TK Kuegler, co-founder and managing partner at Wasabi Ventures, has spent the last 25 years as both a startup founder and investor. TK is a lifelong fan of the sport of horse racing and has taken his startup mentality and applied it to horse racing by founding Wasabi Ventures Stables in early 2017. Although a new stable, Wasabi Ventures Stables has been on a hot streak and has been steadily bringing new fans into the sport with its innovative co-ownership program, which makes horse ownership affordable for the everyday fan. The 5minutestopost team thanks TK for his time and perspectives on the horseracing industry. We hope our readers enjoy this interview and we look forward to following the progress of Wasabi Ventures Stable, as well as seeing their silks in the winner’s circle! This segment is part 1 of our two part interview with TK. Stay tuned for Part 2!
[5MTP] You are a very successful Venture Capitalist and you also run Wasabi Ventures Academy. You’re a busy guy. Why did you decide to start Wasabi Ventures Stables earlier this year? When did this concept start to brew?
[TK] The story is interesting. My great-grandfather and his brother were children of the Depression and they lived in New Orleans. One day they came home from school and there was a sign saying, “Hey…good luck you are on your own.” My great-grandfather was age 12 and his brother was 8 and the only place they could go live was the racetrack. So, they moved to the backstretch and both became exercise jockeys, and later moved on to become trainers. I never met my great uncle, as he passed away before I was born, but my great-grandfather “PJ” lived to his 90’s. As a kid, I got to hear all his stories and I fell in love with the concept of racing industry. Interestingly, none of the generations of my family between my great-grandfather, great uncle and me had anything to do with racing. So, growing up, I thought…when I grow up and make enough money, I want to start a racing stable. The concept of Wasabi Ventures Stables started about two years ago. I have 4 kids and I needed to wait till the kids were past school age, before I had some free time to focus and develop the concept.
I really got thrust into the racing business about 5 years, when I was teaching an MBA class in Loyola University about innovation. Because I was a fan of racing, the focus of the MBA class was doing a deep dive on your most innovative ideas on how we fix the racing industry in the state of Maryland. When I taught the class, somehow it got tons of attention…and not just in the class. In fact, the Dean of the business school was so enthusiastic about how cool the class was that she called the Maryland Racing Commission and all the members of the Maryland Commission came to the final class to hear the presentation. Then, The Baltimore Sun heard about the class and wrote about it. And, then Mid-Atlantic Thoroughbred heard about it and wrote a feature article about me and class. All that coverage thrust me into the limelight.
My whole business life has been spent in the start-up world. I’ve been part of 250 start-ups, either as a founder or as an investor. As a venture capitalist, what I’ve learned is that you can’t just thrust yourself into it. So, last year, I participated in a bunch of different syndicates to learn and observe what they did. I bought into around 15-20 horses last year from many different syndicates, ranging from claiming, yearlings and two year olds. I learned a lot by observing how each syndicate operated, eg how they run their businesses, what they did right and candidly, in some cases, what they did wrong. For example, for some of the syndicates, we were supposed to get monthly bills, but then we would never receive the bills or the bills would come four months late. How can you run your business when your bills are this late? Also, another big problem was the overall lack of communication. There would be no email communication and no updates on the horses. In one syndicate, the only way I knew what was going on with the horse was when I would message the trainer directly. The people running the syndicate never sent out any updates or any communication on the horse ever. That is just plain bad business practice. The general lack of communication happens more than you’d think.
So, this year, if I was to run a syndicate, what would I do? The industry needs help, I want to do what I can do to help. I attack the bookends. There are two things that matter in the industry:
- What can we do to increase the handle? We need more people coming to the track and we need more bettors from a gambling standpoint. Create the fandom.
- The opposite bookend is…how do we attract more owners? The owners are the ones willing to risk capital. They know it’s difficult to make money.
Everything else is just noise. Bigger handles will increase purses, create profits for the track, which they will then reinvest into the infrastructure and you’ll have better programming. If you get more owners, it solves the problem of not enough horses – more owners, more capital to invest in horses. Those bookends are the only two things that matter.
With my syndicate, my vision was to create 1000 brand new owners over the next 3 years – people who have no idea that racing even exists. I’m well on my way to accomplishing this in the 8 months since starting Wasabi Ventures Stables.
How do I accomplish this? To give you some numbers, we are currently at around 150 co-owners. Prior to joining Wasabi Ventures Stables, 83% of our co-owner base had never been to a race and now they are owners. If you are going to get new people into this, you need to keep it very simple, keep it non-risky and non-complicated. You also need to over-educate them, so that people can feel engaged with what you are doing. We call it a club. $99 gets you a lifetime membership into our club. We have a private community for club members where people can talk all day, such as talking about their horses, asking for betting advice, handicapping a card, pretty much any kind of chatter.
Club members can pick and choose horses you want to be part of. There are no bills, no up charges and no hidden fees – just a simple easy way for people to become owners. We allow people to invest in as little as half a percentage of a horse. For example, if we claim a $16,000 horse, for a 0.5% ownership, anyone can become an owner for only $80. It’s one time investment and at $80, they are an owner in a horse. Club members can go see the horses at the barn, go to the races to see their horses run, attend morning training, and when the horse wins, they get a winner’s circle photo.
The key to attracting people is you have to be honest at all times and be completely transparent. We offer webinars on a regular basis as a way to educate people. After we claim a horse, we have a webinar to introduce the horse to anyone that is interested in learning why we claimed the horse and it gives them the opportunity to ask any questions they may have about the horse and the program. We also routinely offer educational webinars on how to bet, how to read the racing form, etc.
Being willing to spend “smart” energy, goes a long way. You have to be educational, be entertaining, be engaging and most importantly, you must be honest. If can do that and are willing to invest the time, that is how you attract and engage people.
Now for a new stable, we’ve had some good success…our percentages on winning and hitting the board are good. But, we’ve also had some horses run really poorly, which is part of the business. The key is that you point blank tell people in a transparent, coaching way, why we bought the horse, what didn’t work and what we plan to do next. People appreciate it. No one likes lose money, but if you’re honest, you win people for life.
I’ve had many racing people who say to me….”I don’t understand how you are not going to lose money”. My response is that I absolutely will lose money doing this. Now I’m not trying to lose money, but because of the way I am running this, I know that I can’t make money and I don’t care. I didn’t get into this to make money. I’m in position in my life, where making money is not the goal. I’m doing this because I love it and transforming the industry is my goal.
[5MTP] What challenges have you faced with starting a new stable, if any? What advice would you give to someone thinking about starting a new stable?
[TK] For one, dealing with the different racing commissions and the tracks that implement the racing commission’s guidelines and rules is ridiculous. It would be like going to the DMV (Department of Motor Vehicle) every single day to renew your license. There’s too much paperwork, different rules at each track, and way too many inefficiencies. The ideal scenario is that you say you want to run at these five tracks and you’re given all the paperwork, all at once.
So far, my biggest complaint is the state of Pennsylvania. We currently run at Penn National, Parx and Presque Isle. All three tracks are all in Pennsylvania and are covered by the same racing commission, yet they have all different sets of paperwork. Why are there different rules at different tracks in Pennsylvania? Why can’t I have a single virtual account for all the tracks at Pennsylvania? So, if I ran at Parx and won a purse at Parx, but want to claim a horse at Penn National, I have to transfer the money from my virtual account at Parx to my own personal account and then wire the money to Penn National. Why can’t I just move the money from directly from Parx to Penn?
Back to your question, if I were a brand new owner, I would’ve have given up. It is so cumbersome to deal with licensing, the constant paperwork. Why are we not embracing technology? We’re not even talking about cutting edge technology, we’re talking about technology that is 20 years old that isn’t being utilized. It’s simple stuff that would make life easier. How do you attract more owners? Well, don’t make it so difficult for them to become owners. Don’t make it so much work that they want to quit.
My advice to someone thinking about starting a stable is to first understand what your bankroll is. If you have less than $200K, I wouldn’t recommend that go on your own yet. Until you have a firm understanding of what you want to do, for a year or two, join some different syndicates and learn what you like and don’t like about how those syndicates are run, as well as what you like or dislike about the business, in general. Once you’ve reached a place where you know how you want to run your business, figure out where you want to run that is convenient for you. Forget about if it is going to monetarily make sense or if the purses are generous. You should want to be around the horses as much as you can…one of the great joys of being an owner is being around the horses. The other thing I recommend, from the licensing part, is to join the National Racing Compact. It will make things easier. Being part of the National Racing Compact will allow you to run in a state, even if you’re not yet licensed in that state. Lastly, you will need to have a lot of patience and you will need to dig through a lot of malaise, from a paperwork standpoint to get set up. Once you do it, you’re not in bad place.
[5MTP] As a startup guy, you’ve said, “Take startup thinking & apply it to the horseracing business. Treat it like a business & find opportunity for positive change” What do you mean by this?
[TK] This falls into many pieces. Let’s start with the technology aspect. There are plenty of places technology can used to transform that aspect of the business. For example, technology can provide a better ways to communicate. If you’re running a syndicate, it gives you a better way to talk to the people in your syndicate. It is incredibly inexpensive to run an online community, which is what we do at Wasabi Ventures Stables. We provide an online forum, where our members can interact with each other at any given time. It gives a sense of community. We can also use technology to transform financial/banking for improvement. Think about going to horse auctions. They still do horse auctions the same way they did 150 years ago. There are plenty of places we can use and deploy technology to better catalogue, review and decipher the auction catalogue.
Let’s kick it up a little more and think about business practices. The biggest thing that has to happen in the East Coast is that key Mid-Atlantic States (let’s say from New Jersey all the way down to South Carolina) need to get all their racing commissions together. We can continue to fight each other and have limited success (depending on the political environment) or we can combine our energy and figure out a way to right the ship, with the common goal to make all of our tracks successful by not trying to beat each other up over things like competing dates, etc. Let’s create one circuit that runs all year round, but no one is running all year round. And have racing festivals at all our tracks, so for example, Delaware Park will have a 6 week meet, but everyone in the Mid-Atlantic is going to Delaware Park. Owners and trainers are bringing their best horses there and we have 12-15 horse fields, instead of trying to scrap together 5 horse fields or not having races go.
Like the Saratoga meet, we need to create a special environment at all tracks for the short and intense timeframe of the meet. This requires cooperation from all the states, eliminating competition – give and take a little – we would have a transformative product. The Mid-Atlantic region would be the greatest place for racing in the country. It would also change breeding environment; it would change the ownership environment. The handles would increase significantly. But, this would require people who don’t currently speak to each other to get in a room and agree to cooperate for the good of the industry. You do see it everyone once in a while. For example, when Virginia lost Colonial Downs, Virginia talked to Maryland and asked what they could do to have Virginia racing days in Maryland. They figured it out and those are great days, they have good handles and they have good horses running. It’s an interesting approach. Virginia doesn’t even have racing and they’ve done interesting things. It required them to look at the problem and come up with a creative way to promote Virginia. We need creativity.
I’m a start-up guy and when something is broken, I actually love it and it gets me excited. I think to myself…how do we fix it and how can I be part of this change? The underlying message is…of course it’s difficult. We have to get creative because eventually it will break. You won’t win the big victories, but it’s the little victories. If you don’t ever try to press the envelope, you can’t ever move forward.
[5MTP] Tell us about your co-ownership program. Why and who should invest with Wasabi Ventures Stables? How are you different from other syndicates/partnerships?
[TK] I am fairly certain that we are the only stable in the country that has a full-time videographer on staff. I pull that resource from my other businesses. We create a lot of cool videos. One of the videos we created is specifically for that purpose – Who should join and why should they join?
The answer to the “Who?” question is…it’s really anybody who likes sports or ever dreamed of owning a sports franchise. This is a way for you to get in for very small amount of money and own a sports franchise. Owning a horse is like owning a sports franchise. You get to be part of the story – where the horse is running, why we are running the horse there. There’s nothing in sports quite as exciting as being an owner and watching your horse coming down the stretch. It is a unique thrill. We make the threshold to get in so low that anyone can get in. It’s not just a rich person’s sport. We have made it so low that anyone can become an owner for as little as $100. For example, we claimed a horse and the way we were able to structure it, you could become an owner in that horse for $36 for a 0.5% ownership. No, Wasabi Ventures Stables isn’t making money on this horse, but again, my goal is not to make money, my goal is to bring in new fans.
The answer to the “Why?” question is…this should be part of your entertainment dollars. If you enjoy sports and you like that sort of thrill, you can get in on the action for so little money. Why not?
[5MTP] As a new stable, your stats have been incredible. As of July, 20% winning and 42.8% in the money. As all owners, such as yourself, know there are ups and downs in this business. With your exceptional stats, how do you set expectations to co-owners who expect this hot streak to continue?
[TK] The first part is that you have to be really strong on educating people that these are living, breathing creatures. Like all living, breathing creatures, there are going to be times you can’t quite figure out why they are not doing as well as you had expected them to do. It’s just natural. The second part is that this is a business, where we give them stats…lots of stats. Look at top trainers and owners…when you look at their stats, you then realize they aren’t doing as well as you think. They are winning at about the same clip as we are. Another thing that I’ve learned is when we have horse that we’ve bought and it ends up running at Penn National, if it wins at Penn National, the owners are just as excited about the win as if the horse won on a Saturday afternoon at Saratoga. The hidden secret is that for most people, if you give them the opportunity and you put their horse in a spot that it can compete and win, your new owners are just as excited as if you give them all the fanfare. Of course, everyone wants their horse to win a Saturday afternoon stakes races, but with new owners, they get the same level of excitement at winning at lower levels. You have to run the horses where they can win. Most owners don’t get it.
We are always transparent with co-owners. We explain why we are placing a horse in a race and whether or not we expect the horse to be claimed. We always follow up with numbers and what they should expect. It’s all about education, even for those people in horses never been to a track and we have educated them all the way to the point so they basically know how to handicap pick 5. If you educate them to handicap, you educate them to be better owners.
[5MTP] You mentioned one of your primary goals of starting up Wasabi Ventures Stables was to bring in new fans. Since starting up your stable, what has been your strategy in recruiting new fans (eg leveraging your business connections, traditional marketing, win/in the money reputation)?
[TK] We’re very active on social media. I’ll give you some stats.
- 20% of people hear or see us on social media or online.
- 60% of the people are word of mouth, where they learned about us from a club member. And we reward club members that have recruited new people – if a club member recruits three people, that club member gets $99 credit that can be used towards buying into another horse.
- 20% people come in because we specifically target them. We think they are a good person to join because of something they wrote or said and we will reach out to them personally.
Obviously with our background and connections in the start-up world, it made it a lot easier for us when we started Wasabi Ventures Stables. Quite frankly, it was an easy thing to pull off and to do it well. The key is to do it consistently and do it with techniques that are engaging with the audience. We are open and engaging. Why am I doing this interview with you? Because someone on your site saw us on social media and thought we would be good to interview.