Deep dive: The growing world of sports teams as VCs

What's happening: The Atlanta Hawks became the latest team to launch their own VC business with Hawks Ventures and its $50 million fund back in March.

• The firm made its first investment in June with fitness tech startup Arena Innovation Corp.
• David Garcia, Hawks Ventures' managing director, tells Axios that the launch of Hawks Ventures was aimed at "lifting up minority businesses outside of The Big A" and impacting communities "in a way that we know has kind of a compounding effect, versus grants or charity."

State of play: The San Francisco 49ers has a VC fund, as does the Green Bay Packers, which partnered with Microsoft to launch a tech-focused fund.

• The Minnesota Vikings and Los Angeles Dodgers ownership groups also have VC firms — WISE Ventures and Elysian Park Ventures — that are closely intertwined with their sports teams.
• The Philadelphia 76ers had a VC-style innovation lab for seven years before shutting it down this summer after its managing director Seth Berger left to start up his own venture firm, Potential Capital (backed by the 76ers).

The big picture: Reasons for the VC push vary. The Packers, for example, saw an opportunity to leverage their community-owned status — they're the only major professional sports team in the U.S. that's publicly owned — by propping up businesses in Wisconsin.

• "The Packers are arguably the best brand in the state of Wisconsin," managing director Craig Dickman says. "Are we doing enough when it comes to economic development? Are we doing enough when it comes to finding reasons for young talents to want to stay and be here in the Wisconsin marketplace?"
• The Packers' VC arm launched in 2019 with a $25 million fund and launched a second, $70 million fund in July.

Of note: So far, the 49ers' biggest investment has been its purchase of English soccer club Leeds United, which it completed in July.

• "We never want to be just a check," Dickman says. "Part of it is creating this ecosystem that can really collaborate so our partners can be first customers and pilot things, buy things, give real-life feedback to the market."

Breaking a sweat

One area where sports teams have targeted their VC dollars is the fitness tech space.

Driving the news: Exhibit A is Arena, which has drawn investment dollars from three separate pro sports teams: the Hawks, Vikings and Dodgers.

Details: Arena develops portable robotic strength training and rehabilitation devices.

• Garcia of Hawks Ventures jumped on the opportunity, currently the firm's only investment.
• Arena represents where the fitness market is going, combining strength training with portable devices, data and AI, says Garcia.

By the numbers: No wonder the three VC units noticed Arena. Fitness tech, and sports tech more broadly, is a booming industry with obvious pro sports teams synergies.

• The global sports technology market is projected to grow from $20 billion in 2022 to $76 billion by 2032, according to New York-based consultancy Spherical Insights.
• Sports tech includes online sports betting and esports, as well as data, production and analytic firms. Examples include Genius Sports and Tagboard.
• Fitness tech alone is projected to be a nearly $22 billion industry in 10 years.

Be smart: Even startups these VC arms turn away can give teams ideas about product innovation and future use.

• Konrad von Moltke, principal at WISE Ventures, recalled multiple times when the Vikings or the firm's two pro soccer teams — Orlando City SC and Orlando Pride — worked with a startup pitch that they passed on, but a product they decided to use.
• "Maybe the TAM isn't big enough, [or] we're worried about competition, but our team assets are really fired up about using the product," von Moltke says.

Outside the lines

For some pro sport venture arms, the majority of investments are in companies that have nothing to do with athletics.

State of play: TitletownTech, the VC firm formed by the Green Bay Packers and Microsoft, focuses on manufacturing, construction and supply chain technologies, as well as ag tech.

• Dickman says that sports is just one small part of TitleTown's portfolio. "It's got a much broader focus than just sports."

• The 49ers Enterprises has invested in EV-charging startup ChargeNet Stations and metal recycler ReMatter.
• WISE Ventures has invested in health care and air purification.
• Hawks Ventures' Garcia says the fund is not mandated to invest in sports.
• "To generate venture returns, we are looking for companies that have markets outside of sports," Garcia says. "It could be CPG companies. We see a lot in the health and wellness space."

Risky business

For teams getting into the VC game, it comes with a promise of a cash windfall from a successful bet. It also comes with the potential for deep pitfalls as well.

The big picture: Big franchises like the 49ers and Packers not only have investment risk to worry about, but they have to keep their globally recognized brands in mind when eyeing future investments.

What they're saying: TitleTown's Dickman says they do extra due diligence for that very reason: "Is it something that the Packers and Microsoft would feel good about that logo being next to theirs?"

Yes, but: That same coverage is also what makes them attractive for startups looking for a brand halo, says Arash Khalili, a partner at Loeb & Loeb.

• "The coverage that that investment will get is certainly going to be presumably more significant than just your typical venture capital investment into some startup right now. That can certainly be a positive for the portfolio companies."

Of note: The more careful approach from the sports VCs runs counter to traditional venture investors who run a broader portfolio and don't have such a high-recognition, local brand to worry about.

• The 49ers are dealing with this tricky mix on both ends of their Leeds investment, where they're making a hefty financial gamble to get the club promoted back to the Premier League.
• Just ask Ryan Reynolds and Rob McElhenney how financially painful that can get.
• "We are a new fund, so we aren't in a rush to deploy capital," the Hawks' Garcia says.

The bottom line: Venture capital is "a more risky asset class," Khalili says.

• Adding to that, these teams "don't have a crystal ball to predict what potential conflicts of interest either exist or may arise down the road," he adds. "That's one of the things that I think is a little bit more unique to teams — the regulatory landscape and collective bargaining agreements."