Elysian Park, PGA Joint Venture Eyeing Outsized Innovation and Returns
Elysian Park Ventures (EPV) and the PGA of America recently announced an investment partnership, EP Golf Ventures. The joint venture—designed to spur innovation in and around the $90 billion golf industry, as well as add strategic value—intends to invest in startups across coaching and training; health, wellness and performance science; hospitality; facility management; retail; and agriculture.
The NFL (32 Equity) and Major League Baseball (Baseball Endowment Fund) also have dedicated investment platforms. However, few other pro sports leagues or federations are known to be actively making direct investments in third-party companies.
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That could be changing though. As smart money increasingly allocates time and capital to the sports industry, Cole Van Nice (co-founder and managing partner, Elysian Park Ventures) believes more rights owners will look to leverage reliable consumer demand, their IP and their position in the marketplace for investment purposes. “That combination of domain expertise, plus capital capacity, plus investment and company building expertise” can result in outsized innovation and economic returns, he said.
JWS’ Take: League- and federation-level investment funds remain a relative novelty. But efforts to invest in, nurture and grow companies—and revenues—at the team level have multiplied since the Los Angeles Dodgers and Elysian Park rolled out the first club-affiliated accelerator program in 2015 (see: F.C. Barcelona, the Philadelphia 76ers and Minnesota Twins).
Elysian Park Ventures is backed by the Dodgers ownership group; a collective that includes Mark Walter, Todd Boehly, Peter Guber, Magic Johnson, Billie Jean King and Ilana Kloss, among others. The private investment firm has made about 60 sports-related investments globally to date.
Sports were largely an afterthought in investors’ minds when EPV was formed in 2014. But that has changed; he industry has spawned a host of unicorns across several verticals over the last eight years and is intersecting in powerful ways with markets such as health, culture, commerce and technology, which is drawing investor attention.
But little capital has found its way into league-level investment vehicles. For starters, most league offices do not invest; they focus on harvesting league IP and distributing cash to club owners based on league-level revenue streams.
While the most successful leagues are comfortable investing alongside private equity given their expertise in deal-making and due diligence, leagues are not necessarily inclined to partner exclusively with a single group, either. Owners in those leagues have the capital to fund attractive investment opportunities themselves and may be hesitant to allow outside investors to trade on their influence through a dedicated structure.
The NFL, which no longer has Providence Equity Partners as a partner in 32 Equity, raised an additional $64 million from the league’s owners in 2018 and has separately invested additional capital in specific opportunities such as Fanatics and On Location. Just last week, the league formed an equities investment committee to oversee 32 Equity.
But even in cases where a league wants to do an investment-oriented joint venture, it can be a challenge to find professional investors motivated by the same outcomes. Private equity and venture capital firms tend to be return-oriented, while a sports league may be content with the innovation and business development that emerges from an investment.
Finding common ground on the investment universe can be problematic too. Investment funds often focus on companies at a singular stage. That may not work for a sports league looking across the gamut to find attractive opportunities.
The PGA of America was drawn to Elysian Park’s willingness to move up and down the capital structure. “It was important for us to work with a partner that would be willing to be stage-agnostic as we believe that opportunities and value exist across the various stages of growth,” Arjun Chowdri (chief administrative and innovation officer, PGA of America) said.
It also valued EVP’s collective of strategic services, performance record and team. “Their expertise will further benefit our ability to perform deep diligence on companies, enhance deal flow and provide a deeper set of value to start-ups than we could solely on our own,” Chowdri said.
While EVP’s infrastructure helped satisfy the PGA’s investment-related concerns, the golf organization’s domain expertise convinced the investment firm a tie-up would be powerful. “The theme we look for is structural advantage,” Van Nice said. “We look for different advantages that we can create at the Elysian level, either ourselves through our ownership group or through some of the things we’re doing, or through partners that will create better insight, better access and better advantages for the companies we invest in.”
EP Golf Ventures gives Elysian access to PGA of America leadership. “To have their point-of-view and their insights on where the industry is going or a particular segment of the industry is going, is pretty additive,” Jay Adya (managing partner, Elysian Park Ventures) said.
Elysian and the association-level investment platform will also have access to the PGA’s approximately 29,000 golf professionals operating across more than 10,000 facilities nationwide. Adya said EP Golf Ventures’ ability to gather feedback on the potential of a product, service or technology will be “pretty critical.”
The PGA of America’s new state-of-the-art headquarters in Frisco, Texas is expected to be a useful resource too.
Considering the structural advantages that Elysian Park is gaining, it could pursue other league- or federation-level partnerships. “We’re definitely exploring some [opportunities] currently and are open-minded on where the best fits are,” Van Nice said.
Golf was attractive to EPV because of “the TAM and the ecosystem around” the sport, Adya said. Historically the segment been under-funded, which made the opportunity that much more enticing.
Investors have shied away from golf because it’s fragmented. Its focus on elite players has also tempered interest. “That kind of narrows the space down,” Adya said. “But as we found, [if you count] the casual golfer or the new golfer or even the person that [just goes to Top Golf or the driving range], the base of that pyramid gets pretty big. That’s the area we want to focus on.”
Both Elysian Park and the PGA have invested capital into EP Golf Ventures. Adya said the group is “in talks with a number of potential LPs to round out the fund.”
To date, EP Golf Ventures has made two investments designed to bring the golfer closer to the game, regardless of their play level. Sportsbox enables users to generate 3D golf biomechanics with nothing more than a smartphone, while Dryvebox is a mobile golf simulator designed to increase access to golf for players of all ages and skill levels.
