Reaction: NFL Starts Venture Capital Firm
Earlier this week, Sports Business Journal broke the story that the NFL was starting a venture capital fund, with the owners willing to put in at least $32 million to invest in businesses. I knew I needed to comment on this, but, to be honest, I didn't think I was the most qualified.
For that, I went to Dan Shanoff of Quickish, a media company focused on short-form, real-time news curation and discovery.
Here is what Dan has written up for Sports Biz:
When news broke that the NFL was setting up its own early-stage VC fund, I tweeted out that it was “fascinating, forward-thinking and savvy.”I have been working in and around digital start-ups for 15 years, most recently spending the last two in the heart of New York City’s Silicon Alley founding and launching Quickish, a media company initially focused on sports, including the NFL. This has given me unique, on-the-ground perspective of the ecosystem of investors, entrepreneurs and institutions that the NFL is joining.
So let’s unpack that tweet:
“Fascinating”: That the NFL would recognize the value of not just investing in its game, but surging up the value chain to where early-stage companies are creating and cultivating the new technologies and techniques and talent that will drive the NFL’s business years from now. It isn’t unprecedented for non-traditional companies to create VC units: In the NFL’s New York backyard, AOL has had great success with its in-house VC “Ventures” group; across the country, Google Ventures has parlayed the company’s dominant position into inserting itself into Silicon Valley’s (and Alley’s) early-stage environment. These are interesting analogues for the NFL. (More literally, it is easy to think of early-stage investment in the same way that teams deploy draft picks — some hit big, some become merely useful, some are wasted. But the best teams have a phenomenal system for product incubation, from college scouting to player development.)
“Forward-thinking”: At least in terms of barriers to entry, there has never been a better moment to found a start-up, and plenty of smart folks are trying. That’s not to say that many of these start-ups are businesses, let alone companies. But the experimentation alone is phenomenal: The process of founding a company, having a vision, launching (and iterating) and, ultimately, serving consumers pays off whether the founding team flies, flops or finds itself acquired by a larger company. By joining the start-up ecosystem in its earliest stages, the league gives itself years of a head-start in figuring out how and why — or even if — a start-up company or trend or talent might have a big impact on the NFL’s business. (Look no further than the same industry: MLB’s Advanced Media group has spent the last decade building out a business that is even more about being a profitable and powerful technology platform than it is about baseball.)
“Savvy”: The NFL is a powerful investor for any early-stage company. The league’s access to tens of millions of fans — let alone the relationship it has with sponsors and media companies, worth well into the billions of dollars — gives it a unique ability to accelerate the companies it invests in. With its market power, combined with the product- and networking-expertise of its co-investors among the more traditional funds, the NFL can create winners and do it efficiently. Meanwhile, the league nimbly gets to experiment with early-stage products that may ultimately turn out to be substantial drivers for its own business, and that's in addition to any direct return on invested capital. Beyond that, inserting itself into the start-up ecosystem of Silicons Valley and Alley (and elsewhere), the league will have a built-in early-detection system for interesting companies and embryonic trends — the kind of thing a billion-dollar business doesn’t want to recognize when the NFL commissioner goes home and his kids tell him about some new product that is trickling into mainstream consciousness.
PLENTY OF START-UPS
There are plenty of start-ups out there that are directly applicable to the NFL’s business: Within a few blocks of Union Square alone, the league could have invested in innovative ticket platform SeatGeek or fantasy football analytics provider numberFire. Would the NFL have been welcomed to join an early funding round of Foursquare, if the company’s founders and earliest investors appreciated what integration into the NFL’s heavily location-based business would have done for the company’s early traction? Perhaps the NFL would have taken a seemingly counter-intuitive early meeting with BirchBox, a high-flying beauty-products subscription service, and recognized its potential for creating a new male-focused commerce channel directly with the NFL’s millions of fans?
Fortunately for the league, the early-stage ecosystem — particularly in New York — is a vibrant, friendly network. New companies are being incubated constantly; incumbent investors are vetting them all the time and likely to be very interested in bringing along a co-investor with as much market-moving power as the NFL. Yes, there is an atmosphere of competition among start-ups and investors, but nothing that the NFL isn’t already used to.
My humble advice (and as a start-up founder, “humbled” is the operative word) would be to dive right in to the start-up ecosystem, particularly in New York, where the NFL is based — fill every day through the end of the year with coffees and intros and demos and discussions, all of which are plentiful. Get league digital media honchos Brian Rolapp and Jeff Berman into TechStars as mentors. Sponsor an event at General Assembly and do something fun at SXSW. Tap talent around the league to help — one name that stands out is Gideon Yu, hired this spring as the 49ers’ Chief Strategy Officer, but from a background at the highest levels of VC (oh, and he was CFO at a couple of small start-ups, Facebook and YouTube).
Undoubtedly, team owners and high-profile season-ticket holders have made plenty of angel investments and have important connections in local markets. (With so many stakeholders, there is also the chance for conflicts of interest, which the league will have to navigate.) Market intel is more efficiently surfaced with each passing month; the best companies bubble up quickly, and as explained above, the NFL is in a fantastic position to join in early-stage syndicates. I’m sure the league is already far down this path of setting up a process to dive in, just as MLBAM and the NBA have worked with start-ups in recent years. (On the sports-media side, ESPN has acquired start-ups and made investments, most notably in Active.com networks; NBC/Comcast owns a piece of SB Nation, among others, through Comcast’s VC group ; Fox Sports , Yahoo Sports and Google’s nascent YouTube Sports initiative will likely also jump in to the early-stage investment game by the end of 2012, if only because the benefits are so clearly evident.)
The point is that there is an incredible opportunity here, both for the NFL and for the start-up community — that includes entrepreneurs and investors, both. Like a Devin Hester punt return, this is an exciting time for the league to zig.
Questions? Comments? SportsBiz@cnbc.com