The Least Obvious Winners Often Pay Off - Miami and the Marlins...

I vividly remember the years of batting practice. Pitching to my dad until it was too dark to see. And, constantly dreaming about baseball. While I wore most MLB uniforms across countless seasons, and helmed almost every position (except catcher) - I eventually moved on from baseball. 

Of course, none of these games were remotely professional. And, my first three seasons involved hitting off a tee - where successfully fielding and throwing the ball to any base was an accomplishment. However, I played baseball much longer than basketball, lacrosse, and every other sport. In many ways, it was my first love, and first major interest. 

Although I grew up around Washington DC, I was a rabid Mariners fan. Posters and pennants littered my bedroom walls - and Ken Griffey Jr. (I still have a signed baseball on my desk now) cards were always in high demand. While the Mariners are the only active team to never make it to the World Series, I still like the team…despite zero connection to Seattle.

Since the Nationals were the Montreal Expos until 2005, the only team I had an actual connection to was the Florida Marlins. Most of my extended family lived in South Florida, and I eagerly looked forward to unlimited shuffleboard and pool time. And as a huge baseball fan, I often wore the original teal Florida Marlins hat around South Florida. Unlike the Mariners, the Marlins won two championships in those teal hats - in just 10 seasons. However, this early success has not translated into long-term success (the Marlins win percentage since 1993 is at the bottom of the MLB). 

Miami is almost 50% bigger (by metro area population) as Seattle, and similar to both Atlanta and Philadelphia. Since 1993, the Mariners have not been to the World Series, the Braves have 2 championships, and the Phillies only have 1 championship. However, the Mariners ($2.2B) are worth more than twice the Marlins ($1.05B) - and the Phillies/Braves ($3.1B/$3B) are worth nearly three times the Marlins. The Braves had sustained success in the 1990s with a nice new stadium, and the Phillies have a rabid fan base. But, the Marlins also have a nice 13-year old stadium in Little Havana. 

On the surface of things, Miami should be a prime location for baseball - there is no state income tax, spanish is a first language in huge swathes of the city, and it’s a great place to live (especially with lots of money). 20%+ of MLB players hail from the DR, Venezuela, Cuba, and Puerto Rico - Miami is a short flight away, and culturally similar. In many ways, the Marlins should both be better, and worth much more. 

Although there is plenty of nuance in baseball, the Marlins payroll has been a constant problem. In order to win, teams need to spend money - and they need to land the flashy free agents. The Marlins theoretically could be a powerhouse now, but choose to accumulate minor league prospects. Even the 29th most valuable franchise, the Tampa Rays are worth almost 20% more than the Marlins…and are playing in a minor league stadium. 

So, what’s the tie-in to venture capital? There are several (as usual), but the most relevant lies in the returns of my past deals. I tend to do deals across a spectrum of scores (on my scoresheet) - the most obviously good ones score higher than the more questionable (though still good) deals. While the highest scoring deals should theoretically have a higher probability of outsized returns, the opposite has been true. 

I consider any deal that scores a 70+ on my scoresheet as an “investable” deal - with the range of past deals from a 70 to a few in the low 80s. Most are between a 72 and a 76 - and the lower scoring ones are almost always either very early (pre-seed), or pricey (higher valuations). The highest scoring deals typically have great traction, strong metrics, and a well below market valuation (or seemingly high multiple exit on the horizon). On paper (literally), the higher scoring deals seem like the most likely winners. 

In reality, my best deals have generally been between a 71 and a 73 - deals that generally gave me some heartburn. However, a gut instinct told me to write the check. These deals were not obvious home runs, or even obvious hits - but felt like hittable enough pitches. While some have been write-offs and bad investments, my blended returns for lower scoring deals have generally been better than the higher scoring deals (76 to 82). These results have forced me to retool how I view valuations, check sizes, and the weight I give the actual scores (vs. just doing deals that have good enough scores). In many ways, it’s pushed me to write more checks, and push a bit out of my normal comfort zone. But, back to the Marlins…

On paper, the Marlins are the dogs of the MLB - with by far the lowest valuation, and pretty horrible attendance figures. On the field, the Marlins have only won one playoff series (a wild card series) in the last 21 seasons. In many ways, the Marlins look like a terrible investment - and a low scoring deal. However, they may be one of the best deals in the MLB - especially if the owners open up their pocketbooks and try to win now. If I could pick an MLB team to invest in, the Marlins would not be the obvious choice - but they would be very high on my list.