McLaren just completed one of the most historic comebacks in sports history. What initially looked like another Formula 1 season of Red Bull dominance quickly became the most thrilling season since the Max Verstappen-Lewis Hamilton title fight in 2021.

Red Bull’s Max Verstappen still won 9 of the 24 races and took home his fourth consecutive drivers championship. However, there were seven different race winners this year, including first-time winners Lando Norris and Oscar Piastri, and McLaren finished the season with its first constructors championship in nearly three decades.

McLaren is one of Formula 1’s most accomplished teams. Ayrton Senna. Alain Prost. Niki Lauda. Mika Häkkinen. Some of the sport’s best drivers have won championships with McLaren. Ferrari is the only F1 team in history with more race wins, podiums, and pole positions, and McLaren consistently had one of the quickest cars this year.

But this was a historic comeback because McLaren wasn’t supposed to be here.

Just a few years ago, it looked like McLaren’s Formula 1 team would cease to exist. The team was losing hundreds of millions of dollars annually. They were selling off valuable assets to pay employees and were only a month or two away from bankruptcy.

But today, everything has changed. McLaren is now a financial juggernaut. The UK-based Formula 1 team ended 2023 with $536 million in revenue and $38 million in operating profit. And they are now one of the world’s most desired sports properties, recently valued at $2.65 billion, according to Sportico’s 2024 F1 team valuations.

This transformation didn’t happen overnight. It’s the result of years of agony, some tough decisions, and moves that many at the time believed to be idiotic (and risky).

To understand how McLaren’s F1 team became such a valuable enterprise, we must first understand its history. In 2015, McLaren was underperforming by every metric.

Performance? Horrendous. The McLaren F1 team put up its worst season in 35 years, finishing ninth in the Constructors Championship. They only scored 27 points all season and finished behind teams like Force India, Lotus, Toro Rosso, and Sauber.

Revenue? Non-existent. In a world where Formula 1 teams make most of their money off lucrative sponsorship deals, McLaren’s car barely had any. The team’s sponsorship department was in disarray, and they were losing millions each race weekend.

The truth is that McLaren had turned what is typically a valuable marketing channel for international brands into a financial liability for a company that couldn’t afford it.

This is where Zak Brown comes into play. Brown grew up in California and had no business being in Formula 1. He actually only got started in karting when he was in high school. The story is that Brown got picked to be on the “Wheel of Fortune” TV show, won a few expensive watches, sold them at a local pawn shop for cash, and then used that money to join a kart racing school in California that he found in a pamphlet.

Zak Brown eventually moved to Europe, competing in Formula Three and other smaller racing circuits from 1991 to 1994. However, after getting homesick and realizing his dream of making it to Formula 1 was not going to happen, Brown moved back to the U.S. and later started a company called Just Marketing International.

The idea behind Just Marketing International was simple. As a junior driver trying to break into motorsports, you must raise a lot of money from sponsors. That’s because a karting career costs tens of thousands annually, while older drivers might need half a million dollars in annual funding as they start to climb the ranks toward Formula 1.

This is why many of Formula 1’s current drivers come from wealthy backgrounds. But for a guy like Zak Brown, who grew up middle-class in California, it meant he had to build relationships from scratch and get really good at selling sponsorships.

This is where it gets interesting. When Brown decided to return to the U.S. in the mid-1990s, his sponsor at the time, TWA Airlines, was getting a lot of value out of the deal and wanted to stay in motorsports. So, rather than saying, “See ya later,” Brown brokered the sponsorship deal with another driver, and his new company was born.

Zak Brown then spent the next two decades building this business. He brokered some of Formula 1’s largest deals, including Ferrari’s UPS sponsorship and the Unilever deal for Williams. After becoming the leading global motorsports marketing agency, Brown sold the company to Chime Communications for $76 million in 2013.

That left Brown with two options: work for Formula 1 or take a leadership role within McLaren Racing. He chose McLaren primarily because it was his favorite team growing up, but in retrospect, it was definitely a much more difficult challenge.

“I found, in no particular order, a team that had had its worst year in the history of McLaren; a blank racecar with record-low sponsorship; drivers that didn’t want to drive for us; and a very disgruntled workforce that lacked leadership, so it was every person for themselves. There was a lot of blame, a lot of conspiracy theories, and a lack of trust. Other than that, the place was great,” Brown told the New York Times.

Brown spent the first two years overseeing McLaren Technology Group before becoming the CEO of McLaren Racing in 2018. It was his dream job, but McLaren’s F1 team was losing $130 million annually when he started and needed a lifeline.

Brown started by selling sponsorships, leveraging the connections he had built up in his previous life to monetize the car. He then brought on the best talent he could find to fix the engineering side of the business, hiring Andreas Seidl as team principal.

Things started looking up for McLaren, but then COVID sent everything sideways.

The pandemic forced Formula 1 to hold races without fans in the stands, which meant less prize money for every team on the grid. The uncertainty also forced companies to rethink sponsorship deals, and McLaren found itself dangerously low on cash.

Brown said the team was only “a month or two away” from going out of business. So, to stay alive, the CEO of McLaren’s racing division had to get creative.

McLaren sold a 15% stake in its F1 team to MSP Sports Capital, buying them additional time with a $250 million capital injection. McLaren also had to lay off employees. They sold some of the company’s historic cars to raise money, and they even sold their headquarters in Woking, England, for $237 million, signing a 20-year lease back agreement so that they could pay their remaining employees.

Fast forward a few years, and the McLaren Formula 1 team you see today looks almost unrecognizable.

McLaren now has the best young driver pairing in F1: Lando Norris and Oscar Piastri, both 25 years old or younger. They were in last place after the first two races last year, but new team principal (and Michael Schumacher’s former engineer), Andrea Stella, improved the car so much that they were the fastest team most weekends this year.

This success has had a huge impact on the business. McLaren went from having only a handful of sponsors a few years ago to more than 50 this past season. Not only is that more sponsors than any other team in Formula 1, but McLaren literally ran out of inventory on the car, so they built digital advertising panels along the cockpit that rotate through various corporate sponsor logos throughout the duration of a race.

Many people in Formula 1 initially thought this was a bad idea because the additional weight could slow down the car. However, McLaren did it anyway, and considering they won the Constructors Championships this year, I’d say it worked out just fine.

Zak Brown deserves a lot of credit for McLaren’s turnaround. He was in charge of the ship, steered them clear of bankruptcy, and is now considered one of the best executives in motorsports.

But the other important factor here is Formula 1 itself. Historically known as a sport in which big brands like Ferrari, Mercedes, and Red Bull spend hundreds of millions marketing their products without the expectation of profits, F1’s introduction of a cost cap — a limit on how much teams can spend annually — changed everything.

For example, the biggest teams previously spent nearly $500 million annually, but the cost cap has now limited per-team spending to $135 million. A few things are excluded from that number, like the salaries of each team’s three highest-paid employees. However, this was a crucial step because it helped even the playing field, drastically reduced expenses, and enabled teams to build accurate financial models.

Every Formula 1 team is now worth at least $1 billion, and almost all are profitable. But based on what has transpired over the last few years, it’s fair to say no one has benefitted more than McLaren.

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