Who do you turn to if you’re a sports club with ambitions for growth or stadium repairs to make and you don’t have a Chinese consortium or Gulf-based billionaire fluttering their eyelashes at you, nor a star player to flog in the transfer window?
Tifosy, a startup co-founded by former Chelsea and Italy striker Gianluca Vialli, has what might appear to many to be an obvious answer: your fans.
The company has already partnered with 15 clubs in England and Italy, raising £2.9m from “fanfunders” for a variety of different projects.
League Two club Stevenage teamed up with Tifosy for the first ever football mini-bond earlier this year, raising £600,000 to help build a new stand at their stadium.
Vialli’s co-founder Fausto Zanetton sensed the value in a platform that clubs could use to raise serious capital from those most willing to lend it, after an investment banking career with the sports and entertainment arms of Morgan Stanley and Goldman Sachs revealed how uninterested most heavyweight investors were.
“I’d worked with various clubs and saw it was not that easy to raise money from institutional investors,” Zanetton told City A.M.
“And given that I’d spent quite a bit of time on the west coast [of the United States] as well through my work in online investment, peer-to-peer lending, crowdfunders, I thought that a vertical play for sports — specifically crowdfunding — would make sense.”
The issue, explains Zanetton, is that the vast majority of football clubs are glorified SMEs, businesses whose revenues are so small as to barely register with the heavyweights in the City.
“Even the top teams like Manchester United or Real Madrid, they’ll have £600m revenues,” he says.
“It’s a multinational, but still relatively small for a very big investment bank and a lot of the more institutional investors. Unless you’re a very, very big club, it’s tough to go to a big investment bank and have a tailor-made financing solution for you.
“So a lot of the other clubs need to look from financing from other sources. A lot of clubs used to tap into local banks but that market has dried up since the crash, or look to pre-existing relationships with small funds or businesses. But it’s not very efficient and is very expensive.”
So rather than owners selling equity stakes to unfamiliar outside investors, crowdfunding solutions such as mini-bonds or equity shares have emerged as alternative solutions to many sports franchises.
Top-flight rugby clubs Harlequins and Wasps raised £15m and £35m respectively by issuing their own bonds, while Surrey County Cricket club raised £5m in seven days in 2015.
Supporters of down-on-their-luck team outside the Premier League may have seen volunteers outside the ground pleading for donations to help the club cover costs.
But rather than simply acting as a digital version of the bucket of change, Tifosy leverages its experienced team of sport and finance experts to come up with bespoke funding campaigns.
These include Stevenage’s five-year mini-bond which required a minimum £500 investment and yielded a four per cent cash return per year or an eight per cent club credit return to spend on merchandise, tickets or hospitality events.
Last month it launched a €1m mini-bond for Italian second-tier side Frosinone, which has already reached 50 per cent of its target.
“With these larger amounts people need real meat around the bone,” says Zanetton. “They need an offering document which explains the club’s financial situation in detail, all the risk factors are included, the legal structure. It’s not just about supporting your club. We want to create a real asset class for sports and give retail investors and fans access to it.”
Tifosy itself recently raised £1.3m in a round of funding — beating a £1m target — as it aims to fuel European growth beyond Italy and England and increase the financial scale of its projects.
Burgeoning football markets such as China and the US are also in the company’s sights, as are the cash-rich titans of the Premier League.
Crowdfunding might not trump a billionaire benefactor, but it can help clubs in the top tier with growing global brands to stay rooted to their followers, according to Zanetton.
“You go to some big clubs here in London and you don’t have that same atmosphere that you had 10, 15 years ago,” says the Inter Milan fan.
“So while a top Premier League team might not use a Tifosy mini-bond as a financing tool, they could use it as a tool to really engage with fans.
“You could develop a loyalty programme while at the same time financing something that is important to the community and the development of the club.”