If you ask ChatGPT about private equity investment in the NFL, it’ll run down a list of blue-chip firms that have stakes in the league and in some of the highest-profile franchises. None of it’s true, of course. In the realm of factual writing, humans still reign supreme.
But as the AI platform shows, speculation about the world’s most valuable league opening itself up to institutional investment is a favorite topic on the internet and on Wall Street.
Of the major sports leagues in the world, only the NFL now stands alone in banning private equity investment in the league or its teams. But that won’t last, say some industry insiders.
One private equity executive predicts the NFL will open itself up to institutional limited partner ownership “in a matter of months, not years.” The executive, who asked not to be named because the firm hopes to invest in an NFL team in the future, believes the league has done all the legwork needed to make a decision. Like its major sport peers, the NBA and MLB, the expectation is the NFL will only allow minority, passive stakes for funds.
The prediction may be overly optimistic. Based on various background and informal conversations with team owners, NFL teams still appear to be divided, with some for PE, some against and probably a plurality preferring to wait and see.
The divide partly stems from the uncertainty around how allowing bankers into the club will affect team values. One off-the-cuff estimate that institutional money would support a 15% to 20% bump in valuations was a level called insufficient by one owner. But a second private equity investor believes letting funds in as part owners would goose values much higher. That’s because the NFL requirement for the primary owner to control 30% of the franchise, coupled with the league’s debt limit for teams—well below debt ratios seen in other business sectors—is whittling down the potential pool of owners.
On one hand, it’s great for the paper fortunes of fellow owners that Rob Walton paid a record-breaking $4.6 billion for the Broncos. On the other, only 11 Americans are richer. One is Walton’s brother, one (Steve Ballmer) already has a pro team, and seven have no discernible interest in sports. The remaining two, Jeff Bezos and Larry Ellison, can afford any team they want, but they’d probably only buy one.
It’s not for lack of demand. At least $7 billion was raised last year alone by private equity funds that seek to invest directly into leagues and teams. One private equity executive, who also asked not to be named, pointed to the sale price of the English Premier League’s Chelsea FC in a $5.2 billion deal (the price of the team itself accounted for $3 billion of that) as proof fund money provides liquidity and a support for values the NFL will want. “It’s difficult to see continued growth in valuations,” the executive said, “without allowing institutional capital in.”
It’s worth remembering that the NFL met with Disney and Seagram’s in 1996 to discuss what corporate ownership for franchises would look like. It’s been a generation since those talks went nowhere.
Athlete Investment Continues to Flow
It’s more than just institutions flowing into private equity and venture capital investing.
The ranks of former players entering investing continues to swell. Thirteen-year NBA veteran Avery Bradley has told Sportico he’s joined sports-tech-focused Venturerock as a partner.
“Me being in the NBA, it gives that perspective on how to connect and find other opportunities my peers are doing that might fit Venturerock,” Bradley said on a video call. “Finding companies, finding different people to be a part of what we are doing here [and] giving fresh, new ideas a different perspective.”
Venturerock is an early-stage VC firm looking to deploy $75 million in assets, ideally across 15 or so businesses. Venturerock last week disclosed a $2.25 million seed round investment in Pogr, a customizable profile system with centralized video game statistics. Pogr is intended to serve as the basis for esports competition in the metaverse. Venturerock followed on earlier investments from Right Side Capital Management and Forum Ventures, according to data from Crunchbase. Danny Cortenraede launched the fund in October, after having led Wannahaves, which publishes “433,” a 60-million-follower soccer social media effort. Sports tech is a fast-growing industry, likely to expand from a $30 billion to a $50 billion market this year, according to the executive. “We see so many opportunities for creating an ecosystem [being] strategic partners with athletes,” Cortenraede told Sportico on a video call.
Bradley aims to help the VC firm identify new investments in sports tech in part by mining his connections from his playing years. He also envisions his role as assisting players who have an idea that could use an incubator firm, as well as potentially finding players who’d like to invest through Venturerock itself.
Bradley, who won an NBA title as part of the 2020 Lakers, joins a lengthening list of athletes seeking to use their money and insight to invest in a more institutional style, like Kevin Durant, Shaquille O’Neal, Alex Rodriguez and Venus Williams.
“Speaking as a black entrepreneur, it’s hard to find a lot of opportunities, it’s hard to find VCs taking this approach, to help you build from the ground up,” Bradley said. “I just want to be a part of something taking this approach. I feel like we’re all walking corporations in the NBA. There’s a lot more opportunities for us, and we need to take full advantage of them.”
(This story has been updated to accurately reflect the former job of the fund’s founder.)
