NBA flexing new muscles with investment arm: ‘We’re not just a sports company’

Six months ago, right as its playoffs were about to hit an apex, the NBA hired a new executive with an extensive history of creating and fueling new startup companies. Even at the league office, where employees funnel in and out with diverse work experiences, it was a notable addition. A league known for basketball, media and technology was now diving head-first into investment.

Last December, the NBA board of governors approved a new team within the league office, one that sought out investments in outside companies. This investment arm, NBA Equity, is an expansion of an already-existing operation but has accelerated the league’s interests.

The NBA’s equity portfolio is now approaching nearly 20 companies, with the total value of those stakes worth nearly $1 billion. While the league has been investing in companies for about a decade, roughly half of those deals have come over the last year.

In that time, the NBA has been active in surveying the market for new opportunities. The league is in constant communication with startups, David Haber, the NBA’s chief financial officer said, and looking at companies in their early and growth stages. It has met with venture capital companies by the dozens to let them know the league’s equity arm exists and is looking.

“But we’re the NBA, we’re not a financial services firm,” Haber said in an interview with The Athletic. “So we’re not a purely financial investor. That’s not what we’re trying to do here. What we are trying to do is identify companies that are really focused on something that fits strategically with the NBA with our brand with our business model, where we can align with them investing in the company to help spur innovation, help them develop products that are going to benefit our fans, benefit our customers, help them use the NBA’s brand and all the assets that we can bring to the table to really grow their business and continue to support the growth of the game and that we think has been really, really successful strategy for us.”

The NBA has taken a wide approach, looking for companies that can complement its core business — basketball, if you forgot — but also could help with some of the problems inherent to the league. The league hired David Lee in May to head its NBA Equity team after he had spent nearly five years running a startup studio for SK Holdings, a South Korean conglomerate, and had co-founded another during his career, which also includes time as a Bain & Co. consultant.

Lee said the league has invested in companies that create sports technology, media and fan engagement, data analysis, apparel and sports betting. Last year, it signed a long-term partnership with SportRadar to manage its data globally and to be its distributor of NBA and WNBA betting data; the league also took a three percent stake in the company.

This summer, the NBA closed several deals. It took equity stakes in Sorare, an NFT fantasy sports company, QuintEvents, which creates fan experiences, and in New Era.

Michael Meltzer, Sorare’s head of business development, said allowing the NBA to take equity in the company wasn’t a pre-requisite to the deal, but he viewed it as crucial nonetheless (the NBPA also took an equity stake).

“The equity was something that was really important,” he said. “We’re building a product with the NBA, and it’s really important that both the NBA and the players are on this journey with us and that they can also enjoy the value that we create together. We want to be true business partners with the league and the union over a very long term, even beyond the term of this contract, so it’s a very strategic decision and something that was important to us as well and important to the league and the union .”

The NBA is not the first professional sports league to start its own VC arm. the NFL has had one, 32 Equity, for years, too. The leagues balance a profit motive with a desire to find companies that meld with their priorities.

The intent, Haber said, is to partner with companies that can benefit the NBA ecosystem over the long-term. The league has targeted companies that can create products and technologies, whether they are eventually for consumers or players or the league itself, that fit into that mold.

“We’re not just a sports company,” Lee said. “We are a media company, events company, consumer-facing tech company with our app. There are many different kinds of sectors that we touch. So there’s a lot of interesting companies that we could find in those areas that would want to work with us.”

In July, when the NBA put on an event at the Thomas & Mack Arena during Summer League, showcasing the companies that graduated out of its Launchpad program, it was also highlighting one of the businesses it had recently taken a share of. Nextiles is a smart fabrics company that came out of the league’s new incubator and is another company in which the NBA owns a stake.

Launchpad serves as a compliment to NBA Equity. It can help the league identify companies that could serve as eventual partners. Last year, Launchpad focused on companies that could help solve for health and performance for basketball players of all ages. This year, it will focus on basketball-related issues and on the fan experience, from in-arena to sports betting. (Haber declined to comment on if the NBA takes equity stakes in every company that is in a Launchpad class.)

As of now, NBA Equity is comprised of what Haber calls a small team and it operates from the NBA’s main office in New York. That allows them to pull from the league’s internal resources. If there are talks, for example, with a media company then Lee or his team can talk to someone from the NBA’s media tech division, or can query its merchandise team when considering an apparel company.

“Because we don’t act like a traditional venture capital fund, which we’re not — we’re a basketball league that’s undertaking some of this activity — we have some flexibility,” Haber said. “But generally speaking, we’re targeting companies that are more in kind of the early stage or growth stage companies where partnering with the NBA can be really, really valuable for them as they can continue to develop products and experiences that we think could be tremendously exciting for our fans and help us evolve the game.”

(Photo: Rafael Henrique/SOPA Images/LightRocket via Getty Images)

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