🇳🇴 The Fund Re-Framing Investing in Sports Tech

Happy Monday to the several hundred of you currently reading this newsletter.

If you are reading this from the UK then good news! you can now watch every Ligue 1 game of the season on the newly launched Ligue 1 Pass streaming service for the lowly sum of £12.99 per month.

Ligue 1, yes the French Premier League have launched a new direct-to-consumer streaming service in the UK after failing to secure a renewed broadcasting deal with TNT Sports.

Two newsletters ago I wrote an article detailing the sad state of affairs of French football (see here). This move, whilst innovative in nature speaks to the lack of demand for French football at present. They could not secure the deal they want to show French football in France. They could not secure the broadcast deal they wanted in the UK either, hence this new offering.

I hope I’m wrong but I cannot foresee very many subscribers to that platform. Not enough to replace the revenue TNT Sport will have given them anyway! This demise is sad to see.

Alas, today we discuss technology in sports and the recent M&A activity in the space. A topic of mine that I keep a very close ear to.

Drake Star release a report on the state of M&A activity in Sports Tech every year. Late last year they reported that there was a whopping $5.4bn of Sports Tech investment in 2023, with the money being deployed in these areas:

• 39%: Wearables & Performance Enhancement

• 23%: Esports, Fantasy, & Betting

• 19%: Sponsorship & Venues

• 10%: Media & Broadcasting

• 7%: Fan Engagement/Experience

• 3%: Data Analytics

Wearables are big business. Think Whoop, for example. Whoop have raised over $400m over 10 funding rounds since they began.

Fan engagement is a sector which is growing too. Think Seat Unique. I speak about that company in my latest YouTube video (which was released yesterday). They have raised £14.5m across two funding rounds to grow their ticketing platform.

The interesting thing about venture capital activity in sports tech is that there haven’t been very many exits. It sounds strange to say but there have not been many acquisitions or IPOs of pure sports tech companies meaning venture firms are still shy with their cheques compared to other sectors like fintech for example.

Where that is predominantly felt the most is at the Seed stage. Not many companies are willing to roll the dice on innovative sports tech ideas as they haven’t truly understood the full asset lifecycle for a sports tech business yet.

This then creates a cycle. VC fund doesn’t deploy capital to pre-seed and seed businesses. Sports startup requires capital to get out of the seed stage and grow faster, but struggles. Who bites first?

It’s an interesting conundrum.

A company who is bucking that trend is sports fund Eberg Capital. Eberg is a family office run by three chaps Roger Ehrenberg, Ethan Ehrenberg and Andrew Ehrenberg. What’s interesting to me is that they have invested in quite a few seed-stage companies in the last two years and have a keen eye on spotting whats coming next in the space. Some of them include:

• Kero Sports: Seed Round (July 2024): Kero provides gamification tools for sports media companies

• Keyring Network: Series A (March 2024): A blockchain-based platform aimed at enhancing loyalty programs and customer engagement

• ALT Sports Data: Series A (February 2024): ALT specialise in providing sports data and analytics.

• PLN (Pro League Network): Seed Round (August 2023): PLN offers a platform that aggregates and distributes sports content, targeting underrepresented sports and leagues

• Betr: Series A (May 2023): A micro-betting platform focused on sports, allowing users to bet on specific moments during live games rather than traditional outcomes, owned by Jake Paul

• Real Salt Lake: (July 2023): Real Salt Lake is a Major League Soccer (MLS) team based in Utah

• WagerWire: Series A (2023): WagerWire is a marketplace for sports bets, allowing users to buy and sell bets before the events conclude​

You can tend to spot the businesses of the future by looking at some of the seed stage funding rounds taking place from the worlds best VC funds.

Let’s see where Jake Paul’s Betr and Kero Sports are in a few years!

I don’t usually speak on American Sports but this week the NFL made a landmark decision to permit private equity and institutional investment in its franchises. It’s quite strange to think that so far all NFL teams are owned by families or individuals. Unlike the NBA, the MLS and MLS, there is no PE presence whatsoever in the NFL… until now.

Arctos Partners (Golden State Warriors), Ares Management (Inter Miami) and Sixth Street (Real Madrid) have all been approved by the league to begin investing. There are a raft of others too.

The ramifications of this are quite interesting.

This decision could bring in substantial capital, aiding teams in managing rising franchise valuations and operational costs.

Many worry however that institutional ownership might alter the league's culture, impacting long-term stability.

To limit the worrying, there are rules:

• Max Equity Funds can own in a team: 10%

• Max equity a single fund can own in one team: 10%

• Max number of teams a fund can own: 6

• Minimum investment: 3%

It will be fascinating to see how many owners decide to sell stakes in the coming years.

See you next week.