Boston Firm Buys Stake in Adventure-Racing Group

Boston Globe
By Beth Healy

Boston investment manager Jim Pallotta is making a multimillion-dollar bet on sweat, mud, and adventure.

Pallotta’s firm, Raptor Capital Management, is investing in Spartan Race Inc., which runs a new breed of obstacle-race events that involve climbing walls, slogging through mud, and crawling under barbed wire. Raptor is looking to capitalize on a craze that’s attracting about two million participants yearly to events around the world.

The investment is being made through a Raptor venture capital fund that backs start-ups. This is the fund’s third deal, all in the $2 million to $10 million range. The firm declined to be more specific about the size of the Spartan investment.

John Burns, managing director at Raptor Consumer Partners and a part-time triathlete, said he approached Spartan with skepticism. “At first I thought it was gimmicky,’’ he said. But after studying the business, he said, the firm decided it could “turn obstacle racing into a standardized sport, much like what’s happened with marathons and triathlons. We think Spartan’s well-positioned to do that.”

Spartan was founded in 2010 by Joe DeSena, a Queens, N.Y., native who escaped Wall Street in the early 2000s, moving to Vermont for a simpler life. For diversions during his days in finance, he used to do extreme racing, he said, from the Iditarod — guiding a team of sled dogs across 1,049 miles of harsh Alaskan terrain — to the Badwater Ultramarathon, which starts in California’s Death Valley.

“It just became addictive, just a way to escape reality and really rebalance yourself,’’ said DeSena, 43. He also found it a healthy reality check from the money world, where roughing it means flying coach, he said.

Spartan now has about 50 employees and 40 events a year with names like Beast and the Death Race. The entry level event is the Spartan Sprint, a three-mile event featuring some 15 hard-core obstacles (including human battering rams). There is one scheduled for November in Fenway Park in Boston.

“We happen to be very good at designing courses that just blow people away,’’ DeSena said. “Here’s a hint: people are going to get to climb the Green Monster.”

Jorge Galvez, 41, a graphic designer and disc jockey, competed in a Spartan event for the first time a weekend ago, in Amesbury. The Winchester resident wound up scratched, bruised, tired — and happy.

“There are people that love running, but then you need to take it up a notch, you get bored,’’ Galvez said. “I needed something else, something more challenging. It was awesome.”

Plenty of women compete in Spartan races, yet there’s a definite macho overtone to the marketing of the events — more grunting rugby scrum than $3,000 racing bike time trial. Think Army Boot Camp, not fashionable cycling gear.

But DeSena seems to be onto something, offering something new and challenging to chiseled athletes and weekend warriors alike.

Spartan makes money primarily from entry fees of $100 to $150 per event, amounts that about 350,000 racers will pay this year to compete, as well as from sponsorships.

In a recent reader poll of extreme race events by Outside magazine, Spartan Race was the most popular, over such rivals as Tough Mudder and Warrior Dash.

So won’t taking venture capital mean DeSena will have to get back into the rat race? He admits there will be changes. For one, they will move the firm’s headquarters to Boston from Pittsfield, Vt. And Raptor’s Burns will join the board.

“Ultimately, when you’re growing as big as this is, we’ve got people calling us from South Africa and New Zealand to do events. You need experts to take it to the next level,’’ DeSena said.

Pallotta, who made his fortune running hedge funds for Tudor Investment Corp., closed his Raptor funds in 2009 after losing money in the financial crisis.

He reopened a smaller fund, and oversees about $621 million, according to a filing with regulators.

In addition to the hedge fund and venture fund, Raptor has a sports management business that includes Pallotta, who is also an investor in the Boston Celtics and in the Italian soccer team AS Roma. He was not available for comment.

“They’re sports people,’’ DeSena said. “It wasn’t like a bunch of Harvard guys that have never worn running shoes.”