Women’s professional leagues, like the WNBA and NWSL, are yielding some of the more attractive startup investment opportunities across sports and media.
While long-time fans and advocates of the ladies’ game may take offense to the ‘startup’ nomenclature, these relatively young properties have experienced rapid increases in investment and value over the last 12-24 months akin to high-flying tech companies.
Startups inside and out of sports have historically struggled with the inability for early investors, owners, advisors, and employees to exit their equity positions. Unlike shareholders in publicly traded businesses who can freely sell stock on exchanges, those invested in privately-held enterprises have been limited in their ability to sell interests.
However, that is starting to change. Markets that facilitate the purchase and sale of non-control equity shares and derivatives in privately-held companies (think: tens of billions of dollars’ worth) are gaining traction.
SpaceX, Stripe, and Klarna are among the unicorns that raised pre-IPO capital on a secondary exchange.
“Secondary markets are a natural evolution when an asset’s value increases and attracts a new type of investor,” Julie Uhrman (founder and president, Angel City) said.
The trend has not yet reached women’s sports. But teams across the WNBA, NWSL, and several other domestic leagues, have started or are primed to begin pulling from a different base of investors given their rapid EV appreciation and still low relatively low cost base (compared to the men).
For context, Ron Burkle paid $2 million for the NWSL’s San Diego Wave FC in 2021. He sold the team for $120 million earlier this year. Sportico values the average MLS club at $678mm.
But Burkle’s exit suggests that not everyone is certain revenues and valuations will be able to maintain the same trajectory.
Of course, differing opinions on expectations is what creates a liquid secondary market. Sell-siders can ‘de-risk’ their positions, while buy-side investors can seek out what they believe to be intrinsically undervalued opportunities; like backing a once-in-a-generation star.
The Indiana Fever recently selected Caitlin Clark with the first overall selection in the WNBA draft. The Iowa star’s arrival is widely expected to positively impact club ticket, partnership, and merchandise sales.
And with the league likley to receive an increase in the value of its national media rights contract(s) after the 2025 season, the Fever should see a substantial boost in both revenue and enterprise value over the next year and a half.
But the addition of Clark does not guarantee the franchise will print cash and be worth meaningfully more come next fall. She could sustain an injury, or simply struggle to adapt to the pro game stunting the momentum that currently exists within the sport.
The rapidly evolving media rights landscape also makes it hard to say that the WNBA’s next TV deal is certain to skyrocket in value. Having a secondary market to trade shares on would, in theory, allow Fever ownership to hedge a bit.
There are two primary hurdles standing in the way of secondary markets becoming prevalent across sports. For starters, collectively bargained league rules limit equity and derivative transactions within the big four leagues.
But even if those bylaws were altered, there is a dearth of individuals with non-control equity stakes (due to limitations on the number of LPs permitted). So, there is never going to be a large number of interests for sale at any one time.
By contrast, employee equity is commonplace in the ‘typical’ startup landscape. A company might have thousands of LPs.
Upstart and challenger leagues have shown a willingness to relax some of the more restrictive rules on club ownership. For example, while the NFL, NBA, MLB, and NHL prohibit institutional investors from taking majority control of a club, the NWSL has been open to the structure (see: Sixth Street and Bay FC or Carlyle and OL Reign)
“It allows for later-stage, long-term growth investors to play a meaningful role in the future of women’s sports,” Uhrman said.
The flexibility shown suggests some emerging leagues may also be more open to embracing secondary market transactions than their established counterparts have been. Doing so could help to accelerate enterprise valuation accretion.
“The [explosion] in women’s sports reflects not just a societal shift towards equity for women, but an untapped market ripe for investment,” Uhrman said. “Secondary markets offer [the] opportunity to enhance liquidity and attract new growth-oriented capital.”
The nascent nature of women’s pro sports seemingly makes these leagues more likely to award athletes direct equity too (which would mean there are more interests to trade on an exchange). The approach would enable club owners to increase player compensation without driving additional losses.
Remember, few of these clubs are currently profitable. And the players are going to command more money as revenues rise.
While athlete equity has traditionally been a difficult relationship for sports properties to navigate with their players, the concept has gained increased attention in recent weeks. Reports have indicated certain PGA golfers could receive millions of dollars in equity in PGA Tour Enterprises for having remained “loyal” to the Tour.
Athletes Unlimited has also built its model around having athlete stakeholders. AU athletes do not have the ability to resell those units.
Non-control equity stakes in a sports property would become attractive to athletes in contract negotiations if they could easily trade them on a secondary exchange.
But the introduction of secondary markets in women’s sports should be seen as more than just a financial instrument to leverage.
“It [would be] a strategic move to diversify and strengthen the economic underpinnings of our leagues and teams,” Uhrman said.
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