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- I always say the New York Knicks are as popular as they are because the kids in the boroughs love the Knicks, right? And so it is important for these teams to make sure that they don't forget about the broader community. I laugh sometimes. I'll go on social media and I'll hear all these things like, oh my God, private equities and sports, they're changing the team. No, that's not what's happening, right? The, the team owners still control the asset. What we're able to do is provide capital for growth.
- Welcome back to The Deal. I'm Jason Kelly. - And I'm Alex Rodriguez. - All right, Alex. Coming up on the show, Don Cornwell, he is the co-founder and the CEO of Dynasty Equity. This is a pioneering firm in a storyline that we are obsessed with. Institutional capital, private equity coming into the world of sports. - As an owner, I've had a front row seat to see what impact institutional capital has made, and I think Don has done the best job explaining how it impacts sports.
- Coming up, Don Cornwell. Don Cornwell, this is such an exciting moment for, for both of us. And Alex, I have to say, it's especially fun when we have a guest who we've both known independently for a long time and, and obviously admired your career. So welcome to the show. - Super excited to be here. Thanks for having me. - Let's talk about Dynasty - Sure. - to start. Help us understand Dynasty at this moment because it's been a fascinating journey over the past few years as you've sort of launched this and, and started to do some pretty significant deals with your partner, Jonathan Nelson.
- Yeah. So Jonathan Nelson and I decided to start Dynasty about four or five years ago. We had this view that the world of sports was going through an evolution, maybe a revolution. And so he saw an opportunity. I saw something as well. We got together and we said, "Let's bring private equity in a traditional form to sports." And that's what we've done. - And importantly for our audience, I mean, to give some of your background, you had been really the go-to investment banker on the sports side, first at Morgan Stanley, then at PJT where you were a co-founder. So it was this, from my perspective, Alex, this really fascinating sort of buy side,
sell side getting together at a really critical moment. And I mean, it's interesting to think about four or five years ago. I mean, that's when you were really transitioning to ownership, right? - It was. And around five, six years ago, Don, when we sat down and we saw the world of sports changing, I don't think anyone could have predicted how much it would've changed in the last five years. I think we were probably short by at least 50%. Yeah. So I think it's a perfect time for Don and Jonathan to be entering this space. And obviously they've done a couple good deals already.
- And so to that point, what did you see then that's different now? What's the biggest difference from the original thesis and the 2026 view? - To Alex's point, this has happened faster than we expected. I think we always thought there would be this change in how people perceive the sports world, but it's happened really fast. I think the other thing that has happened, which when we first got together, AI was a topic, but it wasn't necessarily the main event.
It was much more about social media. And I think the combination of social media and AI has caused an effect where human beings are just dying to get together in real life. And what we're finding is that anything that's a live event is exciting for people and sports is the best backdrop for that. So when you have this combination of Amazon and Google and Netflix all coming into sports, plus consumers really wanting to be together, we saw it this past summer with the World Cup, people just dying to be in rooms with other humans, that combination has created really a great opportunity in the sports world.
- So at the founding of Dynasty, it's interesting because now it seems pretty obvious and there's a lot of deal making going on. And I know we're going to talk a lot about institutional capital coming into sports, but it was a little bit of a novel concept at the time. What was the initial reception like? What was that like in the early days? - A really wide range. I mean, we had people that looked at us like we had eight heads. They though of sports as being this sort of odd vanity play.
Is it a business? What are you talking about? Isn't this just a thing for rich folks to go invest in or buy? And then we had some people, thankfully, who saw it, that came to support us. Over time, what's happened is a lot of headlines, lots of people going out and buying teams. The prices have continued to go in the right direction, but also importantly, the broader private equity world has embraced sports. So while we were maybe a little on the early side, big brand names, if you think about whether it's Ares, Apollo, KKR, they've all jumped into sports and that's caused everybody in the investing world to take note and say, okay, this is a real asset class.
And where we continue to benefit is we're the specialists. So all these big firms are off doing sports. That's great. I love that. But we're the ones that is all we do and that provides us with a really good place. - Not only are you the specialist, we also have these world-class relationships that are intimate and are trustworthy and ultimately we do business with people we like and trust and you have that in abundance. I love the concept of you and Jonathan coming together as co-founders. Talk to us a little bit about what is your lane? What is Jonathan's lane?
How do you compliment each other and why are you so excited about the way you do work together? - Yeah. So on paper, he was the perfect partner, right? Providence Equity, all these investments, track record, really a guy that everybody I talked to really respected and regarded. So I always think about it as we have all this deals work that we're doing, all the sourcing, all the pipeline. When we get to investment committee, he's the guy that says, "No, no, no, no, hold on. I've got pattern recognition." And he can go back into the big, beautiful brain of his and say, "Oh my God, no, this is a topic that we have
to go due diligence on because I did this other deal and this was a problem." He is at a stage of his career where he still wants to work hard. He loves deals and he's trafficking in a world that's very hard to reach. I mean, it's Star Wars, right? If we need a call to really anybody, he can make that phone call. I've got great relationships and we have some overlap, but they're different. Mine are more probably day-to-day, whereas his are more, okay, we need the big gun and he can go do it. And because we've been together so long now,
we can finish each other's sentences. Even when we have times where we have a disagreement, we talk it out and we both trust each other and I think respect each other a lot and that's made for a beautiful partnership. - All right. You mentioned that Jonathan Nelson loves deals. We love deals so much so that we named a show after it. There you go. But let's talk about one of yours. - Sure. Because one of the ones that really has caught my eye TMRW is I think such an interesting vector into the future of golf. This is Rory Mcllroy, it's Tiger Woods, it's Mike McCarley who's been a guest on this show.
How does that deal come to you and how does it play through the filter of Dynasty? - So early on, we're able to get the sense that Mike was a special executive and he was building his business. I was building mine. We both just chatted a lot about ways in which we could help each other. And in many ways I was sort of advising him and I was also learning from him as he was building his business. At some point, he approached us to invest in and maybe purchase the New York golf team that Steve Cohen has invested in. We looked at it. It was very clear to us that this was a special company. And so we called Mike and said, "Thank you for showing us New York,
but what we really want is to partner with you." And so he said, "Well, that's interesting because we're thinking about raising a new round of financing." And I said, "Say the word." And that's how it got started. When we made the initial investment, it was clearly a golf company and we love that business. And we knew that there was opportunity, both men's and women's. We think what they're doing with golf is exactly what golf needed, but doing it in partnership with the PGA was a big deal.
We have this thesis that the big leagues have so much power and so much girth that if they want to go do new things, you are mitigating risk in a massive way. So having the PGA Tour as partners was a big part of the underwrite for us. - And if you're not with them, you're taking a pretty big risk as - We've seen. And yeah, it's really hard. And so when we did the underwrite though we thought, okay, it's a golf company, but this team can do more. And we had this view that other leagues were going to look at this and say, "You know what? I want some of that." Now, I did not know the NFL would come knocking and we can come back to that in a moment, but we always felt like golf would be the start.
It's been a few years getting that going, and then we'd go out to other sports. And so in many ways, this was the perfect way for us to go partner with a bunch of leagues. And between Jonathan and myself, we have those relationships and we felt like this would be a great way for us to help build a company. - And so let's talk about the NFL coming up because it takes us into a really interesting area of growth, which is flag. - Yeah. So as you know, the NFL has been seeding flag football in the youth world for 25 years, Not just domestically, but also overseas.
They've always had this view that, especially on the women's side, it's the best way to get more people involved in the game of football. They also understand that traditional tackle football is very expensive. And so the idea is flag football in many ways, other than global football, soccer, is the easiest thing to do. You just need a ball and you could just get some cloth and create a flag and a couple of rocks and you can play a game. And so as part of that journey, the NFL worked a lot with the IOC to get flag football to become an Olympic sport.
And so in 2028 in Los Angeles, flag football, both on the men's and women's side will be an Olympic sport. And it's going to be a fantastic competition. We're super excited about what that's going to look like. But if you're going to actually ask somebody to dedicate their athletic career to flag football, maybe there's a way for them to earn a living, and that's professional. And there had been some upstart leagues that had tried to go do the professional flag football thing, but the NFL had a plan and their idea was to launch a professional league for men and one for women, but they needed a partner to do it.
And they started talking to some venture capital firms and some potential partners. And ironically, what we heard from the NFL was that a lot of people in those meetings were saying, "We can build the TGL for flag football." And then when you look at Mike McCarley's background, he came from NBC Sports, Golf Channel. But at NBC Sports, he had two big things he worked on, the London Olympics and Sunday Night Football. So he was one of them. So I will never forget there was a meeting where you had Roger Goodell, his whole team, Mike McCarley, his team, we were there and a bunch of other folks, and you could just see the fit that Roger's doing his math in his head of, "Is this a guy that I want to partner with?" It still took some time
to get the deal done, but after another six or nine months, we got it done and it's a fantastic opportunity for TMRW I think for the NFL as well. - So Don, you mentioned that you and Jonathan saw something with TMRW Sports that was very intriguing and you called it special. - Yeah. - What was specifically the economic attributes that you were most attracted to? - Sure. So in the sports world, it's very difficult to own a league. If you think about the NBA, Major League Baseball, National Football League, they're pass-throughs.
It's the team owners who own all the economics. This was an opportunity for us to own a league. - League level economics. Yeah. - And that means we get everything. It's a platform. So any fan that is interacting with us, any corporate that's interacting with us, we get a piece of it. What we liked about TMRW in particular was that they were going about this in a low capital intensity way. It wasn't about building 20 stadiums around the country.
It was one $75 million venue. So you could see from a unit economics perspective, things going in a good place pretty quickly. There really isn't many places out there for you to have the opportunity to own a league, but also do it in partnership with the PGA Tour and the LPGA and now the NFL. That's just hard to come by. And so for us, it was a very unique opportunity that we wanted to jump all over. - So Don, when you and Jonathan look at investment, let's just talk about the four major leagues in America, NHL, MLB, NBA, NFL.
You've seen multiples of top line revenue. How do you value those and what's your thought process? - Sure. So the first thing is when we do look at the various opportunities that are in front of us, one of the things that we're underwriting is the league office. So it's Roger Goodell, it's Adam Silver, it's Rob Manfred. What does the CEO look like, the commissioner look like, and the team beneath them? That's an important part because so much of the revenue is driven by what they're doing in that league office. And so you have to have a lot of comfort. - Because they're negotiating the media deals.
They're negotiating deals. They're negotiating labour agreements, etcetera. That's right. So it's a huge part of the economics. In the NFL, it could be up to 75% of the economics. Now, when we look for specific situations where we want to deploy capital, it's ones where we feel as if our capital and the situation is when there'll be an inflexion. Something's going to happen to the P&L. And so when we look at NFL situations, we are passive investors. I don't want to try and say, "Oh, we're going to come in and change management." That's not what we're doing,
but we want our capital to go support something that's going to have an impact. If I think about Seattle, that's one where the stadium, beautiful stadium, it's almost iconic at this point, but there really hasn't been any money put in for 10 years. And so there's some things they can do to upgrade it that will impact the P&L. We think that the fan base could use more from their ownership group. That's what the Khoslas are going to come do. They haven't really had that person to do that over the past 10 years. And so for us, yes, of course we look at multiples and we do all the analytics that you're supposed to do as prudent investors, but it's really the situation and the setup.
The other thing is relationship, right? Are these people we want to back, right? Because by definition, with these four major leagues, we can't be the control owner. And so we are partnering with people like you and we want to make sure that those are people that we want to partner with and we view them as good shepherds of capital. - Yeah. So walk us through how you're able to get over the line with that specific deal. So this is Vinod Khosla and his family buying the Seattle Seahawks from the estate of Paul Allen for $9.5 billion.
You guys come in, as you said, as a minority investor. How does that come to you? - So they were running a very open process. We were a known entity as somebody who could potentially partner with folks. - Having been approved by the NFL, which is a really important piece of - Business. Yes. So there really is only five firms that people could look to as a financing source. And as the various parties were competing to win the asset, I think they always knew that 10%, because there's a rule that private equity can only up
to 10% of a team, that we would be there as interested parties. And we were watching the process, doing our own work in the background. As things got sort of heated up between two parties, that's when the sell side reached out and said, "We should start talking about you guys getting involved." And for us, being able to do this with the Khosla family was quite unique. We talked a little bit about earlier, the idea of Dynasty is we love technology coming into sports. So here we have really one of the most iconic, best technology investors of all time. Ever.
- Yeah. - Buying a team. Unquestionably. - Yeah. - And hearing him and his family talk about what they can do on the local basis, just thinking about fan engagement, the experience in the stadium, how to think about local sponsors, how to think about ticketing, all the things that. And they're bringing in AI and their experience is very different than most owners. And so for us to be able to be a part of that, super exciting and really does fit into our thesis. And for us, again, it's an M&A deal. This was a fun deal that I have to be very careful about what I say, but it definitely had some old school elements of it.
And as a firm for us to be able to partner with the Khoslas and frankly, to really do something with the NFL, right? I mean, it's one thing to go through the process of getting approval. It's another thing to actually make an investment and be part of the group. And so we're super excited about it. - All right. So let's talk about what you saw in 2020, 2021, which has really come, and you both said much faster than we though, which is institutional capital in sports in a meaningful way at every major league. What's the biggest impact of having institutional capital as owners in professional sports?
- Well, I think it's a complicated question because you have to think about it. There's the leagues which have rules, right? So they do this institutional capital, but it's not as if we are going and buying an NBA team or an NFL team and doing the things that private equity does. And so I laugh sometimes. I'll go on social media and I'll hear all these things like, "Oh my God, private equities and sports, they're changing the team." No, that's not what's happening. The team owners still control the asset. What we're able to do is provide capital for growth, right? So if a team wants to go out and build a practise facility, if they want to renovate their stadium, we can help them with that.
Those things lead to growth and lead to value appreciation, and that's where we can come in. I think for certain team owners who are not necessarily broader business folks, we can be helpful as they continue to grow their business. But I want to be very clear, when we go and make an investment into the Seattle Seahawks, the Khosla family is running the show. We are there. If they need our advice, we're there for them, right? But if they also say, "You know what? Dynasty, we're good.
We got this. We're fine with that because we trust them." - I love that answer. I mean, it does expedite the growth process. You get all the data that they have that perhaps we may not have. - Because you have this experience as an owner. - We do. But what I would say is you get the institutional knowledge, you get the information they're seeing around other leagues and also in the NBA. But to Don's point, at the end of the day, we're able to make decisions very clean and very quickly.
- Right. So what's the effect on valuations? There's availability of capital that wasn't there before. I know there's an argument that like, listen, these valuations are going up. They need to be supported. This is just part of the capital ecosystem, but you know this business better than anyone. What is the real effect of having this capital? - So there's a few things going on. As the sports world has matured and evolved, teams are now able to connect with their fans on a one-to-one basis, right?
Our capital can help with that. And to the extent that teams have a better relationship with their fans, they can create products because they know their fans that those fans want. They can create experiences, they can create merchandise that they want, that inflects the P&L, which then has a positive impact on valuation. To more directly answer your question, I think one of the things we've seen as private equity has been allowed in is it's given wealthy families the comfort that if they make an investment in a team, that they have an exit. Right? - Interesting.
- So what you've seen since private equity has been allowed into the four major leagues is that more wealthy families are coming in and then talking to those families, they've always said to themselves, "Well, if I make this investment, if I need to get out, where do I go?" The fact that private equity sitting there gives them some comfort. They may never sell, but the fact that we're there does give them some comfort. And I think as you have more capital coming into the system, that does have some impact on value. - So Don, as we summarise this conversation, I can't help but think about when I was a 10-year-old boy when my mom had two jobs and I quite honestly couldn't afford to go to Miami Dolphins game
or even a Hurricanes game or the Miami Heat. My point is we're talking about all the winners here. We're thinking about teams win and team owners win because enterprise values goes up. Private equity wins because they get deploy hundreds if not billions of dollars into a very attractive space, sovereign funds, institutional. Yeah. I hope that in all this process, we don't forget about the biggest losers could be the fans. Yes. So how do you think about that?
- Yeah. I think you've heard me talk about this a little bit, Alex. These are obviously massive assets, but in many ways they are community assets, right? And I always say the New York Knicks are as popular as they are because the kids in the boroughs love the Knicks, right? You can't just market to the West Village and Tribeca. You've got to market to the South Bronx and to Queens and to Brooklyn. And so it is important for these teams to make sure that they don't forget about the broader community. And that's a big part of what we care about as investors as we look at teams is, is there a meeting of the mind with this ownership group on that point? And I think for us, if we can make more money
in other ways with merchandise and experiences, and frankly at the high end, so it's getting more sponsorship, it's getting more corporate support, that allows us to not necessarily do the things that some might do on tickets. Liverpool's a great example. They don't really raise their ticket prices. Last year, I think the ticket prices were raised on average 42 cents. - Wow. - That's it. Because they can get their growth elsewhere, right? And the more that technology's coming into this world, I think there is actually a way to have everybody be a winner, right? Where fine, yes, you are getting the growth in revenue
and profits, but the fans still have access. I want that to still be possible. And I actually think that as the world gets more sophisticated around sports, that is more possible because we can make money in lots of different ways. - All right. Well, we could talk to you all day. Thank you very, very much for spending some time with us. Congratulations on your deal. Thank you for joining us. Thanks for having me.
