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Monday, June 17, 2024

Investment App Commonwealth Hits Big With Mage’s Kentucky Derby Win

  • Commonwealth's $170,000 investment in Mage is now worth over $5 million, a 30x return for shareholders.
  • The ownership group's 25% stake in Mage could reach $25 million if Mage wins the Triple Crown.
Kentucky
Syndication: The Courier-Journal

About 390 people held shares in the 2023 Kentucky Derby winner Mage through the sports investment app Commonwealth. And at $50 per share, about 100 app users with tickets to the horse race were in the exclusive winner’s circle at Churchill Downs to celebrate Mage’s victory.

“We had over 100 people at the Kentucky Derby with us. The winner’s circle was packed with people, tons of young people,” Commonwealth co-founder and CEO Brian Doxtator told Front Office Sports. “You could have bet a million dollars on Mage in the Kentucky Derby, but you don’t go in that winner’s circle. You could have put $50 in with Commonwealth, and you’re in that winner’s circle.”

On Saturday, Commonwealth went from a startup that had not spent “a dime” on marketing to getting mentioned by announcer Mike Tirico on NBC’s Kentucky Derby broadcast, watched by 16.6 million peak viewers. About 6,000 people signed up for the Commonwealth app in 48 hours after the Kentucky Derby, with its total user base surpassing 15,000 accounts.

Commonwealth, which Doxtator co-founded in 2019 with fellow entrepreneur Chase Chamberlin, owns a 25% stake in Mage through the company’s partnership with Ramiro Restrepo and Mage’s trainers, Gustavo Delgado Sr and his son. WinStar Farm, an investor in Commonwealth, also provides horses to the startup. At Mage’s 15-to-1 odds, Commonwealth shareholders paid about $95 per share.

Commonwealth’s $170,000 total investment in Mage is now worth over $5 million, a 30x return for shareholders. Earnings from the horse would reach $100 million if Mage wins the Triple Crown, potentially increasing the value of Commonwealth’s stake to $25 million.

“We had a guy make $70,000 on Mage, just that one race. Churchill Downs put his money in a Chick-fil-A box so nobody would know he had that much money,” Doxtator recalled with a laugh. “We had two other people make $40,000; dozens make $20,000. We reckon our entire group at the track made more than half a million dollars off the bat.”

Kentucky Derby Mage owners.
Co-Founders Brian Doxtator (left) and Chase Chamberlin celebrate Saturday’s Kentucky Derby victory. Photo courtesy: Commonwealth.

Just about all of Commonwealth’s users are also bettors. Still, the app touts an average investor age of 36, attracting a much younger demographic than the 58-year-old average horse racing fan, Doxtator says. More than 70% of first-time Commonwealth investors make a second deposit on its app, which has a $300 average investment. 

“We charge a sourcing fee only on the asset cost, so if we buy a position on a horse for $100,000, we charge 15%,” Doxtator says of Commonwealth’s fee structure. “And then we have a training management fee, which is 10% of costs—in a given year, it’s like $70,000 to manage one of these horses. And then, on the back end, which is what we’re really planning for, we get 10% until ROI is achieved. Then we get 20% on all profits above—once we return all invested capital, we get 20% at the back end.”

Shareholders will also earn payouts when Mage or another horse owned by Commonwealth produces offspring. But it’s the community aspect of Commonwealth’s app that Doxtator thinks will stick above financial gains.

“We have a lot of $50 shareholders that we can get into the paddock before the race, we put people in the winner’s circle, people drink champagne after the races when we win. To do that on a $50 investment, where else can you have some fun like that?” Doxtator says. “We have people making friendships at the racetrack, people that are dating based on meeting at the racetrack with us. That stuff just doesn’t happen off a bet.”

Commonwealth hosted about 30 Kentucky Derby watch parties nationwide, including a 300-person watch party in Los Angeles. Outside of horses, Commonwealth also has investments in Joey Vzrich and Cooper Dossey, two former standout college golfers now playing on the Korn Ferry Tour. Doxtator says tennis athletes are another upcoming target for Commonwealth as well as deals with college athletes. 

“For athletes, it’s a little different; we’re doing income share agreements. For both of our first two golfers, we’re funding three full seasons at $75,000 a year for $225,000 total. In exchange for that $225,000, we strike a six-year income share agreement,” he says. “We have a lot of player-friendly terms—buyout provisions, repayment caps. We cover a whole lot of expenses like touring, lodging, caddies, coaching, physios, insurance.”

Commonwealth will receive 30% of Vzrich and Dossey’s earnings in the first three years of their agreements, followed by 20% in year four, 15% in year five, and 10% in the sixth and final year. 

“My co-founder [Chase Chamberlin], our head of racing, he’s a lifelong horseman,” Doxtator says. “I’m a scratch golfer, lifelong competitive amateur. I play golf with all our players before we sign them, that’s one of my rules—gotta see ‘em up close and personal. When it comes to scouting, we lean a lot on agents to get a feel for them.”

Big League Advance is a company that has invested more than $150 million in minor league baseball players. The company earned a large payout, reportedly over $30 million, for its deal signed with Fernando Tatis Jr. when he was 18 years old in the Dominican Republic, as part of his $340 million contract signed with the San Diego Padres in 2021.

“Long-term, I want Commonwealth to be one of the defacto places where young athletes can tap into capital from awesome backers and people that are gonna put wind in their sales. We’re gonna post about them, blow their profile, get them sponsorships,” Doxtator says. “I want to eradicate predatory deals. I am on a mission in individual sports to make it so no kid or young adult ever has to take a deal that is predatory.”  

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