MSVG & AFC Ann Arbor Pro League Advancement
By: Eli Brand, David Watkins, Jackson Minelli, Graham Roche, Ryan Levine
University of Michigan, School of Kinesiology
December 1, 2024
Transition to USL League One
Transitioning AFC Ann Arbor to USL League One entails meeting specific financial, operational, and structural requirements set by the league. These standards are designed to ensure the sustainability and competitiveness of participating clubs, as well as the financial stability of their ownership groups.
USL League One Entry Requirements
- Owner’s Net Worth: The league mandates that the majority owner of the club must possess a net worth between $10 million and $20 million. This ensures that club owners have the financial capacity to support the team’s operations and investments.
- Stadium Specifications: Clubs must play in a stadium with a seating capacity of at least 3,500 to meet league standards for fan engagement and matchday revenue.
- Market Size: The team must operate in a metropolitan statistical area (MSA) with a population of at least 150,000 to ensure sufficient market demand and growth potential.
- Operational Costs: Clubs must demonstrate the ability to cover franchise fees, player salaries, travel costs, and other operational expenses, which significantly exceed those of amateur leagues.
- Governance and Transparency: A professional ownership structure and transparent financial governance are essential to align with the league’s standards.
Proposed Ownership Restructuring
Given the financial requirements, AFC Ann Arbor’s current ownership group would likely need to sell a significant share of the club to investors who meet the league’s financial thresholds. This move would allow the club to satisfy the net worth requirement while bringing in the capital necessary for operations and expansion.
The most viable approach is to create a Limited Liability Company (LLC) that controls the club. This structure allows multiple investors to pool their resources, collectively meeting the net worth requirement. The LLC would assume ownership and operational control of the club, ensuring compliance with USL League One standards. Current owners could retain minority stakes, preserving their connection to the club while benefiting from the financial infusion and professional expertise brought in by new investors.
Benefits of the LLC Structure
- Financial Strength: The combined resources of multiple investors increase the club’s ability to meet operational costs, invest in infrastructure, and attract top talent.
- Risk Management: Shared ownership mitigates financial risk for individual investors while ensuring accountability within a professional framework.
- Strategic Growth: Investors with experience in sports and business development can contribute to the club’s strategic direction, unlocking new revenue streams and sponsorship opportunities.
- Alignment with League Expectations: The LLC structure demonstrates a professional approach to club governance, aligning with USL League One’s expectations for financial transparency and operational stability.
Path to Raising Capital
Possible Investors: Firms and Individuals
Simon Sports: Founded in 2022 by Sam Simon and Peter Simon, Simon Sports is a Michigan-based sports investment firm operating under the Simon Group Holdings umbrella. The firm has two primary divisions: operations, which provides day-to-day management support for sports teams, and investments, focusing on emerging technologies in sports, including mobile applications, media, and sports-related innovations. Simon Sports’ portfolio includes the Halifax Mooseheads, a team in the Quebec Major Junior Hockey League, and a significant stake in Ipswich Town Football Club, a storied English soccer club. They have also partnered with The Players Impact (TPI) to connect athletes with venture education and investment opportunities.
Simon Sports’ expertise in investing in sports teams and technology suggests they might consider AFC Ann Arbor as an opportunity, especially if the club demonstrates potential for growth, community impact, or innovations in fan engagement and operational strategies.
Rockbridge Growth Equity: Established in 2007, Rockbridge Growth Equity focuses on middle-market companies in sectors such as financial and business services, consumer direct marketing, and sports, media, and entertainment. (RBEquity) Their investments include the Cleveland Cavaliers and Rocket Mortgage FieldHouse, indicating a strong presence in professional sports. (RBEquity) Given their experience, Rockbridge might be interested in AFC Ann Arbor if the club presents a compelling growth strategy, community engagement plan, and potential for financial returns.
Danny Sillman: A University of Michigan graduate (BBA, Ross School of Business, 2010) and Harvard Business School alumnus (2019), Danny Sillman is a prominent figure in sports media and entertainment. As CEO of Relevant Sports Group (RSG), he brought El Clásico (Real Madrid vs. F.C. Barcelona) to the United States and negotiated a groundbreaking eight-year, $1.4 billion broadcast deal between ESPN and La Liga. He also served as an executive producer for documentaries like My Name is Ada Hagerberg (ESPN) and Neymar: The Perfect Chaos (Netflix). Sillman has secured major rights agreements, such as the $1.5 billion deal between UEFA and Paramount+. Named in Forbes’ 30 under 30 Sports list and SBA’s 40 under 40, Sillman is deeply connected to Michigan, serving on the Sport Management Advisory Board and supporting the Ross School of Business through philanthropy. His soccer expertise and passion make him a potential investor in AFC Ann Arbor.
Stephen M. Ross: A 1962 graduate of the University of Michigan’s Ross School of Business, Stephen Ross is the founder of Related Companies, a leading real estate development firm managing $60 billion in assets. Ross purchased a 95% stake in the Miami Dolphins, their stadium, and surrounding properties in 2009, establishing himself as a key figure in professional sports. Ross is also the University of Michigan’s largest donor, contributing $100 million in 2004 and $250 million in subsequent gifts, supporting the business school, athletics, and other university programs. His deep ties to Michigan and sports make him a strong candidate for investing in AFC Ann Arbor.
Jayde Riviere: A standout soccer player for Michigan’s women’s team from 2019 to 2022, Riviere played for AFC Ann Arbor during the summer of 2022, gaining experience in local soccer. Now signed with Manchester United as a right back, she has also represented Canada internationally. While primarily focused on her playing career, Riviere’s connection to AFC Ann Arbor and Michigan soccer could make her a valuable ambassador or supporter for the club.
Marla Messing: A Michigan alumna with a Bachelor of Arts degree, Marla Messing served as the president and CEO of the 1999 FIFA Women’s World Cup Organizing Committee and interim CEO of the National Women’s Soccer League. Her extensive experience in soccer administration and ties to Michigan could make her a strategic partner or advisor for AFC Ann Arbor.
Nate Forbes: Managing Partner of The Forbes Company, Nate Forbes specializes in high-end commercial real estate, including properties like Somerset Collection in Troy, Michigan. A former minority owner of the Cleveland Cavaliers, Forbes has a history of investing in sports and community-focused initiatives in Michigan. His business acumen and passion for sports position him as a potential investor in AFC Ann Arbor.
Matt Lester: A 1987 University of Michigan graduate, Matt Lester founded Princeton Enterprises, a real estate investment firm managing over $1 billion in assets across the Midwest and Southeast. As a Champions Circle board member, Lester supports Michigan athletics, scholarships, and medical research. His commitment to the Michigan community and strategic investment expertise align well with AFC Ann Arbor’s mission.
Financial Plan
The transition to USL League One requires a robust financial strategy that bridges AFC Ann Arbor’s current financial state and the capital necessary for professional league entry. The financial plan involves three key components: assessment, funding strategies, and projections.
Current Financial Assessment
AFC Ann Arbor’s financial health has been carefully analyzed to identify both strengths and gaps. This review encompassed income streams, expenses, assets, and liabilities. Additionally, the club’s financial requirements for USL League One were outlined, including franchise fees, operational costs, player salaries, and necessary stadium upgrades. A gap analysis revealed a significant shortfall between the current financial standing and the investments required to meet league standards. Addressing this gap is the cornerstone of the financial plan.
Funding Strategies
To bridge the financial gap, multiple funding avenues are proposed:
- Equity Investment: Attracting investors who are interested in acquiring ownership stakes in the club offers a way to secure substantial capital while fostering shared responsibility for the club’s success.
- Debt Financing: Loans from financial institutions or private lenders can provide immediate funding, with repayment plans structured around projected revenue growth.
- Sponsorships & Partnerships: Engaging local and national businesses will not only generate revenue but also build strategic alliances to enhance AFC Ann Arbor’s visibility and marketability.
- Community Fundraising: Crowdfunding campaigns and local events provide an opportunity to involve the community directly, reinforcing AFC Ann Arbor’s grassroots identity while raising funds.
- Grants & Public Funding: Exploring opportunities for government grants and foundation support aligns with the club’s mission of community enrichment.
Multi-Year Financial Projections
Projections have been developed to map out revenue growth, expense management, and ROI scenarios over the next five years. These models emphasize sustainable operations, leveraging partnerships, and maximizing revenue through ticket sales, merchandise, and sponsorship deals. By aligning financial strategies with the club’s mission, AFC Ann Arbor can build a financial foundation that supports its long-term goals.
The financial plan not only lays out the pathway to USL League One but also serves as a blueprint for sustainable growth. It reflects AFC Ann Arbor’s commitment to creating a lasting legacy in professional soccer while staying true to its community-first approach.
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