NBA Launches In-House PE Group to Invest in Startups

Over the last 10 years, the NBA has acquired equity stakes in companies. However, investments have been rare and not a central point.

A new division of the league is trying to change this with a proactive approach to investing.

The NBA Board of Governors approved NBA Equity in December.

This is a roll-up of existing investments that the league has and will help to accelerate its growth. The NBA hired David Lee to lead the venture in May.

After stints at LG Electronics, consultancy Bain and then in the startup world for a decade, he is now the CEO of the NBA.

The NBA is a strategic investor and not a financial one. Therefore, don’t expect investment in a new startup in healthcare if it isn’t core to its business.

Companies beyond the seed stage are not the primary focus. Instead, it is geared more towards early and growth stage companies. However, this mandate can be flexible.

Take New Era. Haber says that the NBA recently invested in the brand, which is 102 years old, along with the MLB and NFL. Haber also calls it a “direct strategy fit” for what the NBA wants to do in apparel and lifestyle.

The investments are not all the same. You can make cash investments on their own, or you can get equity as part of a sponsorship.

The league signed an 8-year partnership with the data and analytics company Sportradar. This includes equity and cash components. The NBA will also receive 3% over the term of the agreement.

Ted Leonsis, Michael Jordan, and Mark Cuban are the current owners of Sportradar. They invested in Sportradar as a private company in 2015.

Other NBA Equity investments include smart cloth startup Nextiles and NFT fantasy gaming company Sorare. QuintEvents is also an event-management business. Sorare began with a focus on soccer but was able to transition into basketball with the NBA partnership.

According to sources familiar with the matter, the total value of these investments is close to $1 billion. These people were given anonymity as the details are confidential.

Lee is able to draw upon the expertise of the wider NBA organization, including its divisions in media, technology, and merchandise. Although he has a small staff at his disposal Lee can also draw on their smaller team.

When identifying companies and thinking about strategy, he has been able to tap into the network of NBA owners.

The NFL’s 10-figure investment venture 32 equity, includes positions at Fanatics Genius Sports, and Skillz. The fund was founded a decade ago, with each club contributing $1 million and then adding $2 million to it.

Dhruvprasad was recently appointed to lead 32 Equity. Kevin LaForce was previously responsible for overseeing the investments before he left to join RedBird Capital Partners in 2021.

Each NBA team has 1/30th of NBA Equity. This is similar to other league assets like NBA TV or NBA China.

When league executives consider NBA expansion, the rising value of these assets should be considered. Owners have their shares diluted to bring down all revenue and shared assets to 1/32nd.

We’ve recently seen DICK’s Sporting Goods launch their own venture and billions pour into sports.

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