There are over 150 professional sports teams in Australia, across a wide variety of sports from Australian football to motorsports. For these teams to remain competitive, they are required to consistently improve facilities, increase player recruitment spend, and find ways to engage their supporters. They derive their revenue from television and streaming deals, sponsorship and advertising, membership and subscriptions, ticket sales, matchday revenue, merchandise sales, government support, licensing and media rights, events, prize money, revenue sharing agreements, and team owned assets.
However, teams largely rely on revenue that is dependent on how well they perform. So how do emerging teams compete against incumbents at the top of their game?
Funding.
Australian teams are funded via a variety of avenues.
ASX listed: teams like the Brisbane Broncos (ASX:BBL) that utilise public placements to fund business growth.
League owned: teams like the Sydney Swans or Port Adelaide, who are owned by the AFL, and can lean on the league to help with additional funding.
Non-for-profit: teams like West Coast Eagles or the Queensland Firebirds, owned by non-profit entities that rely on donations for additional funding.
Member owned: Brisbane Lions, Carlton or St Kilda are all limited by guarantee, a structure that allows members to vote to appoint the club's board. In this structure, the clubs cannot source private capital and must rely on donations to fund projects they are not able to self-fund.
Privately owned: clubs such as the Western Sydney Wanderers or the Melbourne storm can engage private investors to assist in funding. This provides teams with the most flexibility to raise capital.
Equity Crowdfunding for Privately Owned Teams
In Australia funding for teams has usually come from Australian Entrepreneurs and media companies. In most recent times, some international sports corporations have bought teams. This, for the most part, reflects the global investor base into sports teams. However, there is a source of funding that other markets use for funding that Australia has not explored and that is equity crowdfunding.
A method of raising capital where a company issues shares to a large number of investors, in exchange for funding. It allows retail investors to invest in private businesses.
Funding via equity crowdfunding is suitable for sports teams as they have engaged fans, can offer compelling investor rewards, have an easy to understand business model, unique fan bases, and a great story.
Case Study – AFC Wimbledon
League Two team, AFC Wimbledon has raised three rounds of equity crowdfunding. Raising £2.3m from 5053 investors in 2019, £0.5m from 905 investors in 2020, and £1.1m from 510 investors in 2022.
AFC Wimbledon is a club that is 100% owned by the fans, as it is owned by what is known as the "Dons Trust.” Their supporters come from rival teams that were merged to create AFC Wimbledon. The story behind this team is a David v Goliath narrative that their fans love. The upward growth potential and fascinating story has been compelling to investors.
AFC Wimbledon attracted investors with rewards including stadium naming rights, pins, scarves, experiences, and Plaques.
Since the raise, the team has built a new stadium. This has been instrumental in the growth of the team, and its journey in moving up the leagues.
Case Study – Watford FC
In June 2024, United Kingdom soccer team that plays in the EFL, Watford FC, successfully completed its equity crowdfunding offer.
The company raised $4.3 million from 3,372 investors. Watford has a rich history, having previously played in the Premier League, it is one of the most well-known football clubs in the UK. Once owned by Elton John, the team has strong support from blue-chip partnerships with global brands like American Airlines and Corpay. They were able to leverage their following to raise at a 1.45x revenue multiple.
Watford attracted investors with rewards including executive scarfs, premium box tickets, concierge services, training ground tours, training sessions and lunches with players.
Since the raise Watford has utilised the funds for player recruitment, particularly in the 1sts team. These funds have assisted in the club's greater goal of getting back into the Premier League.
Case Study – Green Bay Packers
Green Bay Packers runs like a non-profit organisation. All profits are donated or reinvested. They issue common stock that cannot be traded, does not pay dividends, and has no rights under securities law. Investors come onboard for the investor rewards and voting rights. The use of funds is expansive as this is the main source of funding the team has used since its inception. The funds have helped build stadiums, recruit, and keep the club running.
Summary
Equity crowdfunding offers an untapped opportunity for Australian sports teams to secure funding while fostering a stronger connection with their fan base. This alternative source of funding has been successful overseas and would be successful if replicated in Australia. Leveraging this approach, clubs can achieve financial sustainability, deepen community ties, grow their club, create a more engaged supporter base and win their league for their fans.
If you are a privately owned professional sports team looking to accelerate your growth, please get in touch with Issac Newbold, at issac@onmarket.com.au.