Fan-Owned Teams Sprout From Obama Era Law and SEC Rules
When Detroit City Football Club sought to raise capital to make up for COVID-19 shortfalls, it summarized the benefits of investing to potential backers. The sport’s fan base was building in the U.S. The team had a strong brand, with years of double-digit revenue growth. Oh, and if you bought in, you could rightfully call yourself a “Professional Sports Team Owner” on LinkedIn or Match.com.
While DCFC has also added traditional investors since being founded by “five regular guys” in 2011, the club—which now competes in the United Soccer League—sold roughly 10% of itself to its fans in 2020, taking advantage of recently changed crowdfunding regulations. A number of other teams and sports-related enterprises have since taken similar steps, changing the definition of what it means to be a fan by using legislation primarily aimed at helping more traditional small businesses.
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Passed with bipartisan support, the 2012 JOBS Act opened the door for companies to acquire funding from everyday consumers through online platforms. “These proposals will help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last,” President Barack Obama said when announcing the new law.
Securities and Exchange Commission rule changes a few years later allowed unaccredited investors to put a capped percentage of their income into such endeavors. More recently, the SEC raised the amount private companies could accumulate via equity crowdfunding to roughly $5 million.
Chattanooga FC is credited with being the first U.S. team to raise money from its fans under the new guidelines. Then in the National Premier Soccer League, the club garnered $872,750 from 3,256 investors in 2019 on the Wefunder platform. In its marketing materials, Chattanooga used the example of the NFL’s Green Bay Packers, which have operated as a nonprofit with public ownership for 100 years and 10—make that 11—days.
Europe, of course, is littered with community-owned soccer clubs. In Germany’s Bundesliga, it is even a standard that teams be majority controlled by their local supporters’ club.
Few stateside are interested in going that far. But today’s U.S. team investors do get more than the Packers’ 500,000-plus shareholders, if only slightly. While Green Bay “stock” is rightly viewed as solely a unique piece of memorabilia, Chattanooga and Detroit backers hold actual equity in their teams. DCFC co-founder Sean Mann said the team’s value has gone from $10.8 million at the time of its crowd sale to roughly $35 million today. However, it is still exceedingly difficult to buy or sell the private company shares.
For now, DCFC has set up regular meetings and video calls with its many fan-owners. Their faces are also displayed inside the team’s facility. The club’s funding round drew particular interest from a diaspora of ex-Detroiters looking to stay connected to their hometown.
“When I travel with the team to Hartford or San Diego,” Mann said, “I’ve had people come up to me and be like, ‘Oh you know, I’m one of the owners… And I’ve never been to a game.’”
In December 2021, Minnesota Soccer Holdings raised $1 million from investors and then let those owners pick a name and crest for a soon-to-debut team in the USL W League. The Minnesota Aurora went 11-0-1 in their first year. They have since submitted a bid to join the NWSL.
Oakland Roots and Soul SC appear to be next, with the men’s and women’s outfits announcing a partnership with Wefunder to offer fans equity in an upcoming “community round.”
“It feels to me like the curve of sports teams [using crowdfunding] is really kind of accelerating,” Wefunder VP of fundraising Jonny Price said in an interview. “It seems to be a sector that is really a perfect, perfect fit for this way of raising money.” Even if it’s far from the initially intended use of regulated crowdfunding.
“Community” has become one of the most overused business buzzwords, right up there with “creator,” but if there’s one sector that can unapologetically wrap itself with that distinction, it’s the one that gets people to gather together on a regular basis, inspires tattoos and tirades, and elicits collective cheers and shared tears.
These days, big-name investors generally come to the table with more than money, offering validity, connections and advice. But when it comes to offering undying support—and maybe even purpose—they’ll never be able to match the wallets of the crowd.
Sports-adjacent businesses have turned to crowdfunding, too. Michael Waltrip Brewing has raised $280,000 from 190 investors. Blue Wire has added more than $100,000 to build its sports-heavy independent podcast network. Aaron Rodgers even took a page out of his old team’s playbook, garnering over $50,000 to date for his athlete information website OSDB.
Top-tier franchises are unlikely to join the party anytime soon. League rules often get in the way, for starters. Signing on thousands of investors also adds unnecessary administrative burdens, particularly when we’re talking about collecting $5 million for teams worth billions.
But there’s still a lesson to be learned here.
Fans jump through hoops to support their teams every day: signing up for streaming services, being gouged for parking, refreshing their jersey collection, all before they get to the ticket window. Along the way, they’re desperate for a sense of closer connection—let alone true recognition—even if it comes in the form of an otherwise worthless sheet of cardstock.
Don’t misunderstand them, though. The perks are nice. Just ask the dozens of proud Detroit City FC owners on LinkedIn.
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