The List: The Most Active VC's In eSports

THE LIST: THE MOST ACTIVE VC'S IN ESPORTS

The List: The Most Active VC's In eSports (Photo: Bloomberg)

The List: The Most Active VC's In eSports (Photo: Bloomberg)

TNL Industry Guest Post 006: Stephen Hays is the Managing Partner of Deep Space Ventures, a venture capital firm investing in eSports and B2B Enterprise startups at the seed stage.  

Prior to Deep Space Ventures, Stephen spent 6+ years as an investment banker and relies on his prior experience advising companies of all sizes on capital structure, capital raising, M&A and strategic alternatives to be a value-added investor.

Stephen received his bachelor’s degree in Civil Engineering from the United States Military Academy at West Point and received his MBA from the Owen Graduate School of Management at Vanderbilt.


As I’ve written about before in The Birth of a Venture Capital Investment Thesis and Why Invest in eSports; the eSports market is huge, has intense user engagement and is growing at an astronomical rate. There is great potential for incredible founders, with excellent ideas, to build businesses that generate outsized returns for early stage investors in the space.

 

SO WHO IS INVESTING IN ESPORTS STARTUPS?

As I worked to answer this question, by compiling a list of investors, I was surprised at some of the results.

I found 352 VCs, angels, accelerators, or companies (strategics) that had invested in eSports startups. Of the 352 total investors, most of them have made only one investment in the space (298 have only one — 85%).

I am not considering the 1-time investors to be true “eSports investors” as many early stage investors have made investments in sectors that are not a focus area, but they ended up in a deal for one reason or another (other than a thesis about the space).

Only ~15% of those invested in eSports have more than 1 eSports investment

Only 15% of Those Invested in eSports Have More than 1 Investment (Chart: Stephen Hays)

Only 15% of Those Invested in eSports Have More than 1 Investment (Chart: Stephen Hays)

15% (54 of the 352) of investors on the list have invested in more than one eSports startup. Of those who have invested in more than one, there are quite a few notable names (see the list of the most active at the bottom of this post).

Some of the investors who have invested in multiple eSports startups are angels or accelerators (some notable, such as 500 StartupsY Combinator, etc.). Often the angels are partners at large VCs who then later invest in the space, when the round sizes grow, and their fund’s minimum check size doesn’t preclude investment.

 

WHERE ARE THE ESPORTS INVESTORS LOCATED?

Where Are eSports Investors Located (Chart: Stephen Hays)

Where Are eSports Investors Located (Chart: Stephen Hays)

The geographic breakdown of the investors in this space is not very surprising.

The bulk of the investors are in California, followed by New York and Europe. I did expect more to be in Asia, as a large percentage of the eSports market exists in China, South Korea, Japan, etc.

The headline number of 352 total investors in the space makes it seem like everyone is piling into eSports startups, and at times, it does feel like some of the rounds I’m seeing are oversubscribed, and/or competitive.

However, I still believe the space is somewhat opportunistic for investors at this time (especially at the earlier stages, and certainly for those with some domain knowledge) due to a lack of institutional investors who are investing regularly in the space.

 

WHO ARE THE MOST ACTIVE VC'S IN ESPORTS

Of the 54 investors who have more than one eSports investment, 39 of those are VC's (15 are angel or strategic investors).

I’ve listed the VCs who are active - have invested in more than one eSports startup -  here as a resource for founders and whoever may be interested. If I’m missing someone, please let me know and I’ll update the list. 

In addition to the most active VCs that I’ve listed below, I've also compiled a Crunchbase list of all the investors in eSports startups with profiles (link)

A list of a few representative portfolio companies showing eSports exposure, is listed next to each VC’s name below. The list of investments is not intended to be inclusive of every deal in the space by each investor, rather a representative sample:

  1. Accel Partners (Raptr, smash.gg, Discord)
  2. Advancit Capital (Unikrn, Blitz Esports, Sliver.tv)
  3. Amplify.LA (Battlefy, AlphaDraft)
  4. Arab Angel Fund (Battlefy, Wonder)
  5. BDC IT Venture Capital (Battlefy, Repable)
  6. BITKRAFT (Kek, Boom.tv, Runtime.gg)
  7. BLH Venture Partners (KontrolFreek, Haste, Wavedash)
  8. BoxGroup (Scopely, Blitz Esports)
  9. CAA Ventures (Vulcun, Sliver.tv, Kickback)
  10. Courtside (FanAI, GameCo)
  11. CRCM Ventures (TurningSense, FanAI, VREAL)
  12. Creandum (RFRSH, Armada Interactive, Resolution, Playraven, Small Giant, Future Play)
  13. Crosscut Ventures (Vulcun, Super Evil Megacorp, Blitz Esports)
  14. Deep Space Ventures (Mobalytics, PlayVS, Haste, Battlefy)
  15. First Round (Boom.tv, BeyondGames, Mobcrush)
  16. General Catalyst (Mobalytics, Super Evil Megacorp)
  17. GGV Capital (Mobalytics, Curse)
  18. Greycroft (Scopely, Gunslinger Studios, AlphaDraft, FanAI, Sliver.tv)
  19. IDG Capital Partners (AlphaDraft, Discord)
  20. Index Ventures (FaceIT, Super Evil Megacorp, Discord)
  21. K Cube Ventures (Kokomo Games, Supreme Games)
  22. London Venture Partners (Dojo Madness, Future Play Games)
  23. Ludlow Ventures (Vulcun, Kickback)
  24. Machine Shop Ventures (Wavedash Games, Immortals)
  25. March Capital Partners (Genvid, Wavedash Games, Dojo Madness)
  26. MIT Play Labs (Esports One, Savvy Stat, Total Respawn)
  27. QB1 Ventures (FanAI, Gameco)
  28. Queensbridge Venture Partners (AlphaDraft, Battlefy, Kickback)
  29. Raine Ventures (Dojo Madness, Super Evil Megacorp)
  30. Right Side Capital Management (GameWisp, Sidelines, Matcherino)
  31. Rosecliff Ventures (YouStake, FanAI)
  32. Sequoia Capital (Vulcun, 5211game, Skillz)
  33. Signia Venture Partners (Super Evil Megacorp, Funzio, Playdom, Drifter)
  34. Social Starts (Battlefy, Youstake, Sidelines)
  35. Spark Capital (Discord, Smash.gg)
  36. Sterling VC (Loot Crate, FanAI, Skillz)
  37. The Kraft Group (Skillz, Overwatch League)
  38. Third Wave Digital (Battlefy, Gunslinger Studios)
  39. Upfront Ventures (Loot Crate, AlphaDraft, VREAL)

 

I have worked with many VCs who are looking actively at early and late stage rounds in eSports businesses on a daily basis. More and more investors will end up on the list in the coming months and years.

This list will be actively updated here on my Medium page.

Disruptive Technologies for eSports: Ethereum

DISRUPTIVE TECHNOLOGIES FOR ESPORTS: ETHEREUM

HBO's Silicon Valley (Photo: YouTube)

HBO's Silicon Valley (Photo: YouTube)

TNL Industry Guest Post 005: Over the past 13 years, Anton Ferraro has helped develop numerous esports focused properties including tournament broadcasts, television programs, streaming platforms, branded campaigns, digital products & live event activations.

Anton began his career in 2004 by organizing and playing at local Halo events and shortly thereafter joined Major League Gaming to assist their media efforts. After 8 years with the company Anton transitioned to the West Coast and helped build the Azubu streaming platform as Director of Content.

Anton currently resides in Brooklyn, New York with his wife and pug. Too much of his time is spent playing Overwatch. You can view his work at www.AntonFerraro.com


TNL Take:  The Ethereum blockchain is an incredibly complex idea that has gained increasing momentum in the past few months. While I am an avid fan of the tech, I will be the first to admit that my understanding of it is basic at best, so I encourage you to explore the below ideas on your own.

For fans of HBO’s Silicon Valley, Ethereum is apparently the focus of this season’s story arc.

 

WHAT IS THE BLOCKCHAIN?

The Blockchain (Photo: BlockGeeks)

The Blockchain (Photo: BlockGeeks)

The blockchain is a concept first pioneered by BitCoin. The Bitcoin Blockchain is a ledger of all existing BitCoin transactions. Think of it as a giant database for every use of BitCoin ever. It uses decentralized technology to verify every transaction to prevent fraud and a failure of the system by compromising any single node.

In the same way that Torrents utilize multiple computers to distribute content, BitCoin uses the blockchain to verify all data in the network. Users on the system have digital wallets in which they can store digital currency.

If you compare BitCoin to something like the US Dollar a clear difference emerges. Every year more and more dollars are printed resulting in inflation. Every year the dollar buys less than it did the year before. BitCoin differs from most traditional currency by installing a cap on the total number of BitCoins that can be in circulation. This has generally caused the value of BitCoin to increase.

Warning: BitCoin prices have fluctuated wildly over the past several years. Do not invest without doing due diligence into the size of these shifts and their causes.

BitCoin was the first mover in the space but it’s current limitations spawned several competitors that seek to fill the holes BitCoin does not. Enter Ethereum.

5 Year Bitcoin Growth (Left) and the S&P500 (Right). Huge Potential for Growth with the Volatility Risk (Photo: Coindesk and Yahoo Finance)

5 Year Bitcoin Growth (Left) and the S&P500 (Right). Huge Potential for Growth with the Volatility Risk (Photo: Coindesk and Yahoo Finance)

Ethereum took the Blockchain idea and expanded it to a true platform. It provides multiple services already and many more are being built out by developers.

 

SMART CONTRACTS

Let’s look at the traditional functionality of an eSports contract. Two parties agree to an exchange of services which will result in an exchange of currency. Here are some eSports related examples:

  • I will stream for 20 hours in exchange for currency.

  • I will compete at a tournament for which I will be compensated a certain amount of money for my performance.

  • I will engage in sponsor content for which I will be paid a certain amount.

Once the service is rendered one of the parties is then obligated to pay the agreed upon amount. However as we know there have been many cases where this party renegotiates for an alternative rate or absconds with the payment altogether. The recourse for the wronged party is to seek legal action which is time consuming, difficult, expensive, and frequently ineffective.

It gets even more complicated if the two parties are in different international jurisdictions.

You would not have this problem on the Ethereum Blockchain. Via it’s smart contract system, once both parties agree to the contract, the contract will automatically execute. Parties agree to terms, designate mutually agreed upon “watchers” for the contract (or utilize API hooks to monitor the desired metrics) to execute the contract.

In essence it acts as a computerized escrow account over which neither party has full control over.

 

ORGANIZATIONAL FUNCTIONALITY

eSports Startup Firstblood (Photo: Firstblood)

eSports Startup Firstblood (Photo: Firstblood)

The Ethereum blockchain allows the creation of custom tokens. These tokens can be used to weigh votes, signify membership, and interface with contracts.

In eSports this can be utilized to create a Pro Players Union that can provide benefits. Tokens can be awarded based on smart contracts. Union rewards and fees can be collected programmatically from each member’s connected wallets.

 

FUNDRAISING

Many an eSports Kickstarter has collected funds from the community without ever providing the advertised result. With Ethereum you can design smart contracts that connect to custom created tokens. These tokens can be sold to raise funds. If the agreed upon product never materializes, the currency pledged by the community can be returned back to the community.

Additionally third party services such as Kickstarter or GoFundMe will be cut out of the equation resulting in more funding going directly to the project.

Many of the Apps being built on the Ethereum blockchain are funded through this method. Some have been able to raise incredible amounts of money in a short period.

 

CONCLUSION

There is a lot of functionality in Ethereum already and I encourage you to explore the topic at greater length. The above ideas barely scratch the surface of what is possible with this decentralized technology.

Institutions such as Bank of America and Microsoft have already made inroads in building their own products on the Ethereum blockchain and many other traditional players are entering the space.

 

Utilized properly the Ethereum blockchain can eliminate many of the Wild-Wild-West antics of eSports while maximizing organizational efficiency.

[Edit: There are few startups-  Firstblood, Skincoins, DMarket, NeverDie and activity - Hungry Panda Games ICO-  in the space that The Next Level will cover next]

Startup Dmarket (Photo: Dmarket)

Startup Dmarket (Photo: Dmarket)