Existing Donor Base May Be ‘Goldilocks’ Solution for College Sports Investments

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Existing Donor Base May Be ‘Goldilocks’ Solution for College Sports Investments

The University of Utah recently announced it is spinning out a for-profit entity that will house most of the athletic-department’s revenue streams and sell a passive minority stake in a newly formed entity —Utah Brands and Entertainment— to Otro Capital (reportedly as much as 49%). The private equity firm is making a nine-figure investment, part of a $500mm influx, to help the school close the financial gap with those in the B1G and SEC, create new sources of funding, and ultimately generate more revenue.

It’s seemingly a logical solution to Utah athletics’ financial troubles–at least, when compared to the alternatives evaluated and presented to the University’s Board of Trustees.

1. Do nothing and risk widening the gap between revenue and expenses

2. Raise student fees

3. Cut research programs

4. Cut some or all of the non-revenue generating athletic programs

But schools exploring financing options would be wise to look towards their existing donor base for investment dollars first. 

“Our model, [known as Project Northstar], is similar to what Utah and Otro did, except the model is flipped. It’s led by donor or relationship-capital led rather than private equity. And Project Northstar does not require any repayment,” Mark Lieberman (managing director of Emergetic Sports, Abel Media & Tech, and operating advisor to Blackstone) said. 

The bottom-up approach also offers the fiscal support needed to save every sport a school competes in, ensures the educational and developmental well-being of the student-athletes, and should help to maintain the authenticity of the campus life and college sports experience.

“This is about keeping the Olympic and Title IX sports whole and, in some ways, [addresses] the overall challenges for universities writ large while remaining complimentary to NCAA, conference, and other third-party long-term options,” Lieberman said.

College sports has experienced an upheaval over the last half decade (see: conference realignment, transfer portal, NIL, House settlement). University of Utah president Taylor Randall and AD Mark Harlan warned in a deck requesting Board approval to proceed with Otro Capital that the changes have placed the school’s athletic tradition at risk. 

“Today, schools face a deficit of $20.5 million for NIL athlete revenue-sharing. But there's an arms race, at least in football, and team budgets are closer to $30mm or $40mm for major programs,” Lieberman said. “The challenge for many is how do you keep up and still protect the non-revenue generating sports?”

For Utah, the answer was a complex transaction led by private equity. 

Details of the deal remain scant. However, PE tends to demand high-percentage structured returns.

So, “a $500 million investment would basically mean that for a PE firm to get their standard 12-15% internal rate of return, [Utah Athletics] has to be valued at over $2 billion in five to seven years,” Lieberman said. 

While possible, that is seemingly far from a certainty. For context, The Wall Street Journal pegged the value of Utah’s football program at $425 million in July 2025.

But private equity doesn’t have to be the solution to save a school’s athletic tradition. The Project Northstar model has universities raising ~$150mm-$200mm, ideally entirely through the school’s donor network.

Collectively, those individuals would receive a much smaller minority equity stake in a Project NorthStar Football NewCo and have representation on its board (no different than PE investors would).

The advantage is “you don't have the same high cost of capital or structured returns,” Lieberman said. “Instead, returns are determined on an investor-by-investor and school-by-school basis as the asset value of the [football] team appreciates. This is the same way minority owners of professional teams profit from their investment.”

Donors also have pre-existing trust in and relationships with the university, which should be helpful in getting an unconventional solution approved.

And if a school is unable to raise all of the cash needed from their donors, PE can always fill the gap.

Project Northstar proposes creating separately funded entities for each individual revenue-generating program as opposed to spinning out the entirety (or most) of an athletic department’s P&L into one company, as Utah did. 

“You then have each of the NewCos paying the university to license its name, to use its facilities, and for players in a revenue sharing agreement,” Lieberman said. 

The amount in total should be enough to provide financial stability for the entire athletic department and its student-athletes–even those in non-revenue generating sports.

By housing athletic programs in separate NewCos, a school could limit employee classification to specific sports, rather than triggering a blanket reclassification of all student-athletes. These new entities would also be able to provide student athletes with better financial management than the current NIL 1099s (think: W2 tax withholdings, 401k).

The model should unlock hundreds of millions, if not billions, in additional unrealized value for universities too.

As it stands, the New York Times’ college football team valuations are purely hypothetical. But once a school has created an independent commercial entity, it can sell shares or raise debt against their ownership in NewCos and use that money as needed. 

“The unlocked value could be used to build stadiums, dormitories, hire more professors, or invest the academic institution in other ways,” Lieberman said.

While many donors may never intend to sell their stake in a NewCo, the hiring of a professional management team should increase share value over time.

“Professional managers should produce a nice growth trajectory,” Lieberman said. “And then if college sports can organize to partner with athletes via collective bargaining, a real NIL cap can be created, producing a significant value inflection point.”

It will likely take a handful of power four schools adopting Project Northstar, or a variation of it, before others fall in line and unionization can occur.

Media rights would be the other significant value creation inflection point. 

The Project Northstar model does not assume increases in media contract values. However, the emergence of NewCos across the country should, at least in theory, put conference commissioners in an optimal position to maximize the value of their football rights in the early 2030s.

“With Northstar, [you would] have legions of major donors lobbying Washington to allow college conferences to negotiate with one voice so that they can increase the value of their investment,” Lieberman said. “Obviously, professional sports have materially benefited from this approach.”

And if those deals can be collectively renegotiated, the value of every NewCo will rise.

“If college football received the same increase the NBA did, then total media rights revenues across the P4 would go from $3.4 billion to up to $10.4 billion. A more conservative assumption would be a 2x increase to over $6bn,” Lieberman said. “Then, a NewCo valued at $1.5bn today could be worth $4bn or $5bn.”

Project Northstar seemingly provides all the benefits and less potential downside than a ‘typical’ PE investment–just right for college sports programs desperate for cash and hesitant to cede control.

“We think this is the Goldilocks approach,” Lieberman said. “Schools get the capital they need while maintaining oversight, athletes are paid properly, and donors/investors own a piece of their beloved teams.”

Editor’s Note: Mark Lieberman will be discussing Project Northstar in further detail at JohnWallStreet’s ‘College Sports’ New P&L’ event on January 19. If you manage a budget, steward a program, or are planning to underwrite the future of college sports, you don’t want to miss it. Express your interest in joining here.