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How venture capital and star power built one of sport’s hot new brands

When investor Kara Nortman and actor Natalie Portman decided to start a soccer team, they created a brand that has grabbed the sporting world’s attention.

As the managing partner of Upfront Partners, the biggest venture capital firm in Los Angeles, Kara Nortman is used to making serious bets.

But with Angel City FC, the soccer team she founded in Los Angeles, on the brink of making the playoffs, Nortman can’t quite hide her nerves.

“Everyone told me it would feel different as a sports team owner and founder, and it really does,” she tells AFR Weekend from LA via Zoom. “I really want to make the playoffs.”

It would certainly be a remarkable achievement given the team, which plays in America’s National Women’s Soccer League, is only in its first season and has suffered a string of injuries to key players.

But playoffs or not, there’s no question that this will be considered a successful year for the team. Not only has it rapidly won over fans, selling out its 22,000-seat stadium on several occasions, but it has signed some of the most lucrative sponsorship deals in women’s sport, including an eight-figure jersey deal with delivery giant DoorDash.

Nortman, who will travel with her entire family to Hobart in November to tell the story of Angel City at the Sohn Hearts & Minds Investment Leaders Conference, admits she’s torn between her feelings as a founder and an investor.

“I’m very ambitious and growth mindset oriented … but at almost every game, I sit there and I pinch myself and almost want to cry. It really is a dream come true,” she says.

“[But] as an investor, I want to see the asset class soar. I think it’s just becoming a new asset class that we can talk about that way, where it’s not just the province of a limited number of people, but institutional capital comes in. This asset class is super interesting because it usually is a scarce asset with operational leverage.”

The story of Angel City’s success is a unique combination of passion, private capital and good, old-fashioned star power. But most of all, it’s the story of how venture capital models can be applied to sport – with some fascinating tweaks.

Like every great start-up, Angel City has a classic origin tale.

It was December 2019, and Nortman, former college athlete and self-confessed sports nut, was sitting on a plane texting with actor, investor and activist Natalie Portman about her love for women’s soccer and the potential for the game.

Portman, who knew Nortman through some of the networks in LA that support female founders, replied with a simple but big idea: Wouldn’t it be great if we brought a team to LA together?

Soon after, Nortman approached Julie Uhrman, an entrepreneur and entertainment industry executive – who she played with in an amateur basketball league – about leading the venture. Uhrman knew nothing about soccer, but was in. Nortman says it was a huge win – every start-up needs that driving force.

“Whoever is running your club, it’s got to be the first thing they think about at 6am or whenever they wake up.”

Next came the money. Nortman says the capital raising process took about six or seven months, but there were plenty of knockbacks and, as it turns out, a big black cloud over the horizon.

“I don’t know what would have happened if we hadn’t gotten the money in the bank before COVID, because everyone got spooked,” she recalls.

While this was very much a passion play, Nortman and her fellow founders have been explicit about the opportunity to grow Angel City’s valuation.

But a key decision was to only take money from investors who would be engaged in the venture – who would cheer the team on in the stands, help attract on- and off-field talent, and talk up the team in the media.

The investor roster certainly didn’t hinder Angel City’s quest to build a buzz around the club.

The lead investor is Reddit founder Alexis Ohanian, who came in alongside his wife, tennis superstar Serena Williams, and even their daughter, Olympia who, then aged two, became the youngest co-owner in professional sports.

Actors Eva Longoria, Jessica Chastain and America Ferrera are investors, as is singer Christina Aguilera, and 13 former members of the US national team.

Nortman says there’s no question the star power has been very helpful. “The key thing, though, is it can be misinterpreted as to how it becomes helpful. The thing that’s been really helpful is finding people who really connect to what we’re doing, who want to show up at games, who want to help us interview sporting staff.”

The success of Angel City is part of a broader push towards private capital in sport.

Indeed, just hours before Nortman speaks with AFR Weekend, US private equity giant Ares Management – best known in Australia for buying AMP’s debt business late last year – announced it had raised a staggering $US3.7 billion ($5.5 billion) for a fund that will be “focused exclusively on investing in sports leagues, sports teams and sports-related franchises, as well as media and entertainment companies”.

Nortman will speak on a panel at the Sohn event that will be hosted by former Australian cricket player Ed Cowan, who is now an investor with private equity firm TDM Growth Partners, and will also feature investor and entrepreneur Matt Berriman, who recently led a consortium that unsuccessfully bid for Australia’s Super Netball competition.

Nortman, who is now sharing some of the ways the venture model has been applied at Angel City with other sporting organisations around America, stresses that there are plenty of ways a successful sports ownership model can work, including the more traditional model of having a wealthy owner in charge.

But even under a single owner model, she argues there are advantages in opening up ownership to attract institutional capital and to involve different types of influential people.

“Use that as a change agent to get people involved, to get the right talent in the CEO seat. If your owners care about the team … you’re just going to get better outcomes. But you can do it in any structure.”

Every good VC investor has an eye on the exit, but while Nortman says she wants to ensure investors do have access to liquidity and can exit if they want to, it’s still very early days.

“We’ve had a lot of interest in buying and not a lot of interest in selling.”

She is still thinking big. Forbes Magazine’s list of the top 50 sports franchises, published last week, showed the total value had risen 30 per cent in 12 months to $US222.7 billion, thanks in no small part to a rich broadcasting deal done by America’s NFL.

The clubs in the NWSL aren’t even enjoying broadcast money, something Nortman wants to change.

“It still sounds mildly crazy, but we want to show that Angel City can be as valuable as Manchester United, or Liverpool, or the Dallas Cowboys, or my home-town team, the LA Lakers. And we’ve done very well making a mark against that.

“But we’re just the beginning – we don’t even have broadcast revenues coming through the league, kit revenues are still quite low, so all the traditional revenue sources that other leagues rely on, we’re just getting into them.

“There’s so much more upside, and I am still greedy. I’m definitely in love as a founder, but greedy as an investor.”

 

Disclaimer: This material has been prepared by AFR, published on 17 September 2022. HM1 is not responsible for the content of linked websites or content prepared by third party. The inclusion of these links and third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the linked websites and third-party content. This information is for general information only and does not consider the objectives, financial situation or needs of any person. Before making an investment decision, you should read the relevant disclosure document (if appropriate) and seek professional advice to determine whether the investment and information is suitable for you.

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