An interesting trend 𝘪𝘯 𝘴𝘱𝘰𝘳𝘵𝘴 is corporate venture capital…
Look at the entities that invest across just tennis for example: 🎾
❶ Winner’s Alliance/PTPA ─ players rights entity that invests in strategically aligned sports companies
❷ AO Startups ─ run by Tennis Australia and the Australian Open to build, test, and pilot startups around their infrastructure.
❸ USTA Ventures ─ invest in companies that advance the growth of tennis and elevate experiences at the U.S. Open.
This is part of a broader movement in sports.
Let’s Dive In 👇
Corporate Venture Capital
Corporate Venture Capital – also known as Corporate Venturing – began in 1914, when Pierre S. Du Pont’s company invested in General Motors.
So how’s it defined?
Corporate venture capital (CVC) is the investment of corporate funds directly in external startup companies.
“practice where a large firm takes an equity stake in a small but innovative or specialist firm; the objective is to gain a specific competitive advantage”
- CVC is not an investment made through an external fund managed by a third party, even when a single investing company funds the investment vehicle.
- CVC is not synonymous with venture capital (VC) but is a specific subset of venture capital.
The CVC division often believes it has a competitive advantage over private VC firms due to what it considers to be:
- its strong balance sheet
- ability to be a patient investor
- superior knowledge of markets and technologies
Due to its hybrid nature involving both elements of corporate rigidity and startup culture, managing a successful CVC unit is a difficult task that involves many hurdles (and often fails to deliver the expected outcomes).
Example CVC Success
Intel Capital, the semiconductor giant’s investment arm, loves to make something called “enabling investments”.
Back in the early 1990s, Intel realized it could benefit from nurturing start-ups making complementary products — demand for them could spur increased demand for Intel’s own microprocessor products.
So Intel invested in hundreds of companies whose products—such as video, audio, and graphics hardware and software—required increasingly powerful microprocessors inside the computers they ran on, thereby stimulating sales of Intel Pentium chips.
Sports Corporate Venture Capital
As sports becomes more of an asset class…
Larger corporations are setting up investment arms to do exactly what software giants have done in tech over the last 30 years.
The ultimate goal of these venture arms?
To find and support innovative technologies that can improve the sport for players, teams, and fans alike while providing financial upside.
*I have identified 28 different CVCs in sports — the full list w/ contact information is available for members of the community here.
Sports CVC Arms
What’s unique about the sports industry is CVC is different between leagues, teams, and companies.
Let’s look at some examples:
Leagues:
- NFL – 32 Equity
The NFL was the first league to create a venture arm as they saw the financial upsides they inherently helped create.
Started with a $1M contribution from every team, then $2M, and recently collected another $5M from each organization ($250M+ total).
Notable portfolio companies: Hyperice, Fanatics, NOBULL, Clear Secure, Genius Sports, Skillz
Purchased a 3% stake in Fanatics for $95 million in 2017 at a $3B valuation — now worth 10x as Fanatics’ December raise valued them at $31 billion.
- NBA Equity (NBA)
The NBA’s equity portfolio is approaching nearly 20 companies, with the total value of those stakes worth nearly $1 billion.
Notable portfolio companies: Sorare, Sportradar, Tagboard, Nextiles, New Era Cap
NBA owners are together worth north of $250B — safe to say they’re a well-connected bunch.
Teams with Venture Arms:
- Minnesota Twins (MLB)
- Indiana University (NCAA)
- Sixers Innovation Lab (NBA)
Individual teams with venture arms don’t make much sense to me personally.
This is why most team owners place money into 3rd-party venture funds or vehicles created by the league to accomplish their strategic & financial goals.
Companies:
- Drive by DraftKings
- DSG Ventures (Dick’s Sporting Goods)
Focus heavily on strategic investments for their larger companies — DSG on retail/merchandise and DraftKings on betting/gaming.
Also to note: Sapphire Ventures was initially SAP’s internal CVC arm until it broke off (and now they’re just an investor).
I’m curious to see how Corporate Venture Capital evolves as there are both 𝘱𝘳𝘰𝘴 𝘢𝘯𝘥 𝘤𝘰𝘯𝘴 that companies should think about:
𝗣𝗥𝗢𝗦: 📈
high-level expertise, established networks, long-term support, deep market insight, and brand credibility
𝗖𝗢𝗡𝗦: 📉
pressure to align with investor’s goals, conflicts of interest, high expectations, equity dilution and control, exit pressures that might not always best suit the founders/company
Going Forward
When the internet was taking off in the 90’s corporate venture capital exploded (and has kept that pace since).
To me…
The rise of corporate venture capital arms in sports is a bullish signal for the industry.
Lots of growth ahead!
