Worth Knowing: How to raise money for a challenger league

0:03Hello and welcome to another episode of Worth Knowing, the sports business podcast from leaders. What's it about, Dave? It's for Leaders in Sport, from Leaders in Sport, with Leaders in Sport. Yeah, by Leaders in Sport, for Leaders in Sport. Do you know what? It's the weekly podcast that we do and we call it Leaders Worth Knowing. And it's the definitive sports business podcast. Yes, please. My name's James Emmett. I'm the editorial director here at Leaders. And with me, as you will have already heard, is David Cushnan. Hello. Hello, David. How are you doing? I'm very well, thank you. How are you?

0:37Very good, thanks. Yep. I feel like it's the start of a new school year approaching and I'm ready to move up a level. You've got a whole new pencil case, haven't you, over there? I have. I've filled up on rubbers this year because I feel like this year, this academic year, I'm ready to make mistakes and learn from them. Oh, that's nice. Have you been reading one of your leadership books over the summer? Always. I don't read anymore, David. I use AI to ingest for me. Summarize and synthesize. Yeah. I actually saw something. You know, there's these hacks about read 100 books while only reading half of one.

1:12Yeah, well, there's hacks and apps, isn't there, that do that? Honestly, those are the worst things in the world. Disgust. Imagine if somebody summarized this podcast. Good luck. Yeah, it'll happen. What's going on with you in your world, David? Well, lots going on. I saw you at Lourdes last week. We proceeded to Lourdes, didn't we? Yeah. On a mandatory team building exercise. To watch the 100. The 100. London Spirit against, I think it was the Northern Superchargers. Double header. So London Spirit, it seems obvious to me where that team's from. Lourdes. The Northern Superchargers. Through a process of elimination, we ultimately decided it was the Leeds-based team, Yorkshire.

1:53Yes. Headingly. A branding difficulty there, in my view. I think so. I think it's difficult to grasp, isn't it? Yeah. Yeah. Yeah. Did you have fun? It was very pleasant. The weather was nice. It's a casual vibe, isn't it? The 100. It's DJs. It's a lot of people, frankly, not really watching the cricket, but having a nice time. Yeah. Equally, there's a good amount of merch, I see. There's a good amount of merch. Popping up in the stands. A lot of London spirit gear. It's an accessible way into a sports stadium for a good number of hours, I'd suggest. Yes. Yeah, no, it was good fun. And I think, you know, it's a women's and men's doubleheader.

2:38I think the women won one and the men won another. Yeah. That's how it happened. You know, spoils shared. Shares spoiled. Yes, I think so. That's something else. Yeah, one for AI to summarize. Coming up on today's show, we're going to be hearing from Sam Renouf. Excellent. who's the co-founder and CEO of PTO, Professional Triathletes Organization, which is one of these, it's no longer a startup, it's been going for sort of five or six years, but it's one of these new wave of, it's not quite short format either, but it is a new wave of challenger sports competitions. This one, obviously, in triathlon.

3:20Professional Triathletes Organization is the, organizing body run by triathletes. Essentially, it's a union of professional triathletes who run their own competition underneath that entity. And Sam Ranouf is the former triathlete who runs all of that. It's a good story, isn't it, PTO, as you say. And what is the route for a new sports property startup to challenger to disruptor to establishment part of the furniture maybe i don't know but um they're certainly on the road and they've been going for a number of years now it is very much a uh sports property that is uh often to be found as a topic of conversation and a case study by the LinkedIn erati, the chattering classes on LinkedIn.

4:18And they really like this as an example of a slightly different model and a model that, as you say, puts athletes, triathletes at the very much at the center of it and sort of builds out from there. So, yeah, I'm looking forward to hearing from Sam. And as you say, one of this wave of whatever you would call them, startups, challenges, emerging properties that we've seen, probably live golf the most famous over recent years, but most sports have them to some extent. SailGP is probably a nice comparison point with what PTO is doing in the sailing world. And obviously SailGP going great guns at the moment in terms of creating value and gaining investment in its individual teams.

5:06There's obviously Unrivaled and TGL, the golf league that we've talked about. There's other properties that are more conceptual stage. There's this new, well, there's a couple of new rugby union leagues series that are in development at the moment, whether that's R360 or a new Sevens-based league. But they don't always work, do they? And I think this is interesting. Well, they usually don't work. Well, they usually don't work. And actually, just over the last sort of few years, I was making a list as we were going into this. Gone but not forgotten. Stuff that hasn't worked, sort of, you know, fallen sports properties that were once the next big thing.

5:44A1GP, of course. A1GP back in the day. W Series, you would add to that more recently. World Series of Boxing, which was at one stage being backed by Mike Tyson. the extreme sailing series was around for a long time and the darling of sort of hospitality fans the e-scooter world championship who isn't who isn't a fan of that particular team yeah but they pioneered my new shirt every year it was extreme sailing that pioneered the the um the fourth man the fourth man or fifth man or sixth man which the america's cup is taking up for its next cycle absolutely terrifying position to be Yeah, e-scooter championship, which sort of came with a bit of hype and then didn't last particularly long.

6:32Seems as though Grand Slam track, Michael Johnson's series might be going a similar way. There's a sort of pause on 2026 planning until they have sufficient funding in place to be able to pay athletes. Until the blooming bank manager pulls his bloody thumb out. Indeed. And remember the International Swimming League, which was a sort of disruptor that came in to sort of challenge the status quo in swimming, in aquatics. The Adam Peaty vehicle. Yeah, which had a bit of Russian backing behind it, I think, and fell by the wayside as Russia became a bit of an outlier internationally. But the best ones, the PTOs, succeed, I think, when they strive.

7:17And there's always a bit of disruption when something new happens. But the ones that have really worked to not necessarily replace the existing, often quite traditional governing body with a very historic, established structure in place. It's the ones who learned to, I think, coexist within those sort of parameters that seem to be working. Yeah. And there's the current crop, obviously, that seem to be making waves, at least commercially and in the media sphere, the likes of unrivaled three on three basketball league, love volleyball as well. All of these new challenges have not only an ability or a desire to work within the existing structure, calendar, etc.

8:10They all have a little secret sauce or some kind of twist on the norm, which is their USP. Unrivaled, of course, essentially a basketball competition built in a TV studio. it's all for broadcast you've got the likes of baller league and king's league just mad versions of uh five a side seven a side um football in the case of pto they've really nailed the mix of a professional athlete involvement so this is owned by run by professional triathletes for professional triathletes mass participation element which is critical for a sport like triathlon this is funded by driven by a band of wealthy folks who want to be doing triathlon and then a smart approach to financing so making sure that the calendar follows that kind of formula one model of um economically important centers of civilization to hold your events in um but also this and we'll dig into it with sam who's really excellent on this this strategic approach to raising funds to keep the operation going but to make sure that there's a quantum leap each time there's a funding round in terms of who's backing it who feels ownership in this particular entity.

9:45And how you tell the story and how you evolve the story. And actually, if this podcast is about anything, they all are really. AI will tell you at some point. It's really about the nuts and bolts of raising funding for an entity like this. So Sam and PTO have just been through a Series C funding round that they intend to use to push forward their T100 series, which is the series underneath PTO. So the funding round is reported to have raised$40 million. It was led by Surge Sports Investment, which is the Saudi entity, the kind of investment arm tagged onto the PIF, and also supported by Cordillera, Verrance Capital and Sir Michael Moritz, who was an initial investor into PTO and into Sam.

10:46Yeah, really great conversation going into the detail of how this works. Should we bring him on, Dave? Let's bring him on. Here is Sam Ranouf of the Professional Triathletes Organisation. Right, delighted to be joined in the Leaders Studio now by Mr. Sam Ranouf, the CEO of PTO. Now, is that paid time off? That's certainly what we get known for on the SEO ranking. Yeah, I'm sure. Those are a tricky set of initials, aren't they? It's a professional triathletes organization, of course. Sam, welcome along to the Leader Studio. Thank you. Great to be here. It feels very American, I suppose, actually.

11:22It does feel quite a bit. It's very blue, isn't it? Yeah. Well, the NFL helmets, basketballs, but fun to be here. Behind you, of course, I'm seeing something from UEFA. We've got Wimbledon. Okay. It feels very sort of English over European, over where you are. Sam, you are fresh. Well, if fresh is the right word for a sort of international events organiser. You are recently off the back of your most recent London event. That's right. How did that go? Yes, never fresh. That's for sure. No, never fresh. That's for sure. Especially in triathlon. We were thrilled. It was a great event. We had a sellout field of nearly 6 ,000 amateur participants over the weekend.

12:05We shut down some pretty key roads into central London, but didn't cause traffic chaos, which is always one of the metrics we sort of work backwards on. You want to be in a city, but not be so impactful that you don't get welcome back. So that also worked really well. And then from a professional and content perspective, I say professional, professional athlete and content perspective, some fantastic races across both the men's and women's field, but particularly particularly the women's with Lucy Charles winning in tears. She came across the finish line, not because it hurt so much, but because it meant so much.

12:35Because a year ago, she had to pull out in that in her home race. It was wonderful to see that. Yeah. And what do you do? It's your home race as well, I suppose. What are you doing across a race weekend? Swanning around VIP, entertaining fancy people drinking champagne. I mean, there is an element of truth to that. Like in any sporting apart, We were hosting delegates and potential sponsors from all around the world. We had quite a few folks from the Middle East who flew in to see what the event was all about and see the size and scale. We had Gordon Ramsay racing, as you probably know, along with his family at Ann and Peter, who did race the next day.

13:11So we had a lot of different people that we were entertaining and really showcasing triathlon as a platform because that's the commercial logic. We'll talk about our fundraiser in a minute, I'm sure. But the reason why we've been able to raise fairly significant amounts of money is because triathlons are highly under-commercialized sport, but it has a very valuable market. I'm sorry, very, very valuable audience, I should say. And so being able to show people in the flesh, look, this is how a triathlon operates. Look at all these people with their fancy bikes. Look at how engaged they are. We had nearly 25 ,000 people across the weekend come through the Excel Center.

13:45So it sort of gets to a fairly significant scale. So being able to show that is uh pretty probably the main part of the job along with the champagne obviously yes of course yeah um one champagne one water one champagne one water of course um sam tell us what uh pto is give us the elevator pitch and then if you will imagine the elevator has got stuck and you've got a bit more time to give us the origin story after that there you go origin story too um elevator pitch we are the players association of triathlon so that's the really really simple way of describing it. So just like the ATP and the PGA Tour, we were formed by the athletes who got together and said, look, our sport has developed well, but maybe we as the athletes are not being the major beneficiaries of that.

14:28So let's create an organization to go and change it. So that's who we are as a group. The longer story probably relates to both the business model and the investors and the rest. And where we're different to the PGA and the ATP is that because we were formed in 2020, the first thing we did was to go and raise money from venture capitalists. So we set up a commercial entity that could raise capital to go and create our own events. And the logic of that was really simple is that we could either as a players association be more like a lobbying union, sort of basically complaining to people saying, please give us more money, or we could go and create that own economic destiny for ourselves.

15:03And that's what we went and did. And the product we have is called the T100 Triathlon World Tour. And one of the reasons it's called that is because PTO stands for paid time off in the States, as you know, so never going to be a brand that really resonates but same principle as you know no offense to fifa or uefa but like those are acronyms for governing bodies as opposed to the the consumer product yeah ours is the t100 it would it's also a set of initials that maybe would strike fear into the heart of a gcse student let's please turn over as well in there in exam i've thought of that before but you're very right yeah um okay so pto player is the the athletes association in triathlon and t100 is the series that you have set up and run underneath that.

15:46That's right, yes. Great. And with the series, tell us what the USPs are versus other triathlon events. Well, actually, in fact, even before going into versus other triathlon events, maybe sort of the background even to within triathlon. So as I said earlier, triathlon is a highly under-commercialized but very valuable sport, which is what attracted the investors that we've had. We launched in 2020 our first auspicious time to launch, given COVID, obviously. In fact, our first investment came from Sir Michael Moritz of Sequoia Capital fame. And that money came in three weeks before the world kind of shut down with COVID.

16:23So best of times, worst of times, depending which way you look at it. So lucky. The timing is so lucky. And that goes into so many things. And Sir Michael is not a triathlete. It's one of the things we talk about quite often is that there are many billionaires in sport that are trophy investors or they're doing it because it's a massive passion play. It's not to say Sir Michael isn't a passionate man. He's incredibly passionate and the incredible success he's had over his life. But he's not doing this to hang out with the triathletes. He was doing it because we presented to him a business plan that showed a sport that had a very, very valuable demographic.

16:57Like if I give you numbers, household income in North America, more than$220 ,000 versus a golf average of about$120 ,000. 130 ,000. So indexing nearly twice the value of golf, but completely fragmented by the business model of the sport. And what I mean by that is you have the Olympic games every four years, massive moment in the sunshine, Alistair Brownlee, stars like Alex Yee get their moment, and then it kind of disappears for four years until that comes along again. And that's very common with many Olympic sports. The difference to most Olympic sports though, is that in that intervening four years, there are millions and millions of everyday people that compete in triathlon for fitness goals and to improve their lives.

17:35And so there's a very valuable demographic there. But because most of those events are purely mass participation, they don't have any media. It means you're talking, if you're a marketeer, let's say you're a brand, let's make one up if you were, I don't know, any brand, British Airways, given we're in the UK, and you were saying, I want to target triathletes. Until we came along, you'd have to go to all of these little races that have a thousand people at a time to try and aggregate it. And you're just not going to go through that brain damage when you can slap your logo on, I was going to say Twickenham at Allianz Stadium instead.

18:05And so there were too many obstacles to entry, right? Well, even simpler than that, it's just a fragmented audience. Right. Whereas if you could consolidate that with bigger events that have the best athletes competing with media underpinning it, then you can create commercial value, whether that's for sponsors or for host partners. and uh the t100 which launched two years ago was when our rapid growth of creating a world tour for triathlon it's 10 stages nine stages this year um in a season-long narrative which we've very much copied formula one so we've looked at what are the other sort of the things that are similar about formula one you're in iconic locations you've got this valuable audience and you have a competition that goes from one event to the other crowning a world champion and that's really what we've sought to create and you're in a lot of the same places it's same kind of places yeah there's a lot of correlation between the places where people want to go because um for us the destinations of sport can almost be as almost as important as the sport itself i say almost because of course you can't just go to a nice hotel and have a good holiday you need to have the event there as well but um the attraction of wimbledon where we are at the moment is partly it's sorry when i say wimbledon the tennis championships it's probably that it's here in this incredible environment as opposed to other tournaments and so we've taken the same logic and and created events that are in Singapore, in London, in the French Riviera in a couple of weeks time, we're in San Francisco, we're in Dubai, we're in Doha, incredible, beautiful tourism places to go and compete.

19:25And that's probably the main distinction to Formula One to state the obvious is that, you know, you go and watch Silverstone, but you can't get your car and drive around the track the next day in triathlon, you can do exactly that. So we have the greatest athletes racing head to head in competition, live on television around the world. And then we get them off the course and then thousands of amateur athletes get to go and do the same thing. Imagine if a Formula One weekend was the race and then thousands of people turning up in their own Formula One cars. It would certainly be a Drive to Survive show to watch.

19:54There'd be deaths. There would be deaths. Great. And it's worth saying that a lot of the stop-offs on the calendar are not just sort of fantastic destinations in the Formula One mould. They're also important economic locations around the world as well. um we have been trying to organize this interview uh on and off for a little while i think um we so so michael moritz came and spoke at a leaders event earlier in the year i think it was march um in london he was fantastic uh all off the record of course i can't say what he said um but he was really great on a range of subjects for a kind of senior audience but since that point we've been trying to find a date for us to talk more um about pto and about the t100 and it seems like it's been sort of just in the next couple of weeks just just when you're we always sort of yeah let's do it when the funding rounds closed and that was going to be sort of march that was going to be april that was going to be may that was going to be june it's kick back and kick back and kick back so that you can complete this funding round series c fundraising process.

21:04You did it, Sam. You've done it. It closed in July, reported$40 million in total, and a round led by Surge, the Saudi Arabian investment fund, sports investment fund, attached to the PIF. What a process, right? That seems like, from the inside at least, a bit of a slog. It was. Hopefully, you've got a really good outcome. I wondered whether we could go into a little bit of detail on this process because fundraising processes in sport, most people sort of hear about the beginning, such and such a property is looking at raising funds and then they hear about the end. The press release comes around with the big headline figure and the one or two lead investors.

21:49Nobody really hears about the detail in the middle, quite agonizing, challenging detail, I'd imagine. And I wonder whether we can dig into this process a little bit, because it does seem like you got to a great outcome. So first of all, I guess, let's get your view on the outcome. Yeah, I mean, well, I suppose I'd start to say never believe any numbers you see in a press release. Also not a press release when you see them reported, but directionally right. We were thrilled. If I go right back to the beginning, and I know we're going to go to greater context, we'd said when we looked at bringing on more investors, we said to ourselves, there are two particular segments we'd like to go and get.

22:26We'd like to get some sovereign wealth from the Middle East, just because there's so much sporting activity in those markets. And we think if there's ownership, then there's going to be more incentive to sort of drive sponsorship and hosting and all the rest. That was one part. Equally, the US is the biggest sports market in the world. And so we wanted to have some US specific investors. And so I'm absolutely thrilled, some over a year later, that we've got Sir Michael Moritz who underpinned the round as our existing investor. So a perfect validation of, hey, this is a great business as it's continuing to be rather than having to go and find new investors.

22:57So Michael played a major part in the round and then bringing in Surge, Verrance and Cordiala investment partners. And if we wind back to like, how did that even start? It was nearly 18 months previous as we were getting ready to launch the T100. And as I said, we wanted to bring on some more investors from different parts of the world. But we felt that in the new product that we had, so the world tour, as we've talked about, iconic locations, 10 stages, same athletes racing head to head, officially recognized by the International Federation. This was the right product to go and commercialize, and we should go and bring on some new investors to take us on that journey.

23:33And so it took a little bit longer than we thought it would, but that was just the nature of the beast of a relatively young and immature business in a market that was changing all the time. If you're in the election and all the different things, there was lots of just very natural reasons why it took us a bit longer than we thought, but we were thrilled to get it done. And now focus on using that money wisely to go and grow the sport and take it mainstream. Right. Let's dig into this a little bit. So you say the whole process took pretty much a year from start to finish. Talk to us about the period leading up to the decision that you're going to go for a funding round.

24:10What's happening with the organization that leads you towards that path? I mean, you say you're not running out of money, but presumably you're running out of sort of a platform for growth. Sure. Yeah. What's happening before the final match? Yeah, actually, I have never really thought about it in that way. This is now winding back quite a bit of time. It was where I guess we were is having established the T100. We've obviously got some deep pocket investors already, but this was less around money and more around contacts and energy about to drive the sport forward. So obviously a multi-billionaire like Sir Michael Moritz could underwrite this forever on his own with his pocket change, frankly.

24:47but equally he's not going to have amazing contacts in the Middle East that can help us with hosting a sponsorship so it was let's go and bring in more strategic investors that can help us with that growth and the timing of it was very much linked to we spent a couple of years through COVID figuring out the you know slightly cliched phrase product market fit of the T100 and the product that we had and we took a few years to work that out once we felt that we've got the right commercial product we're beginning to show the financial metrics that is going to excite and interest institutional investors that was the time to go and speak to people and sort of that probably what really what led to it okay and and how are you how do you prepare for that process what documentation do you need what do you need to do with your races and your operations to set them up so that they look their best you know um and who are you talking to before you're kind of going to market yeah so there's probably two things there's the the main the core business itself, which is, and frankly, there's nothing you do different for the core business that you wouldn't be operating otherwise.

25:46So we wouldn't change any of the events, how they look or feel or even operate for the fundraise, because fundamentally they're investing in the business that we're building. What you do have to do though, is spend an awful lot of time on creating diligence documents and background information, and ultimately a strategic plan that investors can see well into the future, because that might exist within the heads of myself and our chairman and a few of the team, but you've got to be able to articulate that very clearly to a lot of different people who have different investment focus is probably the right way of putting it or aiming for different investment outcomes, because it's not always about financial outcome.

26:21If you take Surge specifically, they are both a financial investor, so they're looking to make a financial return for obvious reasons, but it's also linked to the Vision 2030 in the Kingdom of Saudi Arabia and how you're going to get more people doing sport. And so they would look through things at a different lens than, say, a US investor that might be more focused on purely financial. So this is effectively a pack and a presentation that you're able to kind of reformat for. And reformat to an extent. We try to do that as little as possible. You sort of get to your standard documents. And I mean, if you're getting really detailed, if you want to know, I think, in fact, I looked at it the other day, I think our main investor pack was about 70 pages long of like all the different things that go.

26:57And then the due diligence, once you get to that, So jumping ahead slightly, you create a data room where you've got, I mean, literally thousands of documents. My poor CFO has not slept much for the last year on putting all that together. But that's jumping ahead a little bit. To kick off the actual process itself, the first two rounds we did, so we've done an A round and a B round. So Michael Moritz led the A round on his own. And then we added some other investors in Series B, including Warner Brothers Discovery, Divergence and Acuity, who are two private equity firms. We did all of those ourselves because they were relatively small in terms of the financials being raised.

27:30And we were quite early in our business because this was a much, much bigger funding round. And we were at a point where we're accelerating the business. We decided to go and get investment banking advice. And so I think they call it a bake-off technically in investment banking world. Because you go and speak to all these different banks and different pitch. And they pitch for your business. Sogiest bottom wins. Yeah, exactly. It was for us actually a relatively quick process for very simple reasons is that because of our connections in the market, partly because of Sir Michael Moritz, we were able to go and speak to the biggest players out there.

28:04So, you know, the Goldman Sachs, the JP Morgans, the Allen Coes of the world and had great conversations, but realized by their own admission, they were probably not the right groups to go and raise the money for what we needed to do. We needed to have a specialist sports boutique that would understand both the journey that we've been through from sort of a challenger dynamics and also be tapped more into the venture growth side of sport than institutional private equity. So is that for Ants who did that? No, they're the investors, a group called Oakvale, UK-based, fantastic group led by Samford Luton.