July 7, 2006 5:25 pm

The healthy wealthy cycling roadshow

Jonathan Vaughters was enjoying a tour of the New York Stock Exchange’s trading floor when a stranger tapped him on the shoulder and asked him to wait before returning with a $25,000 cheque for Vaughters’ developmental cycling team.

“I’d never seen him before, he was simply a friend of a friend who had heard I was coming,” says Vaughters, who as a professional rider was a member of the team that helped Lance Armstrong to his first Tour de France win.

Cycling aficionados tend to be passionate in their support for the sport. They are also often wealthy.

Partly as a result of Armstrong’s success, interest in cycling is growing in the US. The sport’s official language may be French – the Tour de France began last week – but partisan supporters point out that the US has walked away with 10 out of the last 20 victories (Greg LeMond, three; Armstrong, seven).

But the American branch of the sport is small enough to depend largely on wealthy backers who believe cycling could be on the cusp of a much bigger boom and perhaps even provide returns.

“Currently, the financing is itty-bitty, so wealthy individuals need to sponsor it until we can make it enticing to real corporate sponsorship,” says David “Tiger” Williams, owner of an eponymous Connecticut-based trading firm and one of the sport’s most enthusiastic supporters.

Unlike other sports, competitive road cycling is completely dependent on sponsorship. Profits from races and television rights go to the race organisers, while roadside spectators watch for free. leaving the team’s budget reliant on someone else’s dollars, which usually turn out to be corporate.

Williams, who counts Armstrong as a personal friend, is also a member of the Champions Club, a group of wealthy individuals who put up at least $100,000 each in their first year, then $25,000 a year thereafter, for the USA Cycling Development Foundation, the fund-raising arm of the sport’s official US body.

The group is headed by Thomas Weisel, the San Francisco-based investment banker. A former speed skater who was once pres­ident of the US ski team, he turned to cycling in the mid-1980s after knee problems. In 1988 he began sponsoring a team which became Tailwind Sports, the organ­isation behind Armstrong’s Tour-winning teams which still runs the Discovery team. The latter is the only US-based group in the ProTour, which consists of elite teams who race in the Tour de France and other top events.

Cycling is not necessarily an easy sport for new fans to get into. Unlike American major league sports, there are no natural “time outs” for advertising-filled breaks, tactics are complex and while the scenery can be stunning, helmets make identification tricky. But Weisel thinks this can be overcome. “I am biased because I think it is a beautiful sport,” he admits. “But once people begin to appreciate it - the teamwork, what it takes to compete in a three-week race - they get hooked.”

Tailwind often used trips to the Tour as a means of attracting sponsors. “That is how we flipped them,” says Weisel. “Phil Knight [Nike founder] couldn’t believe it, he went berserk after a day following Lance. Nothing comes close to being in a team car on the race.”

The cars that follow the riders often carry VIPs who can find themselves in the middle of the race itself and following dramatic break­aways, putting them in the centre of the action in a way not possible for regular fans.

Other Champions Club luminaries include Robin Williams, the actor, Richard Cashin, who heads private equity firm One Equity, George “Skip” Battle, the former chairman of search engine Ask Jeeves, Rob Walton of Wal-Mart and John Doerr, the silicon valley venture capitalist best known for his investments in companies such as Google and Amazon.com.

Tiger Williams sees it as a pyramid. “We are looking at Lance as the tip, then the private individuals as the bridges that are going to filter this down to the masses,” he explains. He believes the health benefits will help spread the appeal and from there people will be attracted to the sport itself. “The elite of cycling are genetic freaks! They are the skinniest dudes in the world but you don’t have to be them, you can get all the same benefits and fun at 10mph,” he says.

Vaughters now runs Slipstream Sports, a sports management company set up to handle teams for juniors, track racing and professional road racing. The goal, in as little as three years, is for the road team to reach the ProTour.

His secret weapon is Slipstream’s majority shareholder, Doug Ellis, who is providing the cash, on top of sponsor dollars, to take the team into the big time.

For US teams it can be harder because the sport’s top events and teams have typically been based in Europe, where the standard of racing is higher and the culture poses a barrier for young American riders.

Vaughters and Ellis are trying to overcome the US-European gulf by effectively operating two teams, one based in Girona, Spain, and the other in Boulder, Colorado. The riders are rotated between the two to give them the exper­ience and the team the exposure necessary to make it in the big league.

This year the team budget is about $2m. Compared with other US domestic teams that is high but it is the price Slipstream pays for its two-team approach

“Logistics – transport, hotels, rent – are almost a fixed cost, so as we grow, that should not rise too much further. We are paying a heavy price now and
getting less bang for it but as we develop we will be diverting a lesser percentage of the budget to these fixed costs,” believes Ellis, who has also just joined the Champions Club.

To develop the team, Vaughters and Ellis are planning to raise the budget to $3m next year and $4m in 2008.

“A first year in the Pro­Tour – that would double it again,” Ellis says. “We are crossing the no man’s land of sponsorship right now. It is relatively easy to find a sponsor to finance a domestic team and similarly easy for a ProTour team but crossing from here to there is the difficult part.”

Once in the ProTour, sponsorship should cover the budget, allowing Slipstream’s owners to begin drawing a modest management fee. “That’s the idea,” says Ellis.

He first became a cycling fan in 1989, when LeMond won the second of his three Tour victories, beating Frenchman Laurent Fignon by just eight seconds – the narrowest-ever victory margin. Ellis began wanting to get involved directly after Lance Armstrong’s fifth Tour victory in 2003, often considered the most dramatic, particularly the stage to Luz Ardiden in the Pyrenees, where the American crashed but got up and pedalled furiously to win the stage and effectively seal the overall victory.

“That Tour reminded me how great a sport it was. I don’t have the sports background, so ownership made sense,” says Ellis. “The idea of trying to have an American team riding in Europe was really appealing to me.”

The Champions Club is growing steadily and, together with the rising interest in cycling generally, has led many to call it “the new golf.”

Chris Lambiase, publisher of Bicycling Magazine, believes that is true. “As these guys move into the 40 year and older bracket, it is easier on their bodies than other sports and it has this worldly appeal – there’s the history of the sport, races are in beautiful parts of the world and there are travel opportunities,” he says.

“Cycling has got high speed, high danger, complex tactics and complex technology,” says Vaughters. “People who like challenges are drawn to it, because it is difficult to understand fully the tactics and nuances in each race.These guys are intellectually gifted and hyper competitive people and they are always trying to figure out the next Rubik’s cube”

One such is Mark Holowesko, the fund manager who ran Templeton’s funds until 2001 after taking over from Sir John himself in 1987. He now runs Templeton Capital Advisors, a Bahamas-based hedge fund offshoot of the group. Holowesko, 46, was an Olympic sailor and regularly competes in cycling races and triathlons.

“The unique thing is the incredible discipline and the fact that it is a thinking man’s sport where you can be a good athlete but you won’t win unless you learn the tactics,” he says. “You can also compete in cycling at any age, whereas I couldn’t do that in basketball or the 100-yard dash.”

Holowesko is behind VMG Racing, a company he founded two years ago to help develop young cyclists, and has also just joined the Champions Club.

”People don’t realise how big the sport is getting – it is exploding and corporate sponsorship hasn’t really caught up yet,” he says. “Even though Lance has retired, I am getting questions all the time from people asking my advice about how to train and which bikes to buy.”

There is also the “toy factor”, as Lambiase puts it. The price of quality racing bicycles begins at $3,000 but custom-made bikes ridden by professionals and the wealthy, with titanium and carbon- fibre components, come in well above that. “They love the fact that the technology comes out of the aerospace industry so they can geek out over that,” Vaughters adds.

Champions Club members are preparing for their own trip to France where they will ride some of the mountains and watch some of this year’s Tour. How hard will they ride? “We’re old guys, and don’t exactly race,” says 44-year-old Williams. “It is hard enough to get on your bike and drag your ass up Alpe D’Huez, then you get the riders going up at three times your speed, it is extraordinary.”

Nobody believes him. “Those guys are really competitive!” says Vaughters. “Tiger will probably be at the front with Dick Cashin and the fittest guys,” Weisel believes. “I don’t think it will be an all-out race, it will be somewhat civil.”

But Holowesko, who will go as a new member, is preparing for something of a race. “These are Type A personalities – you put them on a bike and tell them to ride up a mountain and you can bet there will be blood vessels popping.”

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE