They’re Scary Good: Investment in Sports Startups

by: Kayla Acklin

“. . . stolen away, and cleared out to center ice to Pominville. Pominville, into Ottawa territory. Pominville goes around Alfredsson, cuts in front, S-C-O-O-O-O-R-R-R-E-E-S-S-S! JASON POMIVILLE, SHORT-HANDED! OH NOW DO YOU BELIEVE? NOW DO YOU BELIEVE? THESE GUYS ARE GOOD, S-C-A-A-A-R-R-Y GOOD, AND THEY ARE GOING TO EITHER CAROLINA OR NEW JERSEY! THE BUFFALO SABRES KNOCK OFF THE SENATORS IN O-O-O-V-V-E-E-R-R-T-I-M-E!” Every Buffalo Sabres fan remembers the legendary play-by-play broadcaster Rick Jeanneret’s announcement of the 2006 playoff overtime win by the Buffalo Sabres over the Ottawa Senators. With grand enthusiasm and lungs that just won’t quit, Jeanneret’s “Now Do You Believe” sparked a fire that the city of Buffalo hadn’t seen since the early 90’s. That iconic moment signifies the culture that the sport of hockey has brought to the city of Buffalo, NY.

With sports moments like the one above that still send shivers down the spines of hockey fans, it’s no wonder that investors are looking to sports startups for their next ventures.  Sports are such a vital part of our social and economic culture. When a professional sports team wins a major title for the first time in 108 years, or a “hot-shot” professional athlete controversially dopes during playoffs, that news makes the front page of every major newspaper, and is covered by every major news media outlet. The reach of professional sports on the market is undeniable. As such, startup companies who take advantage of society’s dedication to sports by designing efficient, easily accessible sports-based applications and programs find quick success and high valuations from interested investors. Evidencing the high value of sports and sports fans, in 2015, venture capitalists alone invested more than $1 billion in venture deals with sports startup companies.

What Makes Sports Start Ups Successful?

 TechCrunch detailed four major reasons for why sports startup companies are “scoring big.”

1.      “Obsessed” User Base: It would be an understatement to say that sports fans are passionate; many, arguably, are obsessed. Sports fans dedicate a lot of time to watching games, researching their favorite athletes, and tracking the success of their sports teams. For this reason, a technology service or product that allows sports fans to more efficiently monitor the success of professional and collegiate sports players and teams comes with an automatic user base. These “obsessed” sports-fans become long-term users who will “opt into notifications, click through suggested links and, most importantly, be engaged and interested.” With such a dedicated sports-fan user base, sports startups have been able to avoid retention problems that plague other technology-based startups. A study by Flurry indicated that sports-related apps are the third highest in user retention, at 67 percent retention, falling behind only weather and reference apps.

2.      Controlling Sports Stats: The increasing popularity of fantasy sports has led to more fans paying attention to sports statistics. Particularly with daily fantasy sports, fans carefully analyze each sports player and team, watch for trends in performance statistics, and select which specific athletes and teams to invest in. For example, DraftKings, one of the largest daily fantasy sports companies in the United States, raised $375 million by 2015, with an active daily user count of over 50,000. Fans care about even the smallest statistics regarding professional players and teams. Therefore, a sports startup company with an application that provides in-depth analysis of sports statistics is almost guaranteed to be successful.

3.      Riding the Backs of Partnerships: For many technology startups, partnership with successful companies is often too difficult because of the slow nature of business cycles. That is not the case in the sports world. When one company signs a partnership deal with a professional sports team, other companies are eager to follow suit to reap similar financial benefits off the success of other professional sports teams. For example, when the MLB released MLBAM, a video streaming platform, the NHL saw a great opportunity to offer their fans the same experience, and signed a deal with MLBAM. Sports leagues and companies in particular are constantly looking for ways to enhance their fans’ sports interaction experiences. A sports startup with an app that provides increased opportunity for fans to engage with their favorite sports players and teams will undoubtedly garner the attention of sports leagues and companies.

4.      Who’s Ready to Rumble: The World Series, Super Bowl Sunday, March Madness Week, and the Stanley Cup Playoffs are on every serious sports fan’s calendar from the start of the sports’ season. During these big games, fans are on every social media site, are watching all major media outlets, and are reading as many sports articles as they can to stay engaged with their favorite teams. Fans look for any opportunity to win seats to the big games or purchase specialty merchandise to show their undying support. Startup companies should take advantage of these big games by planning promotional events, offers and contests in conjunction with these major sports events.  

Sports Start Ups Grab Investor Attention

Sports are not a fad, and sports fans are not going anywhere. As such, sports startup companies have found great investment success because venture capitalists recognize how “scary good” the sports market is.  For the second year in a row, in March, TPG Sports Group hosted a Sports Tank to provide sports startup companies the opportunity to pitch their business plan to a group of five investors, a Sports Advisory Panel and successful entrepreneurs. The goal of the Sports Tank was to give sports startup companies face-time with major investors to continue to grow the sports technology market. Ten sports startups were selected to pitch during the Sports Tank, including: Brizi, a company that uses in-stadium, fan controlled cameras to enable teams to grow sponsorship revenue by allowing teams to create fan-generated content; Bubbl, whose technology allows audiences to clip fifteen-second moments from online video streams; Dasdak, a company whose technology allows fans in stadiums to use their cell phone to order food and beverage or retail for delivery directly to their seat; IdealSeat, a company who focuses on all aspects of a fan’s experience, including ticket discovery, game-day decisions, and in-game experiences; and Matcherino, a platform that brings together spectators to play games against one-another, or watch their favorite matches together via a live stream.

The success of sports startup companies has also caught the eye of Silicon Valley venture capital funds and accelerators, meaning that the market for new sports technology is going to continue to grow. Most notably, 500 Startups, a venture capital fund and accelerator founded by Dave McClure and Christine Tsai that has incubated over 1200 companies since 2010, added six sports-based companies to their spring 2016 cohort. Those companies included: YouStake, a marketplace where fans can invest in their favorite players and profit from the winnings; OpenSponsorship, a company that democratizes access to sports sponsorships via a two-sided market; Phenom, a platform for young athletes to showcase their athletic achievements; Ader, a marketplace that connects brands to eSports influencers on Twitch; Mars Reel, a sports network for this young, network-driven generation; and ArrowPass, an integrated payment, vendor management, and ticketing system that helps arena operators eliminate lines and grow sales.                           

Boston Sports Start Ups to Watch

            In the words of Rick Jeanneret, sports startup companies “are good, s-c-a-a-a-r-r-y good,” and investors, both at the venture and individual levels, should pay attention. For those sports fans in Boston, here is a list of sports startup companies to keep an eye on:

1.      Ubersense – a mobile app that helps people improve at sports through video coaching

2.      Jokkspot – a location based sports management platform for athletes, coaches and fans

3.      BeeInPlay – enables users to find and book indoor training facilities (fields, turfs, rinks, etc.)

4.      Go Pro Workouts – provides digital and mobile pro athlete workout and nutrition plans

5.      Sports Lion – a social sports betting platform where players bet against one-another

6.      Spogo – rewards users for making correct predictions during live games

7.      LeagueNation – a mobile fantasy sports platform

8.      PlaybackID – the LinkedIn for athletes

9.      WhattaPlay – enables fans to post their sports opinions on a social sports page like the experts

10.  Fan Cred – provides live streaming, instant scores and the hottest sports takes