Basketball idol Michael Jordan played hardball with Carmelo Anthony at the negotiating table in 2011. It inspired the younger NBA star on a business journey that has led him this week to forming a $750 million private equity fund, Isos7 Growth Equity.
“We’re fighting for a deal, and Michael walks in,” Anthony said in an interview with Sportico, recounting his time as a player representative in the 2011 NBA lockout. Jordan was a legendary player, but when he sat down across from Anthony, he was a team owner, firmly focused on the dollars and cents. “We had to look at MJ like: ‘You’re not the player no more. You’re looking at this from a business standpoint; I’m looking at it like I have to protect my players.’”
Even though Anthony and fellow players had to endure a five-month lockout before getting the deal that has led to more than decade of NBA peace, he’s not bitter from the experience. On the contrary, it inspired respect for the other side of the sports business.
“Seeing the landscape of the sport industry on the inside, hearing that information as a player, sitting across from the owners and being able to operate in the CBA deal and the media rights deals… a lot of us [players] didn’t understand, as athletes, how to approach that,” the 10-time all-star said.
Fast forward to today, and the formation of Isos7, with Isos Capital co-founders and WWE veterans George Barrios and Michelle Wilson, puts Anthony further along the path he envisioned of becoming a team owner. The primary focus of Isos7, as first reported by Sportico Thursday, is equity ownership of premier, major league teams. In the near term, that means taking limited partner stakes in the four major North American leagues—MLB, MLS, NBA and NHL—that allow institutional investors to own passive, minority stakes. Isos7 will also seek equity in top-tier teams and leagues outside the U.S. that have been more open to control ownership from pooled capital sources, such as European soccer.
Overall, Isos7 seeks to raise $750 million to make investments of $50 million to $100 million each, according to a press release from Isos Capital Friday morning. The three partners declined to discuss potential fundraising activity, sources of capital or their asset target, citing regulator prohibitions on marketing to non-accredited investors.
“It’s not a venture fund,” Wilson said in an interview. “We’re looking for businesses, teams, leagues, sports betting and adjacent companies that are profitable or have a short-term path to profitability. Strong core business fundamentals are always the first thing we look for. Beyond that, the ability to build things like a global fan base, global appeal and fan engagement—like what we did at WWE—are really important to us.”
Wilson and Barrios are best known for their long stints as executives at WWE, capped by running the business under Vince McMahon as co-presidents from 2018 to 2020. (The pair have since returned to WWE as board members with the reappointment of McMahon as executive chairman). During their time at the wrestling giant, the enterprise value of WWE increased nearly 400%, while revenue rose about 90% to $960 million. The executives said their experience at helping to grow the business at scale while also broadening its appeal to women, minorities and in non-U.S. markets like India will allow them to not just invest in sports businesses, but help them grow as partners in what they see as a booming global market for sports.
“You’re going to have 2.5 billion more people in the content ecosystem over the next five to six years,” Barrios said in an interview, citing the expansion of Internet access worldwide. “Global GDP is going to grow by 30% to 40%, especially in India, Africa and China. We believe the sports rights holders are going to be the beneficiaries.”
While Isos7 seeks to invest, in part, in the top-tier sports leagues, the gains for sports assets will be broad-based, Barrios added. “This isn’t just driven by the trophy asset element of it.”
Each of the three see their business journey as culminating in the new fund, which jumps into a sector only recently discovered by Wall Street. Anthony, shortly after helping to lock in the NBA’s labor peace, formed with friend Stuart Goldfarb Melo7 Tech, a consumer-tech focused venture capital investment arm. Melo7 has invested at least $73 million in more than 20 deals, according to data compiled by S&P Capital IQ. They include everything from an early stake in DraftKings to taking a position in Africa news and data provider Stears News in October.
But Melo7 and its early stage investing was just partway along the path he wanted, Anthony said. When Goldfarb introduced him to Michelle Wilson and George Barrios, it became clear what the next step should be. “There are a lot of similarities in how we think, how we operate and what we want to accomplish,” Anthony said.
The timing was fortuitous. Barrios and Wilson had just finished closing a deal bringing bowling tour operator and venue owner Bowlero public through their $225 million SPAC. Their successful deal in an otherwise downcast market set the stage for the even more ambitious project of Isos7.
And the opportunity in global sports is sizeable. Teams in the top sports leagues around the world are worth some $400 billion, while the leagues themselves are worth $150 billion. (Those figures include the NFL, which doesn’t allow institutional investment.) The valuation growth of sports teams over the past 25 years has well outpaced the stock market. Part of Isos7’s strategy is similar to peer funds Arctos Sports and Dyal Homecourt: Buy minority stakes in major league teams at a typical limited partner discount (often 35% to a control sale valuation) and benefit from the appreciation of team valuations. Such funds can cash out of positions over time by selling to other buyers interested in a minority stake, or in a control sale, during which limited partners have the option to be bought out at a full valuation, as Dyal Homecourt did with the Phoenix Suns.
Like most general private equity funds, however, Isos7 probably finds greater opportunities for growth existing outside the limited partner strategy. These include cultivating portfolio companies to fully meet their market potential, buying control stakes in entities and managing them for growth, and making potentially fast-growing investments in emerging sports and technologies, driven by the world economic and demographic factors Barrios described. Isos7 aims for about 80% of the fund to be invested in blue chip properties, with about 10% dedicated to emerging sports and the balance to sports-adjacent investments, such as technology or consumer products.
To hunt out promising prospects, the trio have built out an experienced executive staff. Brian Flinn, who joined Isos Capital last year after running various WWE business units including as chief marketing officer, is a partner in the new fund, overseeing the investment and operations teams. Rob Pietroforte, who has experience at Genius Sports and Raine Group, is managing director, while Goldfarb—Anthony’s partner in venture capital—takes on the role of senior strategic advisor to Isos7. Sheetesh Srivastava, who helped grow WWE’s presence in Asia, is managing director for the fund for India and Southeast Asia.
Isos sees its executive diversity as a strength. Knight Foundation data shows that only 1.6% of private equity assets are managed by women, and just 4.5% by minorities. In addition, Isos7 says it will direct 1% of its carried interest to support under-served populations and communities. Carried interest is the accumulated profits from portfolio investments fund managers collect as part of their compensation. That means as the Isos7 fund does well, so will some of those traditionally left outside the wealth creation engine of Wall Street.
Additional reporting by Eben Novy-Williams.