Equity crowdfunding in sport
Equity crowdfunding is a relatively new method of obtaining money for the development of a company or project. In many cases, this form of financing is chosen by companies at an early stage of development (startups) taking their first steps in their operations. This is also associated with equity crowdfunding – financing young companies. But what about companies that can boast over 100 years of activity? Do sports clubs with over 100 years of tradition have a chance to raise money through crowdfunding?
Sport has always been a source of great emotions and emotions attract money – big money. The sports club is not only the players or employees, it is primarily the audience that drives the entire machine – fans at the stadium or viewers in front of TV sets. It is largely for them that sports events are held. Fans are fuel for every football club – regardless of its size or history. So is equity crowdfunding a good way for the club to raise money? Of course! In this article, you will learn how sports clubs (small and large) can use the ECF (equity crowdfunding) tool.
Club emissions in Poland and in the world
The essence of equity crowdfunding is crowdfunding, under which investors pay small (and also large) amounts, thanks to which at the end the company obtains a large sum from many investors. Fans can therefore become such investors – after all, they are very emotionally attached to their club, and for many people, the possibility of being a co-owner of a club is sometimes a dream. The bond between fans and clubs has repeatedly been visible in difficult situations. If a club has financial problems and is unable to function, fans are able to mobilize, carry out an almost levy in mass and support the club. A good example is the issue of Wisła Kraków shares in February 2019. The club’s situation was so critical that Wisła was threatened with withdrawal from football matches and bankruptcy. Thanks to the mobilization of fans, 9,126 people within 24 hours (!) purchased shares for the total amount of 4,000,000 PLN on the Beesfund platform. To this day, it is a record for Polish equity crowdfunding. Other examples? In 2018, the Spanish club Real Murcia also had financial problems and decided to issue its shares. 20,906 investors, including 437 from Poland, invested at that time.
Equity crowdfunding is not only a way to raise funds in worse times. It is also an opportunity to obtain financing for the further development of the club. In 2019, also via Beesfund, the Elana Toruń football club issued its shares and as a result – the club raised 378.600 PLN, i.a. for the development of their football academy. A similar situation occurred in the case of the issue of AFC Wimbledon, which raised 2,488,350 £ through the British platform Seedrs for the construction of the stadium.
Benefits for clubs and investors
As you can see, the clubs’ motivations for raising funds are different, but each of them gives specific benefits. They gain:
- funds for development – the club acquires the money needed for further activity or development – e.g. building an academy or expanding infrastructure
- building a community around the club – increasing fans’ activity and including them in the club’s daily activities. This gives great potential because it allows for dialogue on a completely different level than before – both sides can support each other,
- club promotion – an equity crowdfunding campaign is a great opportunity to promote the brand and reach new fans, invite them to build the club together as a brand,
- increase in sales – building a faithful community around the club is also an opportunity to increase revenues. For example, greater attendance at the stadium, increased sales of club products, rental of conference rooms and rooms, building of a loyalty system,
- acquiring a community of loyal shareholders – the club gains a group of investors who will reinvest again in the future when the club decides on another round of financing for further development,
- building investor relations – an equity crowdfunding campaign is also an opportunity to pay attention to the acquisition of new business partners or sponsors – after all, many fans are entrepreneurs, representatives of large companies or high-level managers working in corporations. Cooperation with the club can bring mutual benefits. As a shareholder, they can also become sponsors.
Summary
Equity crowdfunding is an ideal form of raising capital for clubs that want to develop and constantly raise their sports level. It is also an opportunity to build relationships with fans, for whom the purchase of even one share is extremely important because it emphasizes the attachment to a given club. It is good for sports clubs to treat good and close relations with fans as a long-term investment that will pay off with high attendance during the competition or interest from potential sponsors, and the funds obtained will be the beginning of this development. Equity crowdfunding should, particularly interest clubs with a long and rich tradition. Clubs that are about to celebrate the jubilee of an important event in their history, such as a founding anniversary or international success, should especially consider equity crowdfunding. An issue of shares can be a good way to say thank you for ongoing support and being with the club.
Cheers,
LSZ