Venture Capital’s Wild Stab at Pro Sports Ownership

Collaborative Fund, one of Silicon Valley’s most prominent venture firms, has just invested in Major League Soccer’s D.C. United, marking the latest move in a trend set by rival Thrive Capital. Last year, Thrive launched a dedicated vehicle to hold “iconic franchises and cultural institutions,” paving the way for other venture capital firms to follow.

Historically, wealthy individuals have used their fortunes to buy sports teams, with Vinod Khosla’s family buying the Seattle Seahawks and the Khosla-Taylor duo taking a stake in the 49ers. Private equity firms like Sixth Street, Ares, RedBird, and Arctos have also made forays into sports ownership, but with a focus on building long-term value rather than short-term gains.

Collaborative Fund’s investment stands out because they’re using their existing funds to invest in pro sports. This approach speaks to the allure of trophy assets – teams are seen as status symbols and potentially lucrative investments. According to Craig Shapiro, Collaborative’s co-founder, a franchise can be treated like any other consumer product: marketed, merchandised, and monetized.

Shapiro frames this investment not as a passive play but rather as an opportunity to activate D.C. United’s infrastructure. He points to the stadium, Audi Field, as a distribution channel for Collaborative’s portfolio companies – think wearable activations or sponsored concessions. This move is particularly astute given the growing value of live experiences.

Soccer valuations have soared in recent years, with Inter Miami’s franchise doubling in value since Lionel Messi joined and MLS’s average club valuation up 134% since 2019. D.C. United’s own valuation has climbed from $35 million to $785 million, factoring in its ownership of Audi Field.

Yet, this development raises more questions than answers. Can venture capital firms really add value to pro sports teams beyond what private equity or individual owners can bring? Or are they simply looking for a new way to park their money and reap the benefits of trophy assets?

The success of these investments will depend on several factors. How will Collaborative Fund and Thrive Capital measure success in their respective investments? Will they prioritize short-term gains or focus on building long-term value through marketing, branding, and community engagement? This trend also speaks to the broader venture capital landscape – are firms increasingly looking for alternative investments to justify their fees?

One thing is certain: this development marks a new chapter in the intersection of sports and finance. As investors continue to chase trophy assets, it’s worth examining the implications of this trend on the very fabric of professional sports.

The deal, subject to MLS approval, may just be the tip of the iceberg for venture capital’s foray into pro sports ownership. But as with any new frontier, caution is warranted – especially when the primary motivation seems to be less about building a community and more about generating returns.