The sports industry is continuing to face an uncertain future, with its lifeline of events under question. In the past months, sports organizations have gone through tumultuous changes. First, government guidance on shelter-at-home and social distancing forced organizations to close their offices, launching a rapid adoption of remote working tools & processes. This happened at the same time as business continuity decisions and scenario planning, where sports organizations balanced decisions on calendars, commercial contracts, human resources contracts, city contracts, etc. One thing became abundantly clear in the midst of this melee, “The sports industry lacks a strong balance sheet”.
Looking ahead and beyond the immediate actions taken to stabilize sports organizations and their ecosystems, we anticipate a larger appetite for structural change. Post-crisis response teams and those in charge of ‘future-gazing’ within sports organizations will need to plan ahead to prepare for potentially different situations when governments relax restrictions on sporting events and entities. In that new paradigm, traditional financing models will be challenged. Sports will seek new avenues for business. Organizations will be more open to inviting investment groups and private capital into their value chain. We anticipate that the search for innovative solutions to the inevitable funding challenges ahead will have a healthy impact on the long-term growth of the industry.
Since the beginning of the COVID-19 crisis, we have moved all our Meetups online, hosting them now on a weekly basis with hundreds of participants attending. We’ve loved having these conversations with the community and delighted by the engagement and reaction! On a recent edition of the weekly Meetup on April 8th, we dived into the topic of investments and risk-capital in sports.
Joining us were two industry veterans with a foot on each side of sports and investments, respectively. Ahmet Schaefer, founder, and CEO of Core Sports Capital has multiple football investments including academies, tech companies, and football clubs in Europe, Africa, and the Middle East. Milos Ribic, Director at Adidas Ventures, manages the Adidas Corporate Investment portfolio with a focus on sustainable materials, different media formats, and mobile commerce. Check out the full webinar here to immerse yourself in the conversation, and some of the highlights and key takeaways below.
¨The high increase of the broadcast rights over the last five to ten years has created a further appetite for investment to come in.¨
Heralding the dawn of the 4th wave of investments in the global football industry, Ahmet shared how the healthy investment ecosystem that emerged in the last 10 years in European football specifically, with trickle-down effects across other football regions, is a result of the rapid increase in broadcast rights. This capital flow has professionalized football, and in turn brought new stakeholders, new objectives, new opportunities that have clear ROI.
Today’s football investor is more sophisticated than before, applying data and metrics to support smart asset allocation and strategy. Moving from a vanity investment, football has attracted savvy private and institutional investors with clear investment objectives in place.
The ecosystem around football has also strengthened, with different stakeholders understanding and positioning to take advantage of new capital flows. Ahmet’s group has sought to balance its football investment portfolio by developing an ecosystem of football stakeholders.
¨We are trying to enter into geographical regions, which makes sense in terms of registration, broadcast rights, competition format, and the probability to get promoted. And at the same time, we are trying to create synergies on the cost side by optimizing certain costs¨ – Ahmet Schaefer
With the entrance of new stakeholders that are data-driven and investment-minded, sports technology and tech-based solutions are emerging in football and other sports. Instead of focusing all of its research & development efforts internally, companies like Adidas are accelerating their innovation pipeline of products & services through its corporate venture arm. With its global footprint, it can also help pilot solutions rapidly and at scale.
¨For us having a platform where our startups can test their products would be the ideal scenario as we depend on that feedback, without that we are getting into the dark¨ – Milos Ribic
One of the fastest-growing capital deployment vehicles worldwide in the past 5 years has been corporate venture capital, which invested $57.1 billion in 2019 through 3’234 corporate venture capital arms. Adidas is one of the first sports corporations to set up such a vehicle. Adidas Ventures focuses its investment thesis on categories that can have a significant impact on its future revenue streams. The 3 categories are sustainable materials, mobile commerce, and media formats.
¨Adidas Ventures, the venture capital arm of Adidas, considers startup investments as a potential new revenue source for the entire Adidas Group¨
With close to a $1 billion sponsorship portfolio in sports, Milos shared that the impact of investments can be amplified massively by integrating them into the sponsorship portfolio. With many sports entities looking to engage digitally with their fans, expand their reach, and monetize in new ways, the Adidas Ventures portfolio of startups is an asset to bring into any conversation with sports organizations.
Interested to learn more about how sports entities, athletes and corporations are approaching their investment strategies? Looking for support in setting up your organization’s investment vehicle? Get in touch with our teammate Julian at julian@n3xtsports.com to find out more about how N3XT Sports can support your organization on its investment journey.
If you were not able to make it to our online session, you can watch it here, also we would like to invite you to subscribe to our newsletter, and follow us on Linkedin, Twitter, and Facebook to stay up to date with any N3XT Sports news.