The esports realm is more than just a digital battleground; it’s a convergence of passion, innovation, and immense business potential. Esports has seen a huge rise in popularity over the past decade and is continuing its upward trend. The global audience, both in terms of participants and viewers, has grown exponentially, making it one of the fastest-growing sectors in the entertainment industry.
According to DemandSage, there are currently 532.1 million e-sports audiences worldwide, and the e-sports market is valued at $1.44 billion as of 2023. This number is set to reach $5.48 billion by the year 2029.
The Esports Investment Landscape
The investment landscape in esports is dynamic, reflecting the industry’s rapid evolution. Current trends indicate a growing interest from traditional venture capitalists, corporate investors, and even celebrities. As the industry matures, we’re seeing a shift from early-stage investments to more growth-stage funding, indicating confidence in the long-term viability of esports ventures.
Valuation
Valuing an esports company can be complex. Traditional metrics might not always apply, given the unique nature of the industry. Factors like team performance, audience engagement, and brand partnerships play a significant role. It’s crucial to understand how similar companies in the space are valued and to be prepared to justify your valuation with concrete data and projections. Remember, while you want a valuation that reflects your company’s worth, it’s equally important to negotiate terms that are both favorable and fair to ensure a harmonious investor-founder relationship.
What Esports VCs Look for in Esports Investments
The weightage of these factors can vary. An investor more interested in the technology side of esports might prioritize infrastructure and assets, while another focused on branding might emphasize partnerships and audience engagement.
- Team Performance and Potential: Success in tournaments, player talent, and robust coaching infrastructure.
- Audience Engagement: The size and engagement level of the fan base, including metrics like social media engagement and merchandise sales.
- Monetization Strategies: Diverse revenue streams, their sustainability, and potential for new opportunities.
- Brand Partnerships and Sponsorships: Existing relationships with renowned brands and the potential for future collaborations.
- Market Potential: Industry growth trends, expansion opportunities, and competitive positioning.
- Management and Leadership: The track record of the management team, their vision, and organizational efficacy.
- Infrastructure and Assets: Both physical assets, like training facilities, and digital ones, such as streaming rights.
- Regulatory Environment: Understanding and navigating the regulatory landscape of esports.
- Scalability: The potential to scale and the infrastructure to support that growth.
- Unique Value Proposition: What makes your organization stand out? It could be unique content, community strategies, or other differentiators.
- Exit Strategy: Potential avenues for investors to see a return, be it through acquisition or public listing.
Why Esports is Good Business
Many VCs recognize that esports is not just a trend but a sustainable industry. With its integration into educational institutions and the establishment of professional leagues, there’s a belief in its long-term viability.
- Strategic Partnerships: The potential for partnerships between esports entities and established brands, media companies, and even traditional sports franchises offers lucrative opportunities.
- Diverse Revenue Streams & High Return Potential for VCs: Esports offers multiple avenues for monetization, including advertising, sponsorships, ticket sales, merchandise, media rights, and online streaming platforms.
- Global Reach: Unlike traditional sports that might be popular in specific regions, esports has a global appeal. Games like “League of Legends” or “Counter-Strike: Global Offensive” have massive followings across continents.
- Mainstream Acceptance: With esports events being broadcast on major networks and even discussions of esports becoming an Olympic event, there’s a belief that esports is moving from niche to mainstream.
- Young Demographic: The primary audience for esports comprises millennials and Gen Z, a demographic that’s attractive for advertisers and brands looking to establish long-term loyalty.
- Technological Integration: The ability to integrate emerging technologies like AR, VR, and AI into the esports ecosystem presents opportunities for innovative startups.
- Community Engagement: Esports fans are highly engaged, often participating in online forums, fan events, and even contributing to crowdfunded prize pools.
- Potential for Innovation: From virtual reality to AI-driven analytics, the esports industry is ripe for technological innovations that can enhance player performance and viewer experience.
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BITKRAFT Ventures
Stage: Seed, Series A/B
Investment Location: Global
Key person: Jens Hilgers, Malte Barth, Scott Rupp, and Moritz Baier-Lentz
Gaming investments: Epic Games, Manticore Games, Frost Giant, Anzu, Bit Fry, Carbonated, Koji, Voicemod, etc.
Thesis: Built by founders for founders, BITKRAFT is a global early- and mid-stage investment platform for gaming, esports, and interactive media. We focus on Seed, Series A, and Series B investments in game studios, interactive platforms, and immersive technology.
Velo Partners
Stage: Pre-Seed, Seed, Series A
Investment Location: Global
Key persons: Connor Williams
Gaming investments: Ninjas in Pyjamas, Tripledot, and Moon Active.
About: Velo Partner invests in Gaming and Gambling globally across mobile, online, land-based, online, social, B2B and B2C assets.
Thesis: Velo typically invests in Series A or early growth stage rounds. Our ideal investment candidates demonstrate strong early traction and a clear understanding of their unit economics and growth trajectory. We also work in association with a gaming accelerator called RNG FOUNDRY for earlier-stage investment opportunities. Once invested, we typically follow our rights for later investment rounds and work with management to define good corporate governance and reporting. We will opportunistically evaluate later-stage investments on an ad-hoc basis.
Play Ventures
Stage: Pre-Seed, Seed, Series A
Investment Location: Global
Key persons: Anton Backman, Harris Manninen, Henric Suuronen
Gaming investments: Thirdwave, Azra Games, Fractal
Thesis: We are a global early-stage gaming fund, founded by two gaming entrepreneurs. We invest globally and early into ambitious mobile & PC free-to-play game studios and games services startups that are looking for more than just money.
Makers Fund
Stage: Seed, Series A, Series B
Investment Location: North America
Key persons: Jay Chi, Jiang Li, Lia Zhang, Matthew Ball, Michael Cheung
Gaming investments: Theorycraft Games, Smitten, Xterio
Thesis: We support innovative, ambitious founders. Our fund helps visionary entrepreneurs create their initial foundation and support them as they navigate the waters of early-stage business.
1Up Ventures
Stage: Seed, Series A
Investment Location: Pacific Northwest
Key persons: Chris Wheaton, Ed Fries
Gaming investments: Lost Lake Games, Drop Fake, Lightforge Games
Thesis: At 1Up Ventures we are building a diverse and inclusive community of the most talented, experienced, and creative independent game developers in the world. We believe that by working together we can help each other be more successful.
Black Sheep Ventures
Stage: Pre-Seed, Seed, Series A
Investment Location: Global
Key person: Nolan Bushnell, Ron Bauer
Gaming investments: X2 Games
Thesis: Black Sheep Ventures seeks visionary entrepreneurs who are unflinching in creating new realities for entertainment experiences and human interactions, including in eSports, Gaming, Blockchain Technology and Immersive Experiences, and other sectors, where disruptive technology such as Blockchain and visionary creativity can permanently shift the established order.
CAA Ventures
Stage: Seed, Series A/B
Investment Location: United States, Canada
Key person: Michael Blank
Gaming investments: Streamlabs, Mobcrush, Dapper, & more.
Thesis: CAA Ventures provides value beyond capital to company founders. These companies are largely in the consumer Internet sector with an emphasis on mobile platforms, social media, crowdfunding, online video, publishing, games, and eCommerce.
Dune Ventures
Stage: Pre-Seed, Seed, Series A/B
Investment Location: Global with a focus on NYC
Key person: David Brillembourg
Gaming investments: First Light Games, Oooh TV, Kanga
Thesis: Dune Ventures: a new early-stage venture firm investing in gaming, esports, and interactive technology. We invest globally and back founders building content studios, social platforms and infrastructure that will define the next generation of entertainment.
GameFounders
Stage: Pre-Seed, Seed
Investment Location: Global
Key person: Kadri Ugand, Paul Bragiel
Gaming investments: First Light Games, Oooh TV, Kanga
Thesis: GameFounders accelerate teams or companies with two or more persons with launched games/demos/slices from any country in the world.
Gamerforce Ventures
Stage: Seed, Series A
Investment Location: Global
Key person: Lance Quek
Gaming investments: Resurgence
Thesis: Gamerforce Ventures is one of the first venture capital firms that is set up specifically to create high-value companies in the Esports and Gaming scene. Our partners are successful entrepreneurs and high flying executives coming from diverse backgrounds to help our portfolio companies succeed. We typically invest between seed and Series A, but may come in at later stages should the opportunity arises.
Konvoy Ventures
Stage: Seed, Series A
Investment Location: Global
Key person: Jason Chapman, Jackson Vaughan, Josh Chapman
Gaming investments: Bunch, GameFam, Hiberworld, Lootcakes, & more.
Thesis: We invest in the infrastructure technology, tools, and platforms of tomorrow’s video gaming industry.
London Venture Partners
Stage: Pre-Seed, Seed
Investment Location: Europe, North America
Key person: David Gardner, David Lau-Kee, Are Mack Growen
Gaming investments: Treehouse Games, Knock Knock, Singularity 6, Coda, & more.
Thesis: LVP is a venture capital seed fund with a difference – we’re operating experts in the games sector, and we only ever invest in the games ecosystem. That means we bring real experience and deep understanding. We speak the same language, share the same references, understand the same challenges – and we believe in the same vision.
Remagine Ventures
Stage: Pre-Seed, Seed
Investment Location: Europe, Israel
Key person: Eze Vidra, Kevin Baxpehler
Gaming investments: Hour One, Syte, Minute Media, & more.
Thesis: We meet and invest in startups early, help them refine product-market fit and introduce them to our strategic partners in order to kick-off collaborations and accelerate time-to-market.
Related Resource: 9 Active Venture Capital Firms in Israel
SeventySix Capital
Stage: Pre-Seed, Seed, Series A
Investment Location: United States
Key person: Jon Powell, Wayne Kimmel, Chad Stender
Gaming investments: Nerd Street Gamers
Thesis: SeventySix Capital invests in passionate, smart and nice entrepreneurs who are launching game-changing startups in sports tech, esports, and sports betting.
Griffin Gaming Partners
Stage: All stages
Investment Location: Global
Key persons: Phil Sanderson, Peter Levin, Nick Tuosto
Gaming investments: Forte, Discord, Overwolf
Thesis: Investing at the intersection of content, software, infrastructure, and gaming-related web3 companies.
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