eSports Monetization Platform FanAI Raises $1.8M From Pro Sports VC's, Greycroft and Loot Ventures

ESPORTS MONETIZATION PLATFORM FANAI RAISES $1.8M FROM PRO SPORTS VC'S, GREYCROFT'S NEW FUND AND LOOT VENTURES

eSports Monetization Platform Fan.AI Raises $1.8M (Photo: Fan.AI)

eSports Monetization Platform Fan.AI Raises $1.8M (Photo: Fan.AI)

[Disclaimer: Loot Ventures is part of the the portfolio of companies associated with The Next Level. Exclusive interview with FanAI Co-Founder Johannes Waldstein below]

TNL eSports Startups 013: FanAI Raises $1.8M (Graphic: The Next Level)

TNL eSports Startups 013: FanAI Raises $1.8M (Graphic: The Next Level)

From Forbes July 27, 2017 by Darren Heitner

Esports Audience Monetization Platform Raises $1.8 Million Seed Round

eSports (Photo: Mehdi Fedouach/AFP/Getty Images)

eSports (Photo: Mehdi Fedouach/AFP/Getty Images)

As of July 2017, there is little doubt in the staying power of esports, which is essentially an industry consisting of competitive video game play that has attracted not only participants, but also a wide range of spectators on platforms such as Twitch. However, one of the biggest challenges remains finding out successful methods to monetize the rapidly expanding industry.

Enter FanAI Inc., an artificial intelligence (AI) driven audience monetization platform that is initially focused on exploiting the esports landscape by collecting fan data owned by the rights holders and data available on various social and streaming platforms, as well as data repository services and payment data, and enriching it to build brand-specific personas and achetypes to predict behavior. 

There is clear interest in the startup. FanAI will soon announce that it has closed a Series Seed round, led by Courtside Ventures, for a total of $1.8 million.

"Brands, especially non-endemics, are one of the largest potential revenue drivers for esports, but they have played a very minor role to this point," says Deepen Parikh of Courtside Ventures. "We believe FanAI can spark that shift and drive significant money into the industry. We have a great syndicate of investors coming in on the round."

The round includes Greycroft GC Tracker Fund, a new augmented reality (AR), virtual reality (VR), and esports fund, BDS Capital, CRCM Ventures, Sterling.VC, Loot Ventures (Manny Anekal, Dan Porter), Expansion VC, QB1 Ventures, Rosecliff Ventures, Catalyst Sports, Jason Robins (founder of DraftKings), Jordan Rambis (former VP Business Development at aXiomatic) and Everblue Management.

These investors are observing studies like one from The Next Level, which states that non-endemic brands are looking to increase their esports investment and that the industry is on pace to double 2016's total. FanAI specifically seeks to drive that type of revenue opportunity from non-endemic brands through exploring and delivering information related to the preferences of the esports audience. Thus far, FanAI has already partnered with Mastercard MA, a non-endemic brand, to provide proprietary information to the company as it seeks to make determinations on smart investments.


Johannes Waldstein, Co-Founder of FanAI (Photo: FanAI)

Johannes Waldstein, Co-Founder of FanAI (Photo: FanAI)

TNL Take: Exclusive interview with Johannes Waldstein, Co-Founder of FanAI:

 

The Next Level: Why did you create FanAI and what was the opportunity you saw in the eSports ecosystem?

JW: Our backgrounds are from Google, Facebook and dunnhumby, three of the most data driven companies in the world. Particularly at dunnhumby, where we provided analytics on over 800M loyalty cards from some of the worlds largest retailers like Home Depot and Best Buy, to brands like P&G, Unilever, and Pepsi. We wanted to take the knowhow we had on understanding purchase behavior, social and demographic segments and monetizing data to eSports. 

 

The Next Level: The number of brands investing in eSports are on pace to double 2016’s total with 60+ Non-Endemic’s in the first half of 2017 alone. What can FanAI offer these brands they’re currently not getting after their campaigns end?

JW: There are two problems that we help solve:

/01 There is still a general perception that eSports is an homogenous audience of under-age male, energy drinking caffeine fiends living in a dark basement (our data shows something very different). But many big brands ask how is this relevant to me? 

/02 Because the rights holders can't segment their audience by purchase behavior and channel, even if a brand invests sponsorship dollars or marketing budget, they can't correctly target segments of the audience in different social channels and measure how well their investment worked. It is currently extremely hard to show ROI. 

FanAI has integrated proprietary purchase data streams and the leading social media channels and so can offer brands the ability to understand and predict purchase trends of the eSports audience across about 200 spend categories as varied as CPG, Automotive and Travel. 

 

The Next Level: What partnerships can you publicly announce and how are you working together?

JW: We can publicly announce our partnership with DreamHack, one of the largest digital festival and LAN party organizers and we have several further partnerships that will be announced over the coming weeks and months. 

 

The Next Level: We’ve talked about brands and event partners - how can FanAI help eSports teams as well?

JW: We have a partnership with Immortals, one of the leading eSports teams in LA and owners of the LA Overwatch franchise.

As eSports teams continue to grow their audiences and sponsorship deals they can use the same tools FanAI has built for the games publishers, agencies and brands to understand and monetize their audience. We have also mapped the social ecosystem for the top 100 teams giving teams the ability to see fan overlap and movement in social networks between leagues, teams, players and sponsors. Understanding how many uniques each has and how many fans they have in common. 

 

The Next Level: The current focus is within eSports and Gaming. Do you see FanAI expanding further into other areas in the future?

We are 100% eSports focused. We currently have seen lots of interest from other areas - from English Soccer teams to pro sports leagues in the US and we certainly have the platform capabilities to expand to other markets in the future. 

Why Discord Was Able To Raise ~$50M At A $700M+ Valuation

WHY DISCORD WAS ABLE TO RAISE ~$50M AT A $700M+ VALUATION

Discord Raises ~$50M (Photo: Discord)

Discord Raises ~$50M (Photo: Discord)

TNL Take: Last week we began the first part in a series looking at ~$100M of eSports US investment this year, beginning with Super League Gaming, AEG and Matcherino.

Today we'll look at the biggest investment - and valuation - to date, Discord. 

For those more Brooks Brothers than Battlefield, Discord is basically this: Slack for Gaming and eSports.

Discord's Voice and Text Platform (Photo: Discord)

Discord's Voice and Text Platform (Photo: Discord)

Earlier this year, Techcrunch reported that Discord secretly raised ~$50M led by Index Ventures, along with Institutional Venture Partners and previous investors Spark Capital, Benchmark and Greylock Partners and Benchmark.

TNL eSports Startups 012: Discord Raises ~$50M (Photo: Discord)

TNL eSports Startups 012: Discord Raises ~$50M (Photo: Discord)

While that's by far the biggest raise by a US eSports related startup - yes, it's not primarily an eSports only platform but it's integral to the scene - the pre-money valuation is north of a whopping $700M.

 

Here's what's even crazier: by my estimates, Discord probably made less than $1M in revenue last year. No advertising. Some merch. Again, that's less than $1M in revenue and valued at almost a billion dollars.

 

As I speak to both investors and startups, it's befuddling to me how much both sides minimize monetization early in the strategic planning or product roadmap:

 

Me: How are you going to make money?

Startup: We'll figure out once we get scale.

Me: How are they going to make money?

Investor: They'll figure it out once they get to scale.

 

In the casino game - sorry venture capital - that is startup investing, it's the standard playbook of grab market share/eyeballs and then figure out how to monetize later like Facebook did. Further, Discord checks the boxes on key areas that VC's look for: Team (solid), previous experience (CEO sold OpenFeint for $100M+), and huge return (exit opportunity).

How big is Discord? They currently have 45M registered users quadrupling from a year ago.

There's a very simple reason why Discord was able to grow so quickly: the platform simply works, game integration and most importantly, no one liked using either Teamspeak or Skype.

Discord vs. the Competition (Photo: Discord)

Discord vs. the Competition (Photo: Discord)

So why is Discord valued so much and how could they actually make money? 

Let's look at a few different possibilities:

 

01/GAMEBRIDGE

Gamebridge Integration In Lawbreakers (Photo: Discord:)

Gamebridge Integration In Lawbreakers (Photo: Discord:)

Gamebridge is DIscord's 1-stop solution for integrating a multitude of features into a game that developers don't have to worry about: 

  • Voice and text chat for teams/friends
  • Auto generate game replay's, highlights and even GIF's
  • In a brilliant move, this automatically generates an individual discord server as well

The Gamebridge technology will be integrated into Boss Key/Nexon's upcoming title Lawbreakers, led by Gears of Wars creator Cliffy B.

Revenue Potential: SaaS for Developers

 

02/STREAMKIT

Discord's Streamkit Platform (Photo: Discord)

Discord's Streamkit Platform (Photo: Discord)

Streamkit is Discord's next product which again simplifies efforts for developers for multiple API integrations.

The reason I keep enforcing "make it easier for devs" is that unless you've worked at a gaming company, you don't realize the immense pressure game teams are under to deliver a continually changing product, on time, with little resources and time away from your family. #ShoutOutGameDevelopers 🙏🏽

Somewhat similar to Overwolf, this platform could be the outlet for the 3rd party money plug.

Revenue Potential: Revenue sharing/3rd party app integration/Steam competitor

 

 

03/GAME REVENUE SHARING

Twitch's Amazon Game Buying Integration (Photo: Amazon)

Twitch's Amazon Game Buying Integration (Photo: Amazon)

As I mentioned in "eSports Wars: Twitch vs. Everyone Else Part 2", Twitch will allow streamers to get a piece of the pie of any game bought through them via Amazon - personally I'm shocked this wasn't launched sooner.

Discord could easily copy the same model.

Revenue Potential: Game sales revenue sharing/Steam competitor

 

04/NITRO

Nitro, Discord's Subscription Product (Photo: Discord)

Nitro, Discord's Subscription Product (Photo: Discord)

Nitro is Discord's subscription service that allows users to have an animated GIF, custom emoji's, and badges.

Sound familiar? It's not far off from Twitch's streamer subscription benefits for users.

Revenue Potential: Monthly subscription revenue

 

05/ADVERTISING

Last and definitely not least, Advertising and Sponsorship. With the 3 things that Brands look for the most in their investment - scale, engagement, ROI - Discord could easily provide this.

Revenue Potential: Brands

 

Those are 5 different ways that Discord could monetize their platform going forward. They also do a fantastic job maintaining their "cool brand" within the community, via Hypesquad or their Partner program.

It's not like Discord doesn't have obstacles ahead of them: recently Twitch has launched a Voice app, desktop app, Twitch Pulse, and a massive mobile update.

And the billion dollar question - who would pay a billion dollars for Discord?

 

My guess: A Publisher, platform or a Media company.

eSports Crowdfunding Platform Matcherino Raises $1.5M

ESPORTS CROWDFUNDING PLATFORM MATCHERINO RAISES $1.5M

Matcherino Raises $1.5M (Photo: Matcherino)

Matcherino Raises $1.5M (Photo: Matcherino)

TNL Take: California has been the center of innovation in both technology, Silicon Valley, and Gaming/eSports with over half the US industry based in that state.

Recently Seattle has seen it's own emergence of eSports startups: Unikrn - which is doing the first eSports ICO, Hubtag, Innervate and Beam, which was acquired by little local company Microsoft.

TNL eSports Startups 011: Matcherino Raises $1.5M (Graphic: The Next Level)

TNL eSports Startups 011: Matcherino Raises $1.5M (Graphic: The Next Level)

Last week another Seattle based eSports startup Matcherino raised $1.5M from previous investors Madrona Venture Group, Vulcun Capital and other angels.

Want another NBA eSports connection? Vulcun Capital is the investment arm of Vulcun Inc., run by ex-Microsoft co-founder Paul Allen, the owner of the Portland Trailblazers.

Matcherino is very simple way to crowdfund a prize pool between players, teams or events for a multitude of games.

List of Matcherino Supported Games (Photo: Matcherino)

List of Matcherino Supported Games (Photo: Matcherino)

Matcherino users simply login via Twitch, use PayPal as the transaction platform and the money goes directly to the prize pool.

Matcherino's Crowdfunding Platform (Photo: Matcherino)

Matcherino's Crowdfunding Platform (Photo: Matcherino)

Matcherino Crowdfunded Events (Photo: Matcherino)

Matcherino Crowdfunded Events (Photo: Matcherino)

Matcherino provides 2 additional benefits:

  • Users who donate accrue points towards rewards redeemable for goods which are mostly T-shirts currently
  • As Matcherino CEO Grant Farwell said: "Before us, the prize pools were being completely mismanaged by event organizers, who are often young due to the nature of the industry and don’t handle money well" [Note: That was not said by me. Don't @ me]

Matcherino also offers Sponsored rewards like Soylent, who also happen to invest in eSports.

Matcherino Sponsored Soylent Reward (Photo: Matcherino)

Matcherino Sponsored Soylent Reward (Photo: Matcherino)

By essentially just providing a connection layer and taking a % of each transaction and some sponsorship revenue, Matcherino could work.

 

However the biggest challenge is lack of defensibility: Twitch, YouTube, or Facebook could easily replicate this.

 

Let's see which platform copies this the quickest if the monetization opportunity is there.

AEG Makes Second eSports Investment With Immortals

AEG MAKES SECOND ESPORTS INVESTMENT WITH IMMORTALS

AEG Invests In eSports Team Immortals (Graphic: The Next Level)

AEG Invests In eSports Team Immortals (Graphic: The Next Level)

TNL Take: For eSports owners with decent teams, popular fan following but more importantly - being business savvy - it's like mid-1800's California gold rush or mid-1980's Los Angeles crack era: the money is pouring in.

eSports team Immortals raised another round, this time from massive sports and entertainment conglomerate AEG. Immortals were also one of the first teams to receive investment related to the NBA with Memphis Grizzlies co-owner Stephen Kaplan back in November 2015:

TNL Infographic 027: NBA Investment In eSports (Graphic: Jordan Fragen)

TNL Infographic 027: NBA Investment In eSports (Graphic: Jordan Fragen)

This investment makes sense for a number of reasons:

  • AEG is based in Los Angeles just like Immortals
  • Immortals already has an impressive investor list including Lionsgate, Crosscut Ventures, Michael Milken, Machine Shop Ventures, March Capital Partners, Kaplan and others
  • Immortals will play their events at LA Live, an AEG venue
  • The music, entertainment, and content production opportunity

 

This is also the second investment within eSports, having first signed a long-term partnership with ESL to host their events at AEG's locations including Barclay's Center, Oracle Arena and London's O2 Arena; which all have held eSports events previously.

 

While the round was undisclosed, you know I'm going to take a stab anyway: I'd venture that it was at least $10M+ - more on why that amount when we get to the recent Overwatch League "news" Soon™