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Capitalising in all directions: Jason Traub on 23 Capital’s US$20 billion five-year plan

Since its inception in 2014, capital and solutions provider 23 Capital has been helping stakeholders within the sports, music and entertainment sectors navigate a rapidly changing landscape. Co-founder and chief executive Jason Traub chronicles the London-based company’s journey so far, and lifts the lid on plans to deploy US$20 billion over the next five years.

by Sam Carp
Capitalising in all directions: Jason Traub on 23 Capital’s US$20 billion five-year plan

Framed and mounted in the boardroom of 23 Capital’s central London headquarters is one of the more iconic images from Michael Jordan’s esteemed National Basketball Association (NBA) career. In it he is several feet off the ground, his right arm flexed with ball in hand as he hurls himself towards the net having taken flight from the free-throw line.

At the time, in the final round of the slam dunk contest at the 1988 NBA All-Star Weekend, it was a moment captured by US broadcaster TBS and the well-timed flashes of digital cameras dotted around the Chicago Stadium. Had it happened today, however, it would have been shared around the world within moments, whether through the league’s social media accounts, Jordan’s own PR team, or the messaging apps installed on the thousands of spectator mobile phones at the arena.

How times have changed.

Since then, Jordan’s gravity-defying talent has become the inspiration for a prominent brand of basketball trainers, of which the Jumpman silhouette logo became a central part of the promotion for the 1996 NBA-meets-Looney Tunes animated movie Space Jam. It may be a high-profile example featuring the most high-profile of stars, but in an era dominated by digital it is one which demonstrates the boundless opportunities that athletes, teams and associations now have to extract value from the assets they possess. 

It is a technological revolution that 23 Capital has long since identified. A specialist financier dedicated to the sports, music and entertainment industries, the company provides innovative financing solutions for its clients in each of those sectors amidst a world increasingly disrupted by technology - one which generates a plethora of new commercial rights and opportunities for organisations to cash in on their talent and intellectual property.

Jason Traub co-founded 23 Capital alongside Stephen Duval in 2014 (orginal photography by Henry Hunt)

Launched in 2014 by co-founders Jason Traub and Stephen Duval, 23 Capital has sometimes been mistaken for an investment fund that simply provides direct equity. Traub, however, who serves as the company’s chief executive, likens it to a merchant bank with traditional client services, but with the sector expertise of a finance provider equipped for the digital age. He also explains that while “we have got a small, growing area in our business that does have the capacity to provide equity”, it is an industry myth that the firm operates purely as a venture capital fund.

“We’re a capital and solutions provider to the sports, music and entertainment sectors,” he asserts. “What does that mean? That means that we deploy funding to those sectors. We effectively are lenders across the capital stack, so across our offering it is almost entirely debt as opposed to equity.

“It’s really just being at the nexus of sport, music and entertainment, right at the client-facing level that we can either try and assist through our financings – our regular debt offerings – or really try and drive value through our relationships, whether that’s stakeholders or our knowledge in-house, to unlock value for the clients.”

A precise, assured operator, Traub’s own background is one rooted firmly in finance. Prior to the formation of 23 Capital, he spent over 13 years within the structured credit team at Investec Bank, which under his guidance soon became one of the leading lenders in sport, and where he explains he “started to really understand the challenges and barriers to entry for traditional monies into what at that time was a growing sector.”

In Duval, an industry stalwart who is renowned for spells with agency giant IMG and the Olympic Games, Traub says he found a business partner who shared his belief that the sports, music and entertainment sectors had been historically under-financed, and who brought a wealth of knowledge on the rights side of the business relating to how the company’s clients could realise the true potential of their assets.

“So we came together, and it wasn’t any great revolution,” Traub explains, “it was simply a recognition that these markets are so poorly financed from a traditional, and certainly from a senior financing, perspective.

Portuguese soccer giants Benfica sit within 23 Capital's client portfolio 

“I think part of why it’s both the opportunity and the challenge is we think that if at the outset you believe the market to be poorly funded, you have a blank piece of paper across the industry to align and provide best value.

“Whether that is a club that is looking to build efficiencies through more traditional finances – such as investment in technological advances that allow them to go and build a fanbase globally - or whether it’s an association within a sport that is equally looking for investment to scale an underlying league, it’s really in all directions.”

Traub reveals that the company name is a doff of the cap to the brilliance of the aforementioned Jordan and various other sporting heroes who have donned the number 23, including English soccer icon David Beckham, basketball star LeBron James and cricket spin king Shane Warne.

It’s really just being at the nexus of sport, music and entertainment.

And in the same way that each of those athletes were masters of their respective skillsets, 23 Capital seeks to combine the nous of a team of financial specialists with an eclectic mix of creative minds from the sports, music and entertainment sectors to present clients with what it believes to be a unique value proposition.

More traditional lenders such as banks which offer financing for stadium builds or other major projects tend to be restricted by rigid lending criteria and an inability to assess the value of intangible assets such as copyright or TV rights deals, which Traub explains has made it difficult for those in the sports industry to access the funding they need to maximise value.

23 Capital, on the other hand, differentiates itself on the ability to provide what it describes as ‘flexible new solutions to old problems’, owing largely to a deep-rooted internal knowledge of the increasingly intertwined fields in which it plays.

“Ultimately there is very little by way of deep sector expertise at play across that debt space,” claims Traub. “There’s a huge amount of brain trust and great minds that work within the industry, and equally in some equity investment funds where there is a lot of thinking of alignment that goes across that investment, but in truth very little then crosses into debt and being able to provide that. Typically that sits historically in other sectors.

“In banking groups some of the more institutional routes to market – be those securitisations or what have you – have struggled with these risks so we have been able to gain great momentum and exposure in the market just by being able to align our proposition with the wants and needs of the client in a more traditional sense.

Traub (pictured with co-founder Duval) says 23 Capital wants to deploy US$20 billion globally over the next five years

“That’s what I think is helpful about our positioning and want: it is that traditional approach where we believe we have deep-rooted experience and expertise around the central rights and the relationships between those rights, that then enable us to look at any challenge in the lifecycle of those rights, in the positioning of those rights, and in the various stakeholders as they relate to those rights. You can then follow that alignment in all directions.”

In keeping with that mantra of being active across the board, 23 Capital has already deployed and formally advised on over US$2.7 billion worth of transactions, each of which the company says are typically between US$5 million and US$125 million. Its expertise has enabled clients to generate future revenues for everything from buyouts and acquisitions, to rights, contract negotiations, and player transfers.

There is this general need for our clients around having to embrace new technology.

Given the confidential nature of the business, it is unsurprising to find that details regarding many of 23 Capital’s sporting endeavours have not yet made their way into the public domain. Traub is at least able to reveal that the firm assisted Portuguese soccer giants Benfica to “restructure their balance sheet with a real institutional offering”, while he also points to the work the company carried out with “one of the global football brands” to enable it to “best manage liquidity” when it came to hefty player transfer fees and contracts.

More recently, 23 Capital was also named as a major backer and co-creator of OTRO, the new soccer-centric digital platform that turned heads when it went live in December with exclusive content starring the likes of Lionel Messi, Neymar Jr and Zinedine Zidane. The app’s global launch might have been a short-lived whirlwind of teaser clips, likes and shares, but it was the product of two years of collaboration, during which time 23 Capital created a financing structure that provided millions of dollars of debt finance so that the idea could become a reality.

For Traub, OTRO is one incarnation of the new rights opportunities digital has opened up to athletes. He describes the project as the “perfect illustration” of the innovative finance solutions 23 Capital can provide around those.

“There is this general need for our clients around having to embrace new technology, and I think OTRO speaks very much to that,” says Traub. “As far as 23 is concerned this speaks to the solutions side of our business, where stakeholders within 23 were involved at the very outset of creating that business idea and that strategy prior to it becoming its own beast. It was also an opportunity for us to understand the value of those rights and ultimately be able to build a facility to assist that business in helping exploit those rights.

“Something that players hadn’t dreamt to challenge is how technological advances can be useful for them, as opposed to just thinking: ‘I’m a football player who will get up and play football’. It’s opened up a world of not just being able to align themselves to commercial opportunity, but to actually engage with their fans and be human.”

Looking further ahead, 23 Capital has set itself an ambitious target of deploying up to US$20 billion globally over the next five years. Traub does not divulge precisely where that capital will be deployed, but says it is testament to “having a very strong vision from the outset”, along with a value proposition that the industry hasn’t previously had access to.

“We believe US$20 billion is eminently achievable - if you look at our run rate to date, I think it speaks certainly to achieving that,” he adds. “To try and break that down, we’re growing exponentially into each of sport, music and entertainment, and I would imagine we will deploy fairly consistently across those going forward.”

23 Capital recently opened two offices in the US to be closer to the North American sports market

Traub is speaking to SportsPro in between trips to the US, where he has been helping to establish 23 Capital’s new offices in Los Angeles and New York. Headed up by David Pogoda and Mathew Carvajal, the move gives 23 Capital a physical presence in a lucrative market, and potentially hints at where the firm might deploy a significant amount of funding in the near future.

Traub, however, insists that 23 Capital remains intent on becoming truly global, and that North America will provide the ideal environment to test whether a mature, well-supported sports market will be as receptive to the innovative financing solutions that the company has successfully provided elsewhere.  

“On the sports side,” Traub begins, “I think it’s very interesting for us to challenge sport as it is across the more traditional US sports – NFL, NBA, MLB - but it’s also about challenging ourselves. The US is a great testcase for us in making sense of some of the more traditional sports, because those rights are exploited and managed by associations and regulators in a very different way.

“You could say that the NFL, for example, is one of the best run sports from top to bottom globally, so if I say our initial opportunity was around sport being so poorly funded as a concept and that was our original value proposition, well that’s unlikely to be true in America, and certainly across NFL which is extremely well-funded across stadia, infrastructure, etc. So for us it’s a great opportunity to test not just our value proposition, but equally a different route to add value.”

Beyond that traditional sporting realm, Traub’s eyes understandably light up when the topic of esports is mentioned. The competitive gaming industry is predicted to break the US$1 billion mark for the first time in 2019, according to research firm Newzoo, with the North American market expected to contribute US$409.1 million to that revenue projection.

Given that esports is still at a relatively nascent stage in comparison to its traditional counterpart, Traub is confident that the competitive gaming industry – one which now sees teams recruit their own players in the same way a soccer club does - could benefit from 23 Capital’s ability to help budding businesses scale.

“It’s really exciting,” he states. “It resonates very well with our offering which, at the same time as being very traditional in approach, is challenging the boundaries within each of the sports and the different sectors that we’re in. We speak to these technological advances and esports is right there at sport’s frontier.

23 Capital is exploring business opportunities in the burgeoning esports industry

“Again, we have to make sense of when it is risk appropriate for financing, and if that is a touchpoint with us on our financing debt offering. It might be that esports throws up some more of those advantages around our ability to deploy on the solutions side where we can bring partners together, relationships together, try and put together a different opportunity where we can really add value through those relationships and knowledge, but certainly on the debt side it’s exciting.

“I’d say it seems to still be very much exploration in all directions, and so like anything else until such time as there’s confidence as to a risk profile or certainty or framework around the risk of those rights, it’s a little more difficult. But we’re speaking to a lot of stakeholders in that industry and challenging a lot of those different directions to see how we could add value.”

Despite the early success that 23 Capital has enjoyed, there is nothing to suggest that the company will be sitting on its hands anytime soon. The beginning of this year ushered in news that the firm had invested in SRM Sport and Entertainment, the commercial rights business led by Judith Griggs and Charles Garland, in an alliance that will see the pair share clients, pool knowledge and work together on projects where appropriate.

We believe US$20 billion is eminently achievable - if you look at our run rate to date, I think it speaks certainly to achieving that.

Duval described that particular investment as “invaluable” for the solutions side of 23 Capital’s business, and Traub adds that it “only adds more tools” for “a deeper discussion with clients.”

What’s more is that it serves as another indication that 23 Capital will persist with its endeavours to remain ahead of the curve wherever possible. There is an internal acknowledgement at the company that technology will continue to transform the way sport is packaged, consumed and even played, but even as the industry changes around it, Traub is certain that 23 Capital’s strategic goal will remain the same.

“We want to be the preeminent global provider of finance to sports,” he reaffirms. “That really [means that] we need to be at the cutting edge, and we need to understand that in two years’ time that will have evolved in itself, so we have to keep ourselves very relevant, we have to continue to build those opportunities with our clients, and ultimately, we would like to deploy close to US$20 billion.

“That will show our focus and intent in driving value throughout those sectors. We think we’ve only just scraped the surface.”

Jason Traub will be speaking at SportsPro Live at The O2 in London on 30th April and 1st May. To find out more, click here