Regular readers know that, two and a bit years back, before Ryan Reynolds discovered Wrexham FC and filmed a TV series about its ensuing takeover, Equity Guru made two investments coming out of Covid.
The first was to start a professional wrestling promotion, Nation Extreme Wrestling, with long time sports media guy Rob Fai. That went from a 120 person debut show that sold out in two hours to regular 900-person shows at the Commodore Ballroom, as well as Nat Bailey Stadium, the Vancouver Convention Centre, and Harbour Convention Centre.
This is what that looks like:
We also, around the same time, found a small English football club at the same level as Reynolds’ Wrexham FC, that was based just outside Manchester, had a century-plus of history, had been promoted twice in three seasons and, going completely against the usual, was profitable.
That team was Altrincham FC of the Vanarama Non-League National.
Here’s what they look like:
Why is any of this important?
Because we were ahead of the curve by two years.
Right now, investing in sports is hitting a level not seen before, with the Saudis leading the way, having bought Premier League teams, attracted star players to their own league with insane salaries and transfer fees, and basically buying the PGA Golf circuit an, more recently, The Professional Fighting League (PFL) for $100m.
Reynolds and his Wrexham escapade have drawn big TV ratings, American billionaires and sports figures like Tom Brady have been lining up to buy Premier League teams, and financial guru Professor Scott Galloway has recently mused about buying Scottish giants Glasgow Rangers.
This has now started to filter down the divisions, and investors have realized buying an already big club at a high valuation makes less sense than buying a small club and spending less money to simply climb the divisions (if you can) and end up alongside the big boys. Or even replace them.
But Why Europe?
North American billionaires have long bought sports teams in North America because North American sports are, essentially, a closed shop. You can lose games for decades, put almost nothing into the playing budget, and still make money due to the leagues themselves being set in stone and showered in TV money that gets shared around.
This brings some truly mystifying traditions that only occur in North America, such as deliberately losing, even trading away your best players, to be assured of getting a high draft pick at the end of the season. To be clear, betting on games is forbidden and will get you banned potentially for life because it takes away from the sanctity of the game, but losing deliberately to up your draft position is considered mildly acceptable.
But in football, outside of North America, if you don’t grow or at least maintain your standing every season, you run the risk of being relegated to the league below. There are no player drafts, no salary caps, you simply drop out of the league to the next league down if you end the season in the bottom two or three.
Billionaire owner? Don’t care. Huge following? Sucks to be you. You either stay off the bottom or you’re for the drop.
Sometimes this can be deadly. Many a big team has dropped and been unable to stop dropping until they’re, sometimes, an ex-club. American NFL, MLB, NHL, NBA, and MLS team owners don’t have to worry about this, but those leagues also have no benefit of there being an underclass with a chance of earning their way in.
While relegation is a thing in English soccer, if you finish in the top two or three in those lower leagues, you will be promoted to the next league up. Which makes your little club worth a lot more,
The English game consists of a pyramid of leagues going down many steps, all the way to amateur Sunday League teams, which means, if an amateur team with almost no budget and no standing goes on a successful run for a couple of years, they can over time become a legitimate pro team, even potentially landing in the Premier League.
Recently promoted Luton Town were in the non-league, at the fifth tier (where Altrincham is today), just eight seasons ago but went on a Herculean run that has landed them in the big time. It’s a legitimate Cinderella story, but it can’t happen in the US or Canada. There’s simply no mechanism for a minor league baseball, hockey, soccer, basketball or football team to even play a major league tea in a cup game, let alone take their place through promotion/relegation.
This presents a massive opportunity in England, where the Americans have turned their money cannons in a big way. Rather than paying billions for a team in the NFL, they’re paying millions (or, in our case, because we got in before the rush, considerably less) for smaller teams.
Even our little Altrincham FC drew in UKP 1.5 million this past month from a cavalcade of local business people who have seen the club is well run, have no desire to ‘take over’ but rather wish to invest in their community club, and have given the team a shot in the arm for its promotion hopes this year.
To be clear, all the things they see as beneficial and worthy of investment are things we saw two years ago when we bought in. We’re fairly diluted by this point, but the team is worth considerably more than where we entered proceedings.
When we bought in, they’d had two promotions in three seasons after nearly collapsing several years earlier. The team needed a new pitch, repairs to the ground, the squad consisted of part time players who were starting to struggle to keep up with the full time competition, they needed a training ground, a scoreboard, a Fan Zone to draw fans in earlier and keep them later, and were struggling to keep a hold of their best players and strong management team.
We joined the board and helped them the best we could in getting through the early parts of that process, while being careful not to run up debt (the usual trapo for new owners), and over time we duly brought in more investors, who in turn have brought in more investors still.
At the tme of writing, the club stands fifth in the standings and has been a buyer on the transfer market for the first time.
The valuation when we bought in was around UKP 600k. At the most recent raise it was UKP 2.6 million. Other, smaller clubs, raising money in crowdfunding rounds, have valued themselves at UKP 14 million-plus, which happens a lot when raising money from fans who just want to be a part of things, rather than business people who want to be sure they’re not being robbed.
So now we sit with two hot sporting properties, both doing well (Nation Extreme Wrestling will be at the Commodore Ballroom September 9, tickets still available) and we’re starting to wonder what it might look like to put together a public company shell and put these two investments (and maybe some more) into a fan-owned sports roll-up.
My thinking is we’d need another property to really justify it, and we’ve looked at cricket (which just drew $100m in investment in the US), rugby, pickleball, and a host of others.
But I’ll tell you, nothing beats the opportunity of buying in cheaply at a lower level, putting smart people in charge, and riding their success to profits.
Which Brings Us to North America:
Someone in major league sports is going to get it shortly, that having half of their league basically looking to lose from shortly ater the halfway point of every season is bad for everyone.
Promotion and relegation makes EVERY game for EVERY team important almost right through the season. Playoff games at the top are always exciting, but playoff games to see who’ll come up a division are just as fun, as are games featuring struggling teams who desperately need a point to stave off oblivion.
The NHL, realistically, should look to start a second division immediately. Imagine having a dozen new franchises in growing markets, each paying a few hundred million for the rights to be a part of things, more TV money, more fans being minted, more places for athletes to work and for longer, and every single game counting for something. It would be an amazing boon to the sport, and over several years, perennial shit teams (like our local Vancouver Canucks) would be forced to get better or go down, with well run div two teams fighting their way to the top.
It would be an instant investment opportunity and massive money would follow. A division three would be the obvious next step a decade down the road, and the best junior xclubs would be obvious targets.
Imagine the Quebec Nordiques and Hartford Whalers returning to life! Imagine a deeper transfer market. More places to blood rookies. More coaches showing what they can do. More money floating around for everyone.
Sure, some big rich bastards might get their feelings hurt and have to actually run their clubs well, but how would that be bad?
My prediction is, in the next twelve months, we’re going to see a massive flow of investment dollars into English football, more Saudi money buying up anything that moves, and more traditionally second class sports being pushed as alternatives to the major league organizations.
The US sporting leagues aren’t going to watch what’s happening in England long without wanting to be a part of it, and we intend to be players in the shift as it happens.
Anyways, catch Altrincham games live on www.nationalleaguetv.com like we do. Makes Saturday mornings very entertaining.
— Chris Parry