A few years ago, I was sitting at my desk late at night, frustrated by the latest sports financing project which I was working on at a large investment bank. Despite the iconic brand, large international fanbase and its many trophies, it was extremely difficult to find investors for this top-20 global football club.
Time and again, potential investors struggled with the club’s volatile cashflow profile and uncertainty about its future revenues and performance. I asked myself: ‘If it’s this hard for this glamorous club to raise money, how are less fortunate teams coping?’
However, contrary to normal businesses, sports clubs have one major intangible asset which the institutional market does not value properly: they are global brands with large international, online fanbases. Millions of engaged supporters, all over the world, one click away, follow the club’s every move and every new piece of content. The 30 most followed clubs have more than 720 million followers on Facebook alone, and more than 1 billion followers across all social channels.
For clubs, this is a massive opportunity and an untapped, digital source of financing. By tapping into this global fanbase, they will no longer be solely dependent on traditional sources of revenue: ticketing; broadcasting; commercial activities; sponsorship. If a club makes its fanbase a long-term partner, it has a real alternative.
That is where crowdfunding comes in. Or, as we have coined it: Fanfunding.
Technology and social media has made this a reality; if you engage people in the right way and offer them a solid rationale for why they should back you, you can raise millions. From a standing start in 2010, crowd funding and investing has become a $432bn phenomenon, overtaking venture capital as a source of financing. Businesses are now sourcing billions of dollars in loans and equity online to fund the growth of their operations. The sports industry is lagging. Why?
Sports clubs with digital access to fans all over the world are in a prime position to capitalise on this trend. In one go, it can solve two key issues that sports clubs are facing: financing and fan engagement. It offers a cheaper way for clubs to finance their operations at more flexible terms whilst providing a great engagement and investment opportunity for their fans.
There are many ways that sports clubs can use fanfunding to engage their fans, ranging from simple rewards campaigns to larger investment campaigns where fans can own a share in their club, or lend money to their club in return for a cash interest.
Sports clubs have an unprecedented opportunity to make fans their partners and co-invest in their projects. Why should investment in our leading clubs be the prerogative of billionaires? Fanfunding will allow ordinary supporters to become investors.
I started discussing this idea four years ago with Gianluca Vialli, the former Italian striker, European Cup winner and Chelsea manager. After many long discussions around his kitchen table, we developed the concept of Tifosy (the word means ‘fans’ in Italian), launching a pilot project in 2014 with Portsmouth FC. We raised £270,000 from fans in 35 countries in just 62 days, which the club invested in two new academy pitches at the training ground.
We have now worked with 15 clubs in England and Italy, raising more than £1m. In August we launched English football’s first mini-bond, under our proprietary FCA licence, raising £600,000 for League Two club Stevenage FC in just six weeks. More than 200 supporters took part, buying five-year bonds paying 4% interest or 8% in club credit.
Now, the time is right to scale up and we plan to work with leading Premier League clubs, and cricket and rugby clubs, launching debt and share issue campaigns on a much larger scale. We have also recently launched our own £1m equity raise to accelerate our strategic growth, raising £675,000 in the first two weeks.
Our mission is to enable everyone to invest in the clubs they believe in. Fanfunding will transform the way fans interact with their clubs, unleashing their passion and liberating clubs from their reliance on traditional sources of finance. This is a sports revolution in the making.
Fausto Zanetton is founder and CEO of Tifosy, the first fan funding platform to be regulated by the Financial Conduct Authority.
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