American horse racing got a tremendous boost from American Pharoah’s Triple Crown conquest.  A lot has been said and written about how the racing enterprise can leverage the result to its benefit.

Along with stagnant pari-mutuel revenues, the other major problem racing has is that there are not enough owners and in particular owners new to the sport.  To my knowledge, crowdfunding is an untried concept in racing for attracting owners who would each have a very small investment in a racing partnership.  Eventually, some of the neophyte owners would be apt to increase their involvement in racing by investing larger sums and perhaps even becoming sole owners of horses.

The federal 2012 Jumpstart Our Business Startups law, or JOBS, removed much of the regulatory red tape from equity crowdfunding in order to allow entrepreneurs to raise up to $50 million for new ventures online.  (Currently, there are about 80 crowdfunding websites but many are inactive.)  Until June 2015, crowdfunding investments were limited by law to accredited investors (individuals with a net worth of at least $1 million or who earn over $200,000 annually.)  Now, non-accredited investors are permitted to participate in crowdfunding.

An established horse racing partnership could use crowdfunding to allow people to get their feet wet, so to speak, as owners.  For example, a partnership might offer a package of four yearlings and 2-year-olds for, say, $600,000, which would include ongoing expenses.  Because billing a plethora of owners for maintenance expenses would be cost prohibitive, the overhead would need to be built into the amount of money asked for from investors.  In addition, communication with owners would be primarily by mass email.  The goal might be to raise the $600,000 in $500 increments.

In contrast, a more attractive package to new owners might be a stable of claiming and allowance horses that would provide immediate action.

Whether crowdfunding racehorse ownership would work or not is an open question.  Considerable experimentation and pro-forma financial analysis would be required to determine the package with the best chance of attracting owners.  I’d like to see an experienced racing partnership try crowdfunding, as the process has worked well in a wide array of ventures and it just might work in horse racing.

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