, Haddix Jr. remembers thinking. College should be the start of everybody’s financial journey, not the end.
“It’s not about what’s coming,” Haddix Jr. says. “It’s about what’s here now. A lot of decisions are made based on When I go pro, I’m going to pay my taxes, or When I get this next check, I’ll start saving. Put a plan in place for what you have now to prepare you if you never get any money again, and then you can do all the things that you want to do as long as there’s a plan. It actually makes your life easier, not harder.”
“Is the platform big enough? How successful can you be?”
So Haddix Jr. set out to launch Scout. The first step was building out the company’s team; Haddix Jr. had the passion and mission but wasn’t “technical,” and he also wanted to position the platform to scale.
That’s when Haddix Jr. connected with his co-founder and CTO Cindy Zeng, who’d worked at companies like TikTok and Citizen and knew how to build scalable products that could help millions of consumers. Haddix Jr. and Zeng got to work on the initial ideation — then it was time to raise some money.
Haddix Jr., who is from Mississippi and worked in sales before attending business school, didn’t have friends or family members who could help fund the venture with checks for $50,000 or $100,000, he says. Instead, the first-time founder leaned on the network he’d cultivated at Columbia and joined the cohort-based fellowship program On Deck to make more connections.
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Throughout Scout’s fundraising journey, Haddix Jr. heard a similar refrain: “Is the platform big enough? How successful can you be?”
Still, Haddix Jr. managed to collect smaller checks — from $2,500 to $10,000 — which opened more doors and ultimately led to larger checks. Scout never raised more than three to four months worth of capital at a time; it was a cycle of raising a little, proving it out, then raising more, Haddix Jr. says.
“While the numbers of current athletes are smaller, their lifetime value is substantially more.”
NIL’s rise as a “very hot industry” also helped the company gain traction. As news of paying college athletes spread across media outlets, interest in the subject increased, and Scout leveraged it to help people understand the company’s enormous potential.
“We were like, ‘How do you manage the fact that you’re infusing billions of dollars into a group of people who’ve never had it before and with a really high lifetime value?'” Haddix Jr. explains. “‘If you get a 19-year-old who really loves your platform or product, they’ll be with you for 70 years. So while the numbers of current athletes are smaller, their lifetime value is substantially more.'”
From there, Scout “started to ramp up pretty quickly,” Haddix Jr. notes. Since its launch in 2021, the company has raised more than $6 million. Haddix Jr. credits some of Scout’s success to being a sustainable business that outlasts trends, even as many investors told him they were going all in on AI startups.
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“ You have to withstand [investor feedback] and have strong enough convictions to understand that [just] because someone has a check doesn’t mean they know anything or that they’re the right investor for you,” Haddix Jr. explains.
Another important lesson Haddix Jr. had to learn as a first-time founder? “You can’t boil the ocean.”
“A lot of times, people want to see your big vision as an entrepreneur,” Haddix Jr. says. “‘Oh, how big can this be?’ And when you talk about how big something can be over and over and over again, you forget that you can’t solve for a million people if five people don’t like your product.”
”We can be this unique community-meets-fintech-infrastructure.”
Now, as the number of global athletes grows “by the minute,” Haddix Jr. is excited to double down on Scout’s original mission: serving athletes as best it can.
“We look at what USAA has done for veterans [and think], Can we be something like that for athletes?” Haddix Jr. says. “[Maybe] you go play basketball overseas, come back, and you’re 27 years old and trying to figure out how to get started. You have bad credit. How do you get a house? A car? Learn to invest? We can be this unique community-meets-fintech-infrastructure for anybody who’s been an athlete at some point and is trying to navigate the journey.”
