Creating Sports as a New Asset Class How Venture Capital Meet Sports in the Intersection of Blockchain

By Gayatri Sarkar, General Partner, SportVEST VC Fund

Gayatri Sarkar, General Partner, SportVEST VC Fund

The global sports economy has risen to more than $1 trillion with an infusion of investment from Silicon Valley in recent years as technology continues to permeate every sector of society. Investment in sports-related startups by venture capital and private equity firms is booming and crossed $2 billion annually in 2018. Since 2012, investment in sports venture has been growing by 30 percent year-on-year with no slow down expected anytime soon. These trends have been driven in large part by the rapid evolution of sports technology, with athlete enhancement tools and new-age fan experiences helping to expand the ecosystem and create new industries within the sporting realm.

Democratize sports investments:

We at SportVEST, venture arm of NFLA, believe in the transformational opportunities provided by blockchain technology and have set out to disrupt the “exclusive” nature of the venture capital sector and sports investments. Empowering a broader audience while bringing increased liquidity so it is at the LP discretion to decide the optimal time to take profits.

In the meantime, while the venture capital (“VC”) industry has played a large part in this trend, the VC business model itself has largely remained devoid of innovation since rising to prominence over the last couple of decades. As Blockchain technology is evolving and new cryptocurrencies and digital tokens flood the market, the VC sector is being forced to look inward and now has the opportunity to embrace the latest technology and market innovations from within the VC business itself, for once.

Value of the portfolio companies are continuously assessed based on an innovative approach utilizing token micro-sales “Power Law Sales”, (for blockchain businesses) along with our “Brand Equity Algorithm” and enhanced NAV measurements to provide a basis for the most accurate valuation of these portfolio companies to mitigate errors and some of the flaws in human judgment currently in VC NAV models.

Digital Collectibles biggest use cases in Sports: a new world of asset backed securities

Welcome to the world of digital collectibles where you can breed, sell, and purchase virtual cats called ‘Cryptokitties’. The ‘oh so adorable’ factor along with recreational game centered non-fungible ‘one of a kind’ token made most of the blockchain enthusiasts the new ‘crazy cat ladies’.

Just like our currencies (US dollar, Euro, Pounds etc.) cryptocurrencies are means of exchange, store of value and such characteristics can be maintained through fungibility i.e. mutually interchangeable quality. In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, e.g.: flour, rice, currencies, oil, precious metals.

The baseball cards that were collected by our grandparents and now lying in the attic are each of one a kind. Each such baseball card can be traded in non-fungible token to bring more true digital ownership with viability and authenticity through Blockchain.

Physical Sports Merchandise in non-fungible token:

Non-fungible token tied to existing merchandise, valuable merchandise traded in exchanges as tokenized securities create a huge investment opportunities and a new marketplace of its own. Such digital collectible in sports as well as expensive arts already have an existing ecosystem of scarcity and loyal buyers. Physical collectible global market size is $200B. Imagine a world of tokenized securities where a digital asset can be owned by multiple owners, traded easily as a NFT commodity in the market and bringing much more capital deployment through democratization and fair play of participation. One of the important factors of such tokenized asset is bringing liquidity to the owners through market appreciation and portfolio expansion.

Owning your favorite Sports Team:

How cool it will be to own a part of your favorite sports team. Sports investment has always been top heavy. Tokenized private ownership gives the early liquidity to its investors as well as trust less ownership verification ushering a new opportunity to translate the fan engagement and loyalty into capital deployment. The NFL likes to tout the Green Bay Packers as a publicly owned franchise, and while that is technically true the structure doesn’t provide true ownership for the fans in the way that the Blockchain can allow. The capability for individual sports fans to be able to invest in sports franchises around the globe is sprouting up in securitized tokens already and aiming to revolutionize the global sport ecosystem.

I estimate this digital collectible marketplace will be a Wall Street of its own and can be a potential trillion-dollar ecosystem in future. I will not be surprised if our future generation has a trading career out of digital collectibles backed by securitized or highly evolved tokenized assets.

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