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May 16, 2023

Monarch Collective Investing in Women’s Megatrend, Hopes to be Canary in Coal Mine

The Monarch Collective (Monarch), a new venture capital firm founded by former Upfront Ventures partner Kara Nortman and former Causeway partner Jasmine Robinson, recently held a first close on a $100 million fund.

It is the largest –and only– women’s sports fund ever raised.

Monarch’s objective is to ‘accelerate equity in global sport’ through investment in women’s pro teams and leagues (and adjacent businesses), and to prioritize equity in representation, by “building/partnering with ownership groups and organizations that represent the diversity of the fan base,” Robinson said.

It’s a noble mission, and if successful, the fund will help close the valuation gap between men’s and women’s sports creating billions of dollars in value for athletes, founders, and investors alike

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“Monarch is a canary in a coal mine,” Roger Ehrenberg (owner, IA Sports Ventures) said. “If [its] investments in women’s sports franchises, sports technology and sports entertainment businesses yield outsized returns, it will indicate that the ‘women’s megatrend’ hypothesis is correct, and capital will aggressively flow into the space.”

IA Sports Ventures is an investor in Monarch.

But at least some industry observers have doubts that the returns will be there to warrant the investment activity.

“This idea of doing what looks right is not necessarily right for [a VC fund],” Ricardo Fort (founder, Sport by Fort Consulting) said.

The purchase price of women’s sports assets has risen dramatically over the last two years, media rights budgets for challenger leagues are only getting tighter and it's not certain the anticipated value appreciation in women’s pro sports will happen fast enough for a fund investing on a 10-year time horizon.

The case for investing in women’s sports properties is clear. 

“If you focus on the most mature parts of the market, [they have] real media rights revenue, real sponsorship revenue, and [they are] sports that are global and benefiting from the tailwind of general sport level growth,” Robinson said. 

Nortman has seen firsthand how properly capitalizing and operating a women’s professional team can result in meaningful returns.

The NWSL club she co-founded in 2020 for less than $5 million, Angel City FC, now has a nine-figure valuation. 

The question is should a fund focus exclusively on women’s sports assets. 

Fort argues, “If their objective, as with any other fund, is to be as profitable as possible for their investors, that’s not necessarily the right decision.”

By limiting investments to the emerging category, Monarch is potentially missing out on higher ROI opportunities.

But Robinson didn’t sound concerned about that possibility. 

“You could say the same about any thematic fund and certainly it's true that we may come across other high ROI opportunities outside of women's sports,” she said. “However, [we] believe women's sports is the highest ROI opportunity for sports investment right now as a category and so that's why we're focused on this opportunity.”

While Monarch has a bit of wiggle room to invest outside of the core thesis, it does not expect to.

“People are investing in funds to back you as a manager, in places where [they believe] you can uniquely deploy capital in an effective way,” Robinson said.

And for Nortman and Robinson, that is in women’s sports. 

“By having deep domain knowledge, proprietary deal flow and wide networks, in an area that is part of a megatrend, the benefits [of a thematic fund] can outweigh the costs," Ehrenberg said. "This has been proven in any number of specialty [categories], BioTech and MedTech perhaps most notably.”

Nortman, Robinson and their LPs are convinced there are attractive investment opportunities to be had in women's pro sports.

“The valuation gap between men’s and women’s teams is so vast that even with a measure of convergence, the market opportunity is deca-billions in scale,” Ehrenberg said. 

And it is growing. 

“As women’s participation in sports broadly increases, along with their power as influencers, brand ambassadors and as role models, their impact on women’s sports as a ‘product’ will only increase; [and] as sports betting, sports media and entertainment converge, women will play an increasingly large role in expanding the TAM of sports writ large,” Ehrenberg said.

Monarch will initially focus the bulk of its attention on assets within the NWSL, WNBA and WSL.

“There is a unique opportunity to invest in women’s teams [in those leagues]. We feel the downside is quite protected, and [that investments] can lead to venture like returns,” Robinson said.

Even with valuations haven risen dramatically over the last two years (see: recent $53 million NWSL expansion fee). 

“We have a strong conviction around the revenue generation opportunities surrounding these teams, at a team [and] league level,” Robinson said. 

And that is with relatively conservative underwriting assumptions. Monarch is not banking on these assets generating large, guaranteed media rights payments–at least not anytime soon. 

“We’re using tangible assumptions we think are viable over the course of the next media rights cycle renewal rather than grandiose numbers from the future,” Robinson said. 

The projections being used are largely based on team-level revenues the organization can control leaving incremental upside should league-level revenues climb faster than anticipated. 

Monarch will build a highly concentrated portfolio out of this initial fund (think: four to six investments each ranging from $10 million to $25 million). 

But that’s not because it has concerns about identifying viable opportunities. 

“We want to pick the ones that are going to be the best performers, and [we want to] have the time to be hands on partners to ownership and leadership as they scale their businesses,” Robinson said.

Skeptics will note it has taken MLS more than 25 years to get to the point it has reached today and that there are no guarantees women’s sports will grow at the same pace the men’s league has making a 10-year fund risky. 

But Monarch believes the NWSL and WSL can mature faster than the men’s soccer league (the WNBA is roughly the same age).

“You can see some leading indicators around sponsor demand, viewership, [and] media rights company interest [that suggest they are close to reaching an inflection point],” Robinson said. 

The three women's leagues also have the benefit of learning from all the challenger leagues formed over the last quarter century.

And Monarch is a strong believer in women’s sports as a long-term opportunity. 

“We just don’t think that’s inconsistent with saying there is going to be growth [along the way], and we expect a good bit of that growth to come in the next 10 years,” Robinson said. 

If Monarch is successful with this first fund, one can expect a flood of capital to chase whatever upside remains.