Investment capital looks to play in sports
It’s no secret that investment capital is flowing into sports. Twenty years ago, almost no serious institutional money invested in sports, which in many cases still operated akin to mom-and-pop businesses. But now there is a gusher of new money, driven by the space’s must-see content and growing role in the entertainment landscape. What follows are snapshots of some specific sports sectors and other categories.
Esports: The category is hot, with sports team owners and investors like Bessemer Venture Partners getting in on teams and games. “You have smart money coming in,” said Inner Circle Sports co-founder Rob Tilliss, citing Bessemer, which invested in TSM in July. But it’s early days yet, cautioned Josh Empson, managing director of Providence Equity. “The main of the [private equity] industry is trying to figure it out.” And Jon Moses, an esports investor, cautions that there are some parallels between the extreme valuations and low revenue of the boom/bust days of the late 1990s internet. Nevertheless, he is bullish on esports infrastructure, investing in platforms that enable gaming. “People don’t want to be left behind,” he said of the investment flowing in.
Sports team owners: Last month, the Minnesota Vikings’ owners announced they had been investing through a fund in sports and entertainment assets. They are not alone, whether it’s Stephen Ross of the Miami Dolphins, the Los Angeles Dodgers’ Global Sports Venture Studio or the San Francisco 49ers with their 49ers Enterprises investment arm. “You have a lot of guys very invested in team assets because they made a lot of money, and who wouldn’t want to own a sports team,” Empson aid. “And then they have turned around and said, ‘Hey, is there a broader play in the ecosystem of sports?’”
Empson calls it the professionalization of sports team ownership. “These are becoming much more real businesses than they have been, and as part of that owners are looking around and saying, ‘How do I grow my business? How do I put other services around it?’ They’re taking a much more sophisticated approach to adjacent spaces.”
Sports-specific funds: These have largely been started by sports team owners, too: the Boston Celtics’ owners and Causeway Media Partners, Cleveland Cavaliers owner Dan Gilbert and Courtside Ventures. Bruin Sports Capital, which has funding from WPP, is somewhat different in that it was not launched by a sports team owner. But its founder, George Pyne, had a long track record in sports, with top positions at NASCAR and IMG before starting the fund. These funds invest in a wide array of sports-related businesses, including technology, hospitality and media.
Events: Perhaps nowhere is the zeal greater than the big event space that large pools of capital are targeting. SoftBank was among a group of investors offering $25 billion for new overseas soccer leagues, and Kosmos, backed by Chinese capital, is pledging $3 billion for the new Davis Cup format launching next November. Even on a smaller scale, The Raine Group, a sports adviser that has an investing arm, is helping launch a new lacrosse league with star player Paul Rabil.
Mega events like the Olympics, Super Bowl and World Cup are major moneymakers, but they are events controlled by governing bodies or leagues. Starting a major event from scratch gives the investor control of the revenue streams. “The scale may be higher now, but there is a well-worn path toward doing events like that that fit into a traditional model of monetization,” said Inner Circle’s Tilliss.