Dundon: AAF Could Fold without NFLPA Support

[MinJaBen]

While Dundon is said to have liked the tech component of the business and owns the entire company, sources say it would not be legal for him to shut down the league in order to strip the assets."

Good thing for Dundon that he is not shutting them down, just "suspending operations".....

 

[Navin R Slavin]

Now that you mention it, knowing just how many excellent programmers and developers there are in the Triangle area, and seeing him buy this, you're probably exactly right. Wouldn't be surprised to see him try to move this newly acquired business to the Triangle area to partner directly with the Canes. He could be trying to make this the most tech savvy organization in the major sport leagues.

No. He's not moving 45 Bay Area engineers to the Triangle, because they won't come.

Maybe the Canes are a guinea pig, and a fine one at that with Tulsky at the helm. But no. I'm guessing that this isn't about the Canes at all -- it's about building a multi-billion dollar tech business.

 

[Svechhammer]

No. He's not moving 45 Bay Area engineers to the Triangle, because they won't come.

Maybe the Canes are a guinea pig, and a fine one at that with Tulsky at the helm. But no. I'm guessing that this isn't about the Canes at all -- it's about building a multi-billion dollar tech business.

Those 45 developers won't (or at least not all of them), and they shouldn't because every top quality tech firm needs a presence in Silicon Valley. Some will, and with those, you can open a RTP branch that works tightly with the Canes and the ones who make a move can get a nice little bonus and pay raise which will play nicely with the significantly lower cost of living and use that as the base relationship to build that, as you said, multi-billion dollar tech business.

To me, that's how I see this playing out. He's not going to want to partner with and pay some other league or franchise to test all this tech on. He's going to want to use the one he owns.

 

[Navin R Slavin]

Those 45 developers won't (or at least not all of them), and they shouldn't because every top quality tech firm needs a presence in Silicon Valley. Some will, and with those, you can open a RTP branch that works tightly with the Canes and the ones who make a move can get a nice little bonus and pay raise which will play nicely with the significantly lower cost of living and use that as the base relationship to build that, as you said, multi-billion dollar tech business.

To me, that's how I see this playing out. He's not going to want to partner with and pay some other league or franchise to test all this tech on. He's going to want to use the one he owns.

Nope. Sorry. I've done this exact hustle. When you buy a Bay Area tech startup, you only move it if you're forcing attrition. Hotshot engineers don't move from the hottest job market in the world. If you ask them to relocate, they quit, period.

Maaaaaybe they open a satellite office in Raleigh... but I doubt it.

 

[Brock Anton]

Regardless how you feel about Dundon and his tactics, I feel like Ebersol and Polian are getting off light here. Like, what even was their plan?

 

[Navin R Slavin]

Regardless how you feel about Dundon and his tactics, I feel like Ebersol and Polian are getting off light here. Like, what even was their plan?

Their plan was to do what Dundon did. This thing was Sand Hill Road financed as a tech company from Day One.

They just didn't know how, evidently.

I mean, I presume they retain some equity, at least.

 

[Wolfpuck]

I know we've been playing the role of heel this season, but our owner emerging as a supervillain is an interesting plot twist. I can't wait to see where the writers go with this.

 

[Legionnaire11]

Oh, I'm definitely reading deeper now -- and it's *fascinating*.

For someone who doesn't care, you sure are talking a lot in this thread...

 

[emptyNedder]

How much of those things did he actually pay for? I got the sense from one of the articles I read about the PNC updates, which included some information about the projection system and the new scoreboard, that the authority was paying for all of those things.

I wonder too how much is out of TD's pocket. One other thing that has been mentioned is the 3-year opt out. When Dundon said he put that in all his contracts, I knew it was BS.
Finally, the selling price for the Canes was always "according to sources close" to either TD or Karmanos. Fortune thought the Canes were likely worth a little less than $300M. Would anyone be surprised if that was the true selling price--such that TD's 61% was $200M or less?

 

[Navin R Slavin]

For someone who doesn't care, you sure are talking a lot in this thread...

Oh, I care now! Because now it's not a boring minor league football story. Now it's a Silicon Valley story of intrigue and greed and betrayal. Good stuff. The football was ass.

 

[Vagrant]

the thing about this is that the partners in this venture aren't patsies or pushovers. dundon put up a lot of capital to get this thing rolling, but he wasn't the only one. there are a lot of high profile tech investors that saw this as potentially disruptive technology for fantasy sports and sports gambling. the question of who owns this tech and how much dundon's investment means for his stake will be determined, but all of it is not the correct answer. what was done today was to stop the operation costs of the football end of this endeavor to focus on moving forward with the tech. why this potentially game-changing technology was ever attached to a football league remains a mystery, but we may have witnessed a beta test over 8 weeks. either way, this was barely a sports investment.

 

[Navin R Slavin]

I know we've been playing the role of heel this season, but our owner emerging as a supervillain is an interesting plot twist. I can't wait to see where the writers go with this.

INORITE???

 

[Navin R Slavin]

the thing about this is that the partners in this venture aren't patsies or pushovers. dundon put up a lot of capital to get this thing rolling, but he wasn't the only one. there are a lot of high profile tech investors that saw this as potentially disruptive technology for fantasy sports and sports gambling. the question of who owns this tech and how much dundon's investment means for his stake will be determined, but all of it is not the correct answer. what was done today was to stop the operation costs of the football end of this endeavor to focus on moving forward with the tech. why this potentially game-changing technology was ever attached to a football league remains a mystery, but we may have witnessed a beta test over 8 weeks. either way, this was barely a sports investment.

Yes indeed. I would love to know what the cap table of the "AAF" looks like.

 

[Finnish Jerk Train]

I'm having a hard time hating what he did, at least from a business perspective.

Week 2 rolls around and the league is about to miss payroll. If the players don't get paid, one would imagine they don't play, and the league collapses. Again, this is Week 2 of Season 1. This tells me the whole thing had some spectacularly precarious financing and probably never should have started play to begin with. Either that, or the tech was really the product they wanted to market all along, and the football was a means to an end.

Either way, Dundon walks in and drops $70m with another $180m at risk in a league that was DOA. The league folds six weeks later than it would have if its cash crunch had been allowed to play out.

I don't see how pulling the plug is a dick move; he just stayed the execution for a few weeks. The optics are bad in the sense that he looked like a savior when he first walked in, only to kill it soon after. But without knowing the full story, it looks like the league was beyond saving from the get-go.

He obviously never planned to light his cash on fire. He just had a different idea of how he was going to make money than we expected.

Doing that to get your hands on a growth investment is evil genius, but feels a lot more genius than evil to me. Business is a dog-eat-dog world. He entered into a transaction with willing counterparties who had to know their company was flatlining. He's not the one that put them in a position to fail, and the original owners agreed at arm's length to give up half of their stake in the business (including the part that has value). In return, they got a few more weeks of showcasing their tech and/or trying to avoid running this thing into the ground. They knew the risks of letting him into the henhouse.

Of course, none of this gives me any warm fuzzies about his plans for the Hurricanes. That's a separate conversation, but I still think we were a value play. I think his goal is bring the team's value in line with the rest of the league, have a little fun along the way, and cash out when he gets bored or finds a buyer willing to pay the right price. I don't think he wants to move the team, but I also don't think he'd have any qualms selling to someone who does.

So while I don't completely trust him, I also don't have any problem with the way he handled the AAF.

Edit: Holy shit, that was longer than I realized. Sorry.

 

[DaveG]

I mean, if this stuff can work as well as it looks like it can then cutting out the minor league football part is just straight forward smart thinking on Toms part. f***ing ruthless borderline Gordon Gecco shit, but utterly brilliant.

The nflpa talks were likely just his way to try to cover the costs of running the league as well as getting better talent while he kept the real money maker all along. When that went titts up, because why the hell would the nfl/nflpa agree to that, you liquidate the league and keep the asset that could pay off 100 fold what you put in to it.

The point is, ladies and gentlemen, that greed is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

 

[Navin R Slavin]

So now that I know what kind of company the AAF *actually* is... time to go look at Crunchbase!

https://www.crunchbase.com/organization/alliance-of-american-football

Sole investor of the first seed round, January 2018, was M Ventures out of Menlo Park, founded in July 2017. Not a big hitter. 68 investments, only 1 exit to date -- not that surprising given their young age, but not great either. More a media investor than a tech investor, looks like. $7m to bootstrap operations.

Next round was April 2018, an additional $10m seed, with 4 additional investors:

* The Chernin Group, mostly a media investor looks like (EDIT: ahhh, they acquired Barstool in 2016!)
* Slow Ventures, 376 investments, 65 exits. Notable exits: Twitter, New Relic, Nest, Pandora.
* Founders Fund, 439 investments, 115 exits. Notable exits: Facebook, Lyft, Spotify, Twilio, SendGrid.
* Individual investor Keith Rabois, who is a partner at Khosla, one of the *big* dogs.

So $17m in three months. That's a small round. For a tech company alone it's a decent A or even B round, but it's clearly designated as a seed round, and for a weird AAF-shaped thing that was potentially capital-intensive, that makes sense.

There may have been subsequent investment rounds that never made Crunchbase -- obviously Dundon's investment would apply -- and I read somewhere that MGM was an investor, but they may have been investing through one of the venture funds rather than directly. Let there be no doubt, though: this was a tech company all along. Not a football company.

Of course, if there were no additional investors, then Dundon's $70m is a *lot* in comparison, and may represent a buyout of the original investors at 4x. Not a bad return for a seed round investor who wants out of an increasingly money-hungry and speculative investment.

 

[RodTheBawd]

Thanks Hank, this is fascinating. Keep it coming.

 

[Incubajerks]

He's so much like Axe it's eerie. Just needs to wear band t-shirts instead of Canes t-shirts.

Hell of a series btw, and I can't hate Axe I don't know why.

 

[Wolfpuck]

More power!

 

[GindyDraws]

We'll know the truth at 5:00pm.

 

[Navin R Slavin]

Oh, and back to this tweet: the fact that Rovell interprets this turn of events as Dundon "losing $70m" just confirms the fact that he's a terrible business analyst.

 

[JacquesCousteau]

I don't have the money or the business acumen to engage in these types of ventures, so I don't know what's considered foul play, but it doesn't seem particularly underhanded to me. Think of it this way, there is a struggling restaurant/brewery, its a popular place but the owners are in the red. There is a possibility that a major development will move in across the street that would put the restaurant in a position to be profitable. The restaurant also has expensive brewing and cooking equipment. You decide to invest with the thought that, best case scenario, the development goes in across the street and you make money now and in the future. Worst case, the development deal falls through, the restaurant can't survive, and you sell the equipment to recoup some/most of your losses. The rest is a tax write-off. I don't know, it doesn't seem that nefarious. Obviously, if that restaurant is your brainchild its a sad day, but if it isn't viable, it isn't viable. Maybe you even avoid additional financial harm due to the "bail-out" investment. I think it seems more predatory because it involves interests that seem less tangible. I could be wrong.

 

[A Star is Burns]

I don't begrudge Dundon for this, or even how he made his riches in the first place. But he could have said a lot of things and made a lot of "promises" to a lot of people to put himself in a position to buy in to the league and gain access to these assets. And then he may not have followed through on them at all. That doesn't fall all on him, as he obviously wasn't obligated in any way to do so with whatever agreement was made. As has been mentioned by a few of us, it's largely on the people who started the league and didn't seem to have all the finances they needed in place and must not have had any safeguards to prevent their new owner from doing this. But it could still be a bit underhanded to make people think you aren't going to let this go under, and then pull the rug out from under them for your own gain. And it affected a lot of livelihoods of people who had nothing to do with any of it. That's their risk too, but again, if it's all for his gain, maybe a little underhanded.

 

[Legionnaire11]

You can defend the business aspect of it, but you can't overlook the personal impact.

Dundon just pulled the paycheck from men who gave up (presumably lower paying) jobs for a second chance to prove themselves for the NFL. They did this under the assumption that they had a 3-year salary of $80k/year plus health insurance. Many suffered injury as well and no will not have the league support behind their medical care.

Fans who had purchased tickets to the remaining games will not be refunded, unless their credit card provides some protections. Stadium workers, officials, broadcasters and medical staff are now left high and dry.

And I get that it was a risk for any of these people to sign with a minor league football league which are notorious for going under. But Dundon comes in with "$250M" to save the day, and now can't even give them the final 11 games and about a month's worth of notice to start making other plans?

It's not just that he bought in only to grab the tech, it's that he led everyone on about being the savior when he had no plans do so. And yeah, Ebersol and Polion are just as much to blame for having an awful startup plan, seemingly based on a hope and prayer.

 

[SaskCanesFan]

^ yeah, it's the fact he seems unable to give a shit about anybody else involved. Players, fans, etc. This is a guy I feel wouldn't hesitate to use his 3 year out clause or move the team at a moments notice, if say, the downtown arena doesn't happen quickly, etc. All of a sudden any "negotiating" he does around the team could be used to pull the plug.