The NFL is launching a new investment fund with private equity giant General Atlantic that will give owners a new revenue stream outside the CBA’s revenue-sharing guidelines. Or, in simple terms, NFL owners have found a unique way to leverage the league’s audience and growth, potentially generating hundreds of millions of dollars in long-term profits they don’t have to share with players.
What you need to know is that the NFL launched an investment fund called 32 Equity back in 2013. Each owner put $1 million into the fund for a total of $32 million. The idea was to invest in businesses across sports, content, and fan experiences. The NFL could use its platform to give these businesses unique advantages (think: access, data, preferred sponsorship deals). As a result, these businesses would grow, and the NFL could capture financial upside through a sale, merger, or other liquidity event. Think of it as double dipping. The NFL was going to sell data to sports betting companies anyway, but by investing in the company it sold the data to, the league could profit from both sides of the deal.
For example, in 2017, the NFL reportedly invested $95 million for a 3% stake in Fanatics, the same company that just so happens to have exclusive deals with the NFL on everything from merchandise to trading cards. The sports commerce company was valued at $3.17 billion during that transaction but is now worth more than $30 billion, a nearly 10x return on its investment in less than a decade.
The NFL also launched On Location, a hospitality business that handles premium experiences (luxury suites, VIP experience packages) at events like the Olympics and Super Bowl. The NFL brought in private equity partners in 2015, and through its connection with the league, On Location went from generating $20 million in annual revenue to $600 million. Endeavor then purchased a majority stake in On Location in 2020 at a $660 million valuation. The NFL ended up investing an additional ~$90 million to exercise a prior contractual term that allowed the league to increase its ownership stake at a lower valuation, but SEC filings indicate the NFL walked away with ~$250 million in cash and Endeavor equity.
Most of these private equity transactions are executed out of 32 Equity, but if a specific deal requires more capital (think: follow-on investments), the NFL has shown it can raise capital through larger SPVs, like when the NFL invested another $320 million in Fanatics as part of a $1.5 billion financing round in 2022.
But even if you exclude those SPVs, NFL owners have clearly been happy with 32 Equity’s performance because they keep allocating more money to the fund. In 2018, each of the NFL’s 32 owners added another $2 million to the fund, and then they added another $5 million each just four years later. That means $256 million has been invested in the fund since its 2013 launch — $8 million per NFL owner.
It doesn’t take a genius to see why this model has been successful. By launching a private equity fund, the NFL earns money in several connected ways. A company pays the league office for a license or partnership. That license or partnership then improves the company’s revenue, credibility, or product. If the league owns shares in the business, it participates when the business appreciates or is sold.
Here are a few good examples:
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CLEAR: The NFL participated in CLEAR’s $100 million fundraising round in 2021. The identity verification platform you see inside airports then became the “Official Fan Experience and Secure Identity Partner” of several NFL stadiums, allowing teams to collect data and get fans into the stadium faster.
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NOBULL: NFL team owners voted during their 2022 winter meeting to invest in NOBULL, the athletic apparel company now owned by Mike Repole and Tom Brady. At the same time, NOBULL signed an exclusive deal to become the official training apparel and footwear partner of the NFL Combine.
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Hyperice: 32 Equity invested in recovery technology company Hyperice as part of a $47.8 million Series A funding round that valued the brand at $700 million. As you can probably guess by now, Hyperice was then named the NFL’s official recovery technology partner, placing products like the Hypervolt massage gun and Normatec compression boots on NFL sidelines.
The common thread in these investments is that they are category sponsorships the NFL was already going to sell, but rather than just selling the sponsorship for cash, the league invested in each company to benefit from the value it would add.
That advantage gets even stronger when the investment improves operations. The best examples of this are Genius Sports, EverPass, and Appetize. That’s because Genius Sports gave the NFL 9.5 million warrants at $0.01 per share to remain the league’s exclusive distributor of real-time, official play-by-play statistics, which Genius Sports uses to power legal sports betting markets worldwide.
The NFL co-founded EverPass with RedBird to distribute NFL Sunday Ticket to bars and restaurants, then sold it to DAZN. 32 Equity also invested in a venue payments software company called Appetize. Appetize’s technology was then implemented in roughly a dozen NFL stadiums to prove that its digital kiosks, tablets, and mobile-ordering systems sped up checkout times and increased average order value, and the company was eventually sold for $415 million.
The only downside to this model is that the NFL can only do so much. If the NFL really wants to grow 32 Equity into a multi-billion-dollar investment fund, it would need to hire dozens of people. These employees would handle things like investment sourcing, financial due diligence, legal work, and operational support.
That’s a difficult proposition for the NFL because it’s not the league’s core business. All of a sudden, 32 Equity would go from a side business that benefits from the league’s audience and sponsorship inventory to an institutional investment fund that needs drastically more financial and personnel resources.
That’s where General Atlantic comes into play. General Atlantic can contribute significant capital to the investment fund (because it has $130 billion in assets under management), and it can also handle the operational work beyond writing checks. This would let the NFL pursue larger investments while also limiting dilution and retaining meaningful stakes through subsequent financing rounds.
But let’s not bury the lede. The NFL is partnering with General Atlantic because it wants to start earning fees for managing other people’s money. As a general partner, you get paid in management fees and carry. These fees vary by fund, but the industry standard is 2 and 20. That’s a fancy way of saying that the investment firm earns a 2% annual management fee based on total assets under management and a 20% performance fee taken from the profits the fund’s investments generate.
Let’s run through a hypothetical scenario: say General Atlantic puts $320 million into the NFL’s investment fund. If the fund doubles in value, the NFL would receive $64 million in carried interest and $6.4 million in annual management fees (not including the capital team owners provide). In reality, the NFL will likely split the economics with General Atlantic, but I wouldn’t be surprised if the NFL got more favorable terms, given the unique advantage it brings to the partnership.
The NFL could theoretically launch a larger investment fund on its own. Given 32 Equity’s early success, NFL team owners would likely keep writing bigger checks, and I’m sure plenty of outside investors would want access to the NFL’s platform.
That said, partnering with General Atlantic feels like a good mix of risk and reward. Not only will General Atlantic potentially contribute hundreds of millions in new capital to the joint venture, but the private equity giant’s resources, deal flow, and operational expertise will reduce the risk of failure.
And that’s without mentioning the most important part: team owners don’t have to share any of this money with players. That’s because, unlike media rights, ticket sales, concessions, sponsorships, and licensing deals, which are split roughly 50/50 between the league and its players, the NFL’s collective bargaining agreement excludes investments made by 32 Equity from revenue sharing.
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