Sweeney, a longtime venture capitalist and partner at Accel, was the first to invest in Qualtrics, the tech company that gave Smith success and the wealth to buy the Utah Jazz. When he did that in 2020, Sweeney came in as a minority owner.
Over the last two years, Sweeney has been pushing Smith to join him on their next big idea, a fund devoted exclusively to the intersection of sports and technology. Finally, he got Smith to budge.
On Tuesday, Smith and Sweeney launched Halo Experience Co., a new investment firm that the two have founded together. The two believe that their sports holdings — and specifically the experiential elements of live events — can be a backbone for their investments and help pull tech companies into that space.
“Part of the evolution of this experience movement within sports and entertainment is that we are a microcosm of the entire economy,” Smith said. “We’re a healthcare company. The amount of money we’re spending on healthcare is insane within these sports franchises. We’re a payments company. We’re a security company for events and digital and everything else. We’re a streaming company; we have full over-air media, and we’re selling advertising.
“We are in the music industry because people are making money on live events now, not CDs like they used to. So, concerts are everything. We’re a social media company; I think 10 million followers between our brands. You look at the areas that we touch, it’s easy to be like, OK, would we be a buyer of this? Would this help us? Would it help one of our partners?”
While Smith owns the Jazz and Utah Hockey Club, along with Smith Entertainment Group, the firm will be separate from those properties, and it will not be a part of Accel, although it will operate with some of its support. Initial investors include Smith, Sweeney, Sweeney’s Accel partners investing as individuals and limited partners they declined to disclose.
The new firm, which Smith and Sweeney have nicknamed “HXCO,” plans to raise $750 million to $1 billion, Sweeney said, and already has 5-6 deals in its pipeline. The two intend to find companies that they can bring into the sports and live events ecosystem, or have a role in it and invest in them.
Halo Experience would be another example of how the sports world continues to bring in financial capital that had previously remained out of the sector. Private equity companies have started investing in North American professional sports teams in recent years, from the NBA to the NFL, and some, like Arctos Partners, have even deployed funds centered around sports team ownership.
“There’s two revolutions going on,” Smith said. “One’s definitely in AI, where every venture capital firm is, you know, doing this movement where they’re renaming everything AI, dot ai, which is real and it’s not going away. We’ve also seen this movement in sports. We’ve seen it kind of come from the inverse of what we’re doing. We’re seeing a bunch of funds being created to buy a bunch of sports teams. And I understand why. I think the background of all those people are very different. It’s private equity, it’s everything else.
“We just have a unique background. We come from tech, and we’re still young, and we’re involved. If you look at consumer spending, if you look at where things are going, if you look at what people are prioritizing, everything is around experiences right now, and you know the amount of tech plays that have to tap into that to be successful is enormous. And so we’re bringing this kind of the other way, where, for the first time ever, there’s a tech fund that has the ability to lean into tech, do it with sports on that platform.”
Sweeney believes that the sports investment market is “massive” and growing. The surge in demand for live events since the pandemic has not stopped, Smith said.
They have also seen big tech companies come into the sports world recently and get involved in media, which, Smith believes, has led to media being nationalized and no longer local. Amazon, Netflix and Apple have all grabbed portions or all of significant league media rights packages over the last five years.
The Jazz have been an example of that, as their media distribution deal has morphed in recent years from a cable regional sports network to a combination of an over-the-air channel and a streaming app, Jazz+, both of which have created different needs for technology partnerships.
The two hope that by using their networks and their resources, they can pull companies into their orbit. The fund is going to be evaluating both early-stage and later-stage opportunities.
“This is going to be a fund that harnesses the power of sports, and it’s real, and it’s a real movement,” Sweeney said. “And as we started this conversation, you compare and contrast with a movement like AI, which gets a lot of press within the tech ecosystem right now, the size of this economy is very similar, and I would say, oftentimes less competitive, right?
“You can go disrupt it, and you can go become a player that gains significant market share relatively quickly as an investor, and that’s all you’re looking for. You’re looking for big untapped markets, and this feels like one where disruption from technology is certainly there for the taking.”
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