The Role Of Venture Capital, Private Equity, And Fans In The NIL Era

Former Tennessee Volunteers quarterback Nico Iamaleava was a high-profile transfer after last season’s College Football Playoff. With FanStake now fans can bid to help their school secure their next star.

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The college sports landscape is evolving daily. In June, a U.S. District Court approved the settlement of the federal court case between the House of Representatives and the NCAA. Universities are now authorized to make direct payments to student-athletes, and are required to pay athletes $20.5 million in revenue sharing.

With the NCAA set to pay nearly $3 billion in backpay to roughly 390,000 former student-athletes, and universities chasing donations from their alumni to fund the acquisition of their next star quarterback or point guard, private investors are circling, and fans are left wondering what their role is in this new era of college sports.

Courtside Ventures, Venture Capital, and Private Equity

Vasu Kulkarni is the founder of Courtside Ventures, a venture capital fund investing in technology and media at the intersection of sports and gaming. Courtside has over 80 active investments, counts on NFL Pro Bowl receiver Larry Fitzgerald as an advisor, and, according to the company’s website, has a portfolio valued over $9 billion.

The company invests in start-ups and has a keen eye on the college sports market, especially as the Name, Image, Likeness (NIL) era continues to take shape. Kulkarni says this moment “feels a lot like 2018,” when the floodgates were opened to sports betting. At the time, DraftKings, FanDuel, and other betting operators were the biggest winners. It remains to be seen who will be the biggest beneficiary of the new college sports system.

What is certain is that with the money now (officially) flowing towards student-athletes, universities are more incentivized than ever to generate new revenue streams. Recruiting and retaining athletes is now as much a battle of the purse as it is a battle of credentials.

Kulkarni says the recent NCAA settlement “turned out exactly how people had been expecting it to go.” He adds that he doesn’t know that the settlement “solves any major problems.” The $20 million cap will not be enough for major athletic departments to recruit whom they want; in fact, it may not even be enough to get more than a few star basketball or football players.

With his venture capitalist hat on, Kulkarni is looking at this new era as one full of opportunity. “The good news is that after this settlement case, a lot of great founders will try and build,” says Kulkarni. There will be many spaces where athletes can make money, but he has his eyes fixed on collectibles and Web3 to start, seeing both spaces as areas with “infinite profit margin.”

Kulkarni expects major private equity firms to show interest in the power-five conferences’ major programs, seeing a quick return on potential investment. Private equity is already abundant in professional sports — the NFL approved private equity purchasing up to 10% stakes in its franchises last year — so there is no reason to expect it won’t move into the college sports arena at the earliest opportunity.

As previously reported in Forbes, the University of Kentucky has already established Champions Blue LLC as an affiliate of its athletic department. The ultimate goal of the entity is to increase Kentucky’s athletic revenue through private capital.

Venture capitalists will be assessing the college landscape in a different light, looking at NIL opportunities across the wider spectrum of sports, not just the major money-makers. This is why Courtside has decided to invest in Fanstake, a fan-driven market that aims to democratize the NIL and transfer portal process.

Fanstake and Fan Engagement

Founded by former tech executives Greg Glass, Donnie Flood, and Alex Boisvert, Fanstake bills itself as a platform that can level the college sports landscape and offer fans “a risk-free way to have more influence and engagement.”

The basic premise is that college alumni can have a say in what athletes their school signs by donating to their school’s coffers or contributing directly to the athlete’s NIL fund. The donation will only be finalized if the player moves to the school the fan has selected; all other funds will be returned.

Glass expects his site to democratize the school selection process, giving smaller schools a chance to sign athletes who previously may have been out of their reach. As Glass puts it, “Smaller schools have fanatical fanbases that will get behind their schools with small donations.”

Fanstake acts as an intermediary, entering into an agreement with the athlete and forwarding them the funds if they decide to play for the selected school. In essence, it is akin to a sports betting site, only that the money is being used as a lever to sway an athlete’s choice.

According to Glass, Fanstake is in constant conversation with universities across the country about partnering; as of yet, most are taking a wait-and-see approach, but there is potential for schools to use Fanstake as part of their loyalty systems. In other words, contributions made to a school via Fanstake could give alumni points, discounted tickets, or early access to new merchandise.

The app has over 20,000 users, and north of $500,000 has already been staked. Glass is particularly excited about activity on the app at smaller universities. He notes that Montana State has raised $70,000 for its football team, and other schools like New Mexico State and Howard are active on the platform.

Glass insists that Fanstake’s true north “has always been fans and athletes,” which is one of the reasons Kulkarni decided to invest in it. He says, “If everything works the way they think it will, fans will be funneling money to athletes.”

The rapid influx of money and the lack of guardrails in the college sports system have left everyone wondering how the ecosystem will evolve in the next few years. In a recent interview on The Dan LeBatard Show, former Miami Marlins President David Samson said universities are now in a “never-ending cycle of looking for more sources of money.” As such, college sports have become a test lab for how to raise and use capital efficiently. Much like in European soccer, there will be those who advocate for large private investment, and there will be others who argue fans should hold the purse strings. What is clear is that in the era of NIL, everyone from Congress to the average fan will have their say.