Rich Paul and the Art of Building a Powerhouse Sports Agency From Scratch
Rich Paul, LeBron James's agent, has built his agency Klutch Sports to a point where it rivals even the biggest firms in sports.
Image via Complex Original
Business is about risks. The greater the risk, the greater the reward. Just ask Rich Paul, the NBA agent who in 2012 left powerhouse talent agency CAA to start Klutch Sports. Even with LeBron James in tow, few believed Paul, then 30 years old, could pull off the move and navigate the NBA on his own.
"How's he going to walk into a Fortune 500 sports-brand company and negotiate a deal?” asked one anonymous agent to ESPN back in 2012. “You can't give a dentist a scalpel and say, 'Go do heart surgery.'"
For an agent, Paul doesn’t hide in the shadows. At any given Cleveland Cavaliers home game, Paul routinely takes in the action from his usual courtside seat as three of his clients—LeBron James, J.R. Smith, and Tristan Thompson—play a few feet away. Almost oblivious to the game’s outcome, Paul seems to genuinely enjoy his front-row seat simply because he loves basketball. “This is not just a job for me, it’s a passion,” Paul says. He has played competitive basketball throughout his life, knows the game, professes to know how players think, and believes his fire for the sport is what draws players to Klutch. It also doesn’t hurt that possibly the biggest athlete in the world validated Paul. “I think that resonates across the board when you’re dealing with guys on a high level,” he says.
I care about their family. I may sleep on their couch. They have children. So when we’re in that room and we’re in negotiations, I keep all those things in mind.
Klutch, based in Cleveland and Los Angeles, is an acronym that explains Rich Paul's vision: Knowledge, Longevity, Understanding, Trust, Commitment, and Honesty. How did Paul, now a 34-year-old with no college degree, successfully rep one the biggest athletes in the world and create a company that’s positioning itself to compete with the CAAs and IMGs of the world?
Paul wasn’t born with a silver spoon; he grew up in the hood on the east side of Cleveland. His backstory, and more importantly, the story of how he linked with James, is well known. The two met back in 2002, when James was still in high school, and bonded over throwback jerseys, which Paul used to sell out of the trunk of his car. The duo developed a friendship, which found Paul at James’s side wherever he turned. “Every time I was doing something, I’d call Rich and ask if he can make it, and he’d say, ‘I’ll be right there,’ and he was,” James told The New York Times in 2014.
But that partnership birthed a large band of detractors who saw Paul as an inexperienced, fresh-faced figurehead. Critics suggested that he was merely riding James's coattails without any real skin in the game. He was called a “joke” by longtime sports critic John Gambadoro. Paul’s shrewd and sometimes cavalier path to success has not been without a few hurdles.
But a lot has changed for Paul since he first stepped out on his own. As of this September, Klutch had signed its clients to a combined contract value of over $524 million and expanded to represent 13 NBA players, including All-Pro John Wall and the 2016 top pick Ben Simmons. That’s in addition to James, who—after securing the city of Cleveland’s first championship in 52 years this past June—is probably still the best basketball player in the world. Along with veteran NBA agent and lawyer Mark Termini, a crucial asset in contract negotiations, Paul has turned the relatively small Klutch Sports Group into a powerhouse. In comparison, Dan Fegan, one of Paul’s biggest competitors from the ISE Agency, reps over 30 clients himself. Jeff Schwartz, another rival from Excel Sports Management, reps 42 current players.
According to Paul, how Klutch got to this point and differentiated itself in an incredibly competitive marketplace comes down to the agency’s personal touch. Paul makes a point to reach his clients on a emotional level and not always focus on money. “We understand the window that they have to play but we also understand the business and where it’s going,” Paul says.
The vision is self-explanatory, but the execution has been carefully calculated. This was especially evident when James let Paul take the lead on his free agency during the summer of 2014 when James decided to leave the Miami Heat and rejoin the Cavaliers. At the time there were doubters who questioned the move, and more who questioned James allowing Paul to lead such a pivotal career decision.
I understand the game, I know the game, I understand how to evaluate talent. I look at more than just the mock drafts and it shows.
The first time James decided to change cities culminated in the disastrous and universally panned 2010 ESPN-produced TV show The Decision. The special, which featured James breaking the news of his departure from Cleveland live, might have played a role in his leaving CAA.
When James returned to Cleveland in the summer of 2014, things were different. There was no live TV show. No leaks to the media. No public relations nightmares. James put his trust in Paul to navigate possibly the most important decision of his career. “Anytime you make a move or advise someone in a business decision, the end result and the best result is to come out on top of that move,” Paul says. “When I was advising him, I felt like what we had put in place for him to evaluate was the best move for him.”
The forward-thinking Paul and Termini have set NBA contract trends, most notably in 2014 when they negotiated James’s new pact with the Cavaliers. Instead of seeking a four-year max contract, James and Klutch agreed to a two-year deal. The second year of the deal included a player option that allowed LeBron James to opt out of the deal after one year. This wasn’t because James had any intention of leaving the Cavs, but because Paul and Termini saw the rising NBA salary cap and knew they could use it to their advantage. This led to James signing a three-year, $100 million contract with the Cavaliers this past summer, thus making him the highest-paid player in the NBA. Because of the complexities of the NBA salary cap and James taking less money earlier in his career, the four-time NBA MVP had never before been the league’s highest paid player.
The precedent was set for the NBA’s biggest stars. Kevin Durant followed suit by inking a short-term deal when he signed with the Golden State Warriors in July, giving him more flexibility and earning potential going forward. “These players put a lot of trust into what we do, we understand the window that they have to play, and we have to maximize their opportunities,” says Paul. “We understand where the business is and where it’s going.”
According to Paul, the importance of knowing the landscape of the NBA and where it’s going is just as important as his personal “beyond basketball” interactions with clients. “Everything [with Klutch] seems genuine,” he says. "This is someone I really care about when they’re done playing. I care about their family. I may sleep on their couch. They have children. So when we’re in that room and we’re in negotiations, I keep all those things in mind. A lot of them are one and dones, so it’s not like they’re falling back on some type of career.” As fans saw in the recent Showtime documentary One and Done, which documented Philadelphia 76ers rookie Ben Simmons’s journey to the NBA, Paul will do whatever it takes to land a client. Whether that means crossing lines is another story, which some accused Paul of after he officially landed Simmons thanks in large part to his close relationship with the Australian prodigy's family.
Aside from being LeBron’s agent, Paul is probably best known as a notoriously tough negotiator. There have been a few specific instances where Paul and Klutch went the extra mile to fight for a deal. In 2014, they were able to secure a five-year, $70 million contract for Eric Bledsoe with the Phoenix Suns after an initial offer that was significantly below that. In 2015, they negotiated Tristan Thompson a five-year, $82 million contract, which many thought was outrageous. In September, Paul accomplished what many thought was impossible by securing J.R. Smith a multi-year contract worth $57 million. “He gets his leverage and he knows how to use it,” a league source said on Paul’s negotiation strategy. No matter the player, Paul with fight for them, and that was very evident in the case of Cory Joseph, who signed a 4-year, $30 million deal two years ago after spending the majority of his career in the D-League.
This is why Wall left rival agent Dan Fegan last January and signed with Klutch. With the business of the NBA booming and Wall’s free agency approaching in a few years, he’s putting his trust in Paul to do right by him. Based on history, Paul will get Wall the contract he wants. “At the end of the day, a guy could love you to death, but that’s not the deciding factor. We’re dealing with millions of dollars,” Paul explains.
Klutch is still in its infancy. As they continue to grow within the NBA—behind James, Simmons, and company—the pressure will continue to build as the roster expands. There are currently real questions about Ben Simmons’ health and how he will fare on the highest level of basketball. LeBron James is getting older and the time will eventually come when Klutch isn’t the home to the league's best basketball player. How will they handle that? That’s the (multi) million dollar question.
“When you’re running a business, you have to evaluate all things and right now our focus is basketball and I don’t see that changing anytime soon. I understand the game, I know the game, I understand how to evaluate talent. I look at more than just the mock drafts and it shows,” he explains. “If you look at where Klutch guys started and where they’ve finished, it shows. Whether it was Tristan Thompson or Eric Bledsoe, or a guy like Trey Lyles, who I’m very excited about. It’s not just LeBron, where people try and paint that picture, but you look at the guys, and they’re all solid.” Additionally, the Klutch roster boasts young, budding talent such as Montrezl Harrell and Dejounte Murray, which further speaks to Paul's ability to evaluate talent at the highest level.
With LeBron James entering the later stages of his career, Klutch faces new challenges as it blazes new trails into the future. Nobody can definitively say what will happen next. Simmons could end up being a bust. Wall may never take his much-anticipated next step. Thompson might fizzle out. Anything can happen, but from what Rich Paul and Klutch Sports Group have shown over the past four years, we can be certain they won't shy away from fighting for every dollar they believe their clients are worth.