Team owners tend to make their money outside of the world of sports. Buying a team has generally been a status play. That’s changed as the business side of sports has become more and more complex. Handshake deals in a smokey back room are now vetted by consultants and front office personnel with graduate degrees. Revenue driven models find the best return on investment and drive where teams decide to allocate budget. Teams and leagues have also turned their eyes to the businesses that drive the industry. Where companies used to have to go to institutional investors for seed, series A, or series B funding, teams, leagues, owners and niche investment groups have stepped in to provide funding and find return for sports business investors.
One of the more publicized examples is the Los Angeles Dodgers Accelerator. That should be of no surprise. The Dodgers are owned by Guggenheim Baseball Management, which is a consortium led by Mark Walter who is controlling partner of Guggenheim Partners. Guggenheim Partners is global investment and advisory financial services firm. It makes sense that they would be interested in investing in companies that provide an intersection between sports and start-up tech companies.
One of the companies that received seed money from the Dodgers Accelerator is FieldLevel. Their goal is to connect high school athletes and coaches with college coaches and recruiters. Essentially FieldLevel found a pain point with the recruiting process. Their private social network creates a referral based recruiting process and transitions some of the support high school coaches give to their athletes to the online community FieldLevel created. They now have 140,000 athletes across 10 sports, 37,000 high school teams, and 51,000 high school, college and professional coaches and scouts on the system.
That seems like an easy sell to an institutional investor. It’s a growing market with very engaged users, and youth sports has a pretty high overall spend by people involved. It wasn’t that simple at first according to Brenton Sullivan, CEO of FieldLevel. “Originally we targeted institutional investors, but sometimes it didn’t immediately work. Once we found investors who understood pain points in both tech and sports, it made sense. The funding landscape is shifting, and the leadership of the Dodgers Accelerator immediately understood what we were trying to accomplish.” The good news for a company like FieldLevel is that once these sports-related investors took notice, institutional investors started to see where they can find a return on their investment. “Someone like Steve Kaplan, who is not only involved in sports, but is very successful in investing and business, understands how important recruiting and scouting is, but he also understands the business. That helps us,” said Sullivan. Kaplan is an owner of the Memphis Grizzlies and Swansea F.C. but also invests in companies from manufacturing to solar panels. Youth Sports has been valued at a $15 billion dollar industry by some, and that’s ripe for investment and the market FieldLevel is targeting.
These investors are leading the way in the new world of sports based venture capital. The names are familiar to anyone monitoring the financial markets. Joe Lacob and the Warriors ownership, Josh Harris — owner of the 76ers — and Apollo Global Management, Kraft Sports Group, Jerry Jones, and Wyc Grousbeck and Causeway Media Partners are some of the many sports-related ownership groups constantly looking for new investments and partnerships. The owners listed are not the only people involved in providing capital for new companies. Leagues have their own investment arms as well.
This is just the beginning of the trend. Sports ownership groups understand the market and may not demand such a high return that a typical institutional investor demands. New solutions don’t necessarily have to cater to everyone in the world. Something that can be niche but still provide a return on investment is still worth taking a look at. While typical VC firms are looking for the next Facebook or Snapchat, these sports-related investors are partnering with tech companies to find solutions to a market that is smaller, but where they have expertise. Startups like FieldLevel benefit from these investment partners because they understand the goal and what type of return can be achieved. That allows the startups to focus on their business. The trust and confidence of the investors make sure the companies can actually execute on their vision. Then everyone wins.