University Dropout to Savvy Investor
How Toto Wolff became F1's newest billioniare
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Today, we look at how Toto Wolff took a different route to become the latest billionaire in Formula 1. I love this story because it shows how a fancy University degree doesn’t necessarily guarantee success and that anyone can make something of their situation with grit and determination.
Also, this week:
What’s fueling the F1 boom
Remembering the Caesar’s Palace Grand Prix
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© Mercedes AMG F1
Toto Wolff has officially joined the billionaire club, thanks to his impressive 33% ownership of the Mercedes Formula 1 team. Wolff acquired this equity stake at a significant discount and has guided the team to immense success. With annual revenue exceeding $450 million, Wolff's rise to prominence is worthy of exploration.
Wolff was born into a modest life in Vienna, Austria. Throughout his childhood, Wolff's father battled brain cancer, eventually succumbing to the disease after a 10-year struggle. This painful experience significantly impacted Wolff's life, shaping his perspective and fostering a sense of self-responsibility.
Wolff admits that his views may be subjective but acknowledges the lasting effect of witnessing his father's decline in health. He learned to cope with the chasm between those who had and those who didn't.
At 17, when a friend competed in the German Formula 3 championship, Wolff became intrigued by motor racing. However, he soon realized his skills were not up to par for a professional driving career. Consequently, he decided to pursue banking and worked in Warsaw, Poland, where he refined his expertise as an investor.
Wolff is a polyglot fluent in German, English, French, Italian, and Polish. Although he attended the University of Vienna, Wolff has admitted to dropping out.
With determination to be self-sufficient, Wolff allowed the hardship of his youth to mold him into the resilient individual he is today.
Mercedes-Benz has a storied history in motorsports, participating in Grand Prix racing from the early 1900s and achieving two Formula 1 World Driver Championships in 1954 and 1955. Mercedes withdrew from motorsports in 1955, not to be seen again for over 50 years.
Mercedes returned to Formula 1, supplying engines to teams like Sauber, McLaren, and Brawn GP throughout the 1990s and early 2000s. Mercedes made their return official in 2010 by purchasing the Brawn GP Formula 1 team for $175 million.
Despite high expectations, Mercedes struggled to succeed, failing to secure a single win over the next three years and finishing fifth in the standings in 2012. This is where Toto Wolff's involvement proved to be a game-changer.
Wolff's Investing Savvy
Wolff founded investment companies Marchfifteen (1998) and Marchsixteen (2004), which initially focused solely on technology-related investments.
Soon after, he also made investments in companies that provided supplies for the racing cars of German automotive giant Mercedes. He made his first significant breakthrough in 2007 when he acquired a 49% stake in the Mercedes DTM racing team.
Wolff, a former racing driver turned venture capital investor, previously acquired a 16% stake in the Williams F1 team and even joined its Board of Directors.
Mercedes approached Wolff to manage their F1 team, but he initially declined due to his existing equity stake in Williams. Mercedes offered a deal he couldn't refuse—an unlimited budget and a 30% stake in the team at an attractive valuation of approximately $30 million.
Accepting the proposal, Wolff set out to turn the team's fortunes around. Formula 1 regulations changed in 2014, allowing Mercedes to develop a superior power unit compared to rival teams. The result was a decade of unparalleled dominance – eight consecutive team championships and seven consecutive driver championships.
Turbo Hybrid Era and Liberty Media
Financially, the Mercedes F1 team flourished under Wolff's leadership, with the employee count rising from 650 in 2013 to 1,300 in 2022 and annual revenue doubling from $196 million in 2013 to $450 million in 2022.
The entire Formula 1 ecosystem has also thrived, exemplified by Liberty Media's $4.4 billion acquisition of the sport in 2016. US viewership has increased 123% since 2017, and F1's market cap has grown by 263%, reaching $16 billion in 2023.
The Mercedes F1 team is now valued at ~$1.5 billion, up from $170 million. With Wolff's 33% ownership, his initial equity stake is now worth over $500 million, which doesn't include his estimated $26 million annual salary.
The popularity and hype generated by the Liberty Media marketing blitz, including Drive to Survive, have made that impressive investment even more lucrative as team values have soared.
And it doesn't stop at Formula 1 for Wolff. In April 2020, he bought $35.24 million worth of shares in Aston Martin for a 0.95 percent stake in the iconic British sports car maker.
Toto Wolff's journey from a racing driver to a billionaire team owner is an extraordinary story of tenacity, sharp business acumen, and a passion for motorsport.
Have a listen to VF Castro and me talk about it on the VF1 Show:
What’s fueling Formula 1’s growth?
Formula 1's meteoric popularity, driven by its exotic cars, superstar drivers, and global appeal, translates into unprecedented profits, TV viewership, and sponsorship interest. Here's a breakdown of F1's impressive growth and what's fueling it.
Skyrocketing profits: F1's total revenue hit $2.573 billion in 2022, an increase from $2.136 billion in 2021. Operating income reached $173 million, a staggering 333% jump from the previous year. F1's financial success is mainly attributable to lifted attendance restrictions, growth in sponsorships, and expanding hospitality.
Record attendance: F1 welcomed a record-breaking 5.7 million fans in 2022, a 36% increase compared to 2019. With the addition of the Las Vegas Grand Prix, 2023 will draw even larger crowds.
Growing TV audience: ESPN's multi-year extensions and dedicated network coverage in the US, Latin America, Mexico, and the Caribbean has propelled F1 viewership to new heights, and in the US, the 2022 season reached an average of 1.21 million viewers per race, breaking previous records.
Sponsorship: Global brands are increasingly flocking to F1, attracted by the sport's worldwide reach. Heineken and Mercedes are investing heavily in the US market, and other major sponsors include Salesforce, DHL, Rolex, and more.
We’re seeing over 275 sponsors and somewhere in the vicinity of $2 billion being spent by companies on teams with an additional $350 million sponsoring F1 itself.
The allure of the F1 experience: Formula 1's opulent hospitality, targeting a higher economic demographic, generates substantial revenue. The Las Vegas Grand Prix boasts extravagant offerings with high-demand luxury suites, skyboxes, and exclusive paddock access, all commanding premium prices.
Remembering the Caesar’s Palace Grand Prix
The massive half-billion dollar paddock building built by Formula 1 at Koval and Harmon represents only one of the many significant differences between the Las Vegas Grand Prix later this year and the pair of races in 1981 and '82.
Thanks again to News 3 Las Vegas for having me on to talk about the Grand Prix.
This time we talked a little bit about the 1980's editions of the race and some changes that will make this year so much better.
— Vincenzo Landino (@vincenzolandino)
Apr 20, 2023
For one, UNLV history professor Michael Green says Las Vegas has changed. "The last time we had Grand Prix auto racing here in 1981, a lot of the country thought Las Vegas was just a mob hangout," Green said.
At the time, the ownership of Caesars Palace was dreaming big by hosting the Caesars Palace Grand Prix. "They were hoping that, just like the Grand Prix of Monaco, international racing fans would come here and want to be part of the scene," Green added.
That scene would include the likes of Strip headliners like Sammy Davis, Jr. trackside with F1 racing legends like Mario Andretti. But back then, there wasn't enough glitz in Las Vegas for the international glamor of Grand Prix racing.
The circuit, seen in yellow, was on land now occupied by the Caesars Forum Shops and the Mirage.
By comparison, the 2023 Grand Prix circuit, seen in magenta, will allow drivers to run full throttle 85% of the time around the resort corridor because of the numerous long straightaways.
In the four decades since the Caesars Palace Grand Prix, the track and Las Vegas have grown.
The hype matches what you get when you go to Vegas: the glitz, the glamour, and the era of social media. For Formula 1, the timing coincides perfectly with the growth of motorsport interest and the popularity of the series to return and make this happen.
It’s the perfect convergence.
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