The Super Bowl is the pinnacle of NFL promotion—a sprawling event that commands so much attention even the commercials are must-sees. But not everything the league does is meant to grab headlines and eyeballs.
Take, for instance, 32 Equity.
Few people have heard the name, much less know that it’s the NFL’s venture capital arm. Despite its low profile, the fund has scored some significant investment gains in its few years of operation, focusing on supporting and growing efforts that promote football and the league while providing owners a strong return on investment.
“We want to invest in companies, digital platforms and technologies that we think can help drive innovation and that we think should be good for our fans—to drive engagement in NFL football or media more broadly,” said Kevin LaForce, senior vice president, media strategy and business development. LaForce heads 32 Equity as part of his responsibilities, crafting investment decisions with a dedicated committee and team ownership input. LaForce declined to comment on specific fund investment amounts and returns.
32 Equity was formed by NFL owners early last decade, with each club contributing $1 million. Another round of $2 million per club a few years ago brought invested capital to $96 million. Generally speaking, 32 Equity will make a handful of deals a year and, unlike a traditional VC fund, doesn’t need to have its capital fully invested or have a timeframe to exit any investment. The primary guiding principal is that “there should be a benefit to our fans, or to our clubs or to our partners,” LaForce explained.
The mandate allows 32 Equity wide leeway to invest in ideas small—perhaps a new point-of-sale technology that makes stadium transactions quicker—and large, like something that can get more kids playing football and bonding with the game. While many of the deals are sourced from business discussions the league holds around licensing, media and game-day experience, 32 Equity investments are never a condition of deals the league strikes, LaForce explained. “It’s strategic money.”
Probably the best-known investment by 32 Equity is the formation of On Location Experiences, a hospitality and entertainment business. On Location is said to have required only a few million dollars of the league’s money but demanded much more league time and expertise to coordinate with outside partners to creatively package league ticket inventory and experiential programs into a new business model. One of its highlights is this weekend: tickets to the Super Bowl, which come with tiers of unique fan experiences and access. It’s a resounding success every year with corporate clients and high net worth individuals. Even with the pandemic slashing attendance in Tampa on Sunday, On Location will still have customers attending the game.
While LaForce declined to discuss specifics of On Location, it’s a big winner for the NFL. The 2020 sale of the majority of the business to Endeavor, a larger event- and talent-focused business, valued the startup at $660 million, less than five years after its formation. 32 Equity actually increased its equity in On Location Experiences in the Endeavor transaction because other investment funds needed to exit the investment, but the NFL didn’t need to.
On Location financials aren’t disclosed. One possible comparison: Legends Hospitality, a similar business formed by the Cowboys and Yankees. Based on general disclosures that investment firm Sixth Street seeks a 13% average annual return on investment, and the fact it purchased a majority of Legends this month, it’s likely safe to say On Location can probably generate a double-digit return on investment for its private equity backers, too. While 32 Equity does balance non-financial interests with its investments, LaForce said the fund ultimately wants to produce private equity-like returns for its NFL owner-investors.
Generally speaking, LaForce said 32 Equity is in a position to capitalize on shifts in the fan experience and the sports business broadly. “There’s been a lot of convergence between media and technology the past 10 years,” he explained. “There is all this disruption—and with that comes interesting innovations and ideas. Instead of selling media rights or intellectual property, we go to market with capital, access, relationships and networks, and do so in a commercially friendly way for entrepreneurs and investors.”
One example of that idea at work is a late venture-round investment in Skillz, a mobile gaming business. 32 Equity invested an undisclosed amount in Skillz in its Series D round in 2019. Skillz raised around $284 million total in all of its venture capital rounds, according to data compiled by Crunchbase. In December, Skillz went public by SPAC in December at a $3.5 billion valuation—an excellent return for its VC backers. Investor eagerness for the platform has since rocketed Skillz’ stock market valuation to more than $11 billion. “That was an opportunistic deal alongside some really smart other investors,” LaForce said. “The Skillz team is really talented in a space we really like.”
Skillz and On Location probably sit at either end of the spectrum of deals 32 Equity will do. Skillz is a relatively straightforward investment in a platform that dovetails with the NFL’s interests, while On Location is a complex situation that made great use of the league’s in-house expertise. In every case, 32 Equity wants to see how it can “put its thumb on the scale” to help a business succeed, LaForce allowed.
A third prong of 32 Equity’s investments consist of larger one-off deals, where capital isn’t necessarily drawn from the $3 million per club seed money. It’s in those deals in particular where 32 Equity shows it can call upon heft usually seen only with larger and more ballyhooed VC funds. For instance, with Fanatics, 32 Equity reportedly purchased a 3% stake in the business for $95 million in 2017. That’s now worth twice as much after an autumn funding round valued Fanatics at $6.2 billion. “Fanatics has a really big competitive moat and is a great executer of its business,” said LaForce. “We wanted to drive support beyond our commercial rights, but also through capital and trying to create alignment across our organizations.”
Looking ahead, 32 Equity is staying abreast of new technologies and developments that promise to create tremendous value. For instance, in October the fund invested in Hyperice, a pioneer in athlete recovery technology, including using AI to develop better fitness tech to meet pro and consumer demand. Investors in the business include active athletes Patrick Mahomes, Russell Westbrook and Fernando Tatis Jr. Another sector of interest for the fund is the expansion of legal sports betting, due to its effect on fan engagement.
Still, just as the Super Bowl pregame, halftime show and commercials make for great spectacle, the main focus is still the game itself. For LaForce and his team, 32 Equity’s portfolio may touch streaming, social media and technology, but it ultimately is centered around the product on the field. Said LaForce, “We’re still very much a believer in the return of live sports, live events and the value of the experience for a fan.”