Oct 3, 2023

Insider compiled a list of the top venture capital investors pouring money into sports. Leaders of 10 VC firms offered advice for sports startups trying to fundraise in a tough market. The startup scene in 2023 is bleak. Investor Tom Loverro called it a " mass extinction event for startups ." A cooldown in funding over the last two years is leading some startup founders to turn away from venture capital and start bootstrapping their companies. In the sports world, betting and gambling startups have started the last two years raising fewer and fewer funding dollars . This story is available exclusively to Insider subscribers. Become an Insider and start reading now.Have an account? Log in . While funding is harder to come by, startups are also facing changes in the world of sports business and technology. Think esports, sports gambling, and youth sports. Think AI, streaming, and social media. Think of the new generation of fans changing the ways audiences watch and engage with sports. "I think we're entering a new cycle for our industry in general," Cole Van Nice of the sports investment firm Elysian Park told Insider. He said he predicts continued growth of health, culture, commerce, and technology in relation to sports, as well as "a wave of consolidation" where specific technologies fold into larger platforms. Insider recently released a list of the top VCs investing in sports and asked their founders, CEOs, partners, and directors what they would tell startups trying to break through. Here's the advice sports VC leaders give to startups looking to raise money in the coming years, in alphabetical order by firm name (answers have been edited and condensed): Chris Grove, cofounder and partner, Acies Investments, EKG Ventures: Adjust your timeframe Grove. Key investments: Acies Investments and EKG Ventures are focused on sports, gambling, and technology. His advice to fundraisers: Expect it to take longer than you think, especially if you've raised money in the past couple of years. Everyone is on a slower track. Diligence is more thorough than it was a year or two ago. There's also less competition for deals than there might have been a year or two ago, so build in that extra buffer to get the commitments and get funding. Deepen Parikh, cofounder and partner, Courtside Ventures: Have a good story Parikh. Courtside Ventures Key investments: Founded in 2016 to invest in sports, lifestyle, and gaming, Courtside has backed Tom Brady and Michael Strahan's media company Religion of Sports; Veo, a subscription platform for youth sports; and Mojo, a sports betting platform, among others. His advice for fundraisers: We are a very founder-centric fund, so the storytelling aspect is really important. The other thing is the ability to address a big addressable market. We're a thematic fund and people often think about how to solve a specific use case; we're looking for fund-returning potential. Some say it's good to find a warm intro; that will help, but one of our biggest investments came in cold. The timing was really good, it was a space we knew really well. It also didn't hurt that they were growing really fast. We look at everything. Meredith McPherron, CEO, Drive by DraftKings: Gather proprietary data, which is essential to compete Meredith McPherron. Drive by DraftKings Key investments: The VC firm has invested in 19 sports and gaming, fandom, and human-performance startups since launching in October 2021, including the ticketing startup Jump cofounded by Alex Rodriguez. Her advice to startups looking to raise capital: Put in a plan to accumulate proprietary data, which is essential to competing in the world of sports tech. Raise 24 months of cash at a reasonable valuation. Build a core A-team with the ability to attract more A+ talent, as investors consider high quality teams as a risk mitigator for big bets. Know what's driving value and challenging convention in your space. And have a plan to acquire customers in a differentiated way. It will show discipline and thoughtfulness and build confidence in investors and team members alike. Cole Van Nice, cofounder and managing partner, Elysian Park Ventures: Grab the industry's attention with a fresh idea Van Nice. Elysian Park Ventures Key investments: The firm focuses on sports and sports-adjacent investments, including the collectibles marketplace Arena Club, baseball and softball tech company Diamond Kinetics, and gaming platform Splash Sports. Elysian Park Ventures established in the past year a fund specifically to invest across golf in partnership with the PGA of America and Topgolf Callaway. How to succeed in sports: Do something that requires very little capital but that gets the sports industry's attention — something in the area of health, culture, commerce, or technology that establishes you as a new voice worth listening to. Believe us, this industry is looking for new voices, because the old ones are getting short on answers. Brad Farkas, co-founder and general partner, HBSE Ventures: Conserve cash — the quickest way to fail is to run out of money Key investments: HBSE has made around 20 investments across sports and sports-adjacent areas like entertainment, sports betting, and exercise, including Buzzer, a sports content app; Swoops, an NFT-based fantasy basketball game; and Anzu, a programmatic ad platform for video games. How to survive a tough environment: We recommend to all our early stage companies that they manage their cash very carefully and limit their run rates. No national advertising campaigns or speculative spending or R&D that is not strategic and imperative. The quickest way for a company to fail is to run out of money. And have enough lead time to raise future rounds. The window used to be, you can have three months to raise; give yourself at least six months. Raise money around valuation inflection points, like winning an award, releasing a new product. Steve Ahern and Lance Dietz, partners at KB Partners: Keep customers top of mind Key investments: Chicago-based KB Partners invests at the intersection of sports and technology; its portfolio includes fan-engagement company FanPower, fantasy platform for motorsports GridRival, and Stadium Live , an app for Gen Z fans. How they advise founders: Build for the customer or user, not investors. At the seed stage, we encourage founders to rapidly experiment and iterate on their product; develop a deep understanding of the target user and how they're interacting with product features; build a culture that can withstand the ups and downs of company building; and have an eye on unit economics as the company scales. These priorities can inch founders towards the elusive goal of product-market fit, which can open up fundraising opportunities for the next phase of the business. Craig Thompson, founder, Mindspring Capital: Have a unique product, and show it works Key investments: With a focus on sports tech, Mindspring's portfolio includes LIGR Live, a sports livestream company; Credenza, which uses the blockchain to enhance teams and athletes' relationships with fans; and Pumpjack, a fan data platform. What fundraisers should know: It's a tough time for raises; valuations tend to be down. When we invest in a tech company, we have four criteria. The tech has to be unique and solve a problem that hasn't been solved. It has to drive revenue or save money on costs. The tech has to be easy and inexpensive to onboard. And they have to have case studies that show it works. If they do that, they don't have to worry about investors. Michael Proman, managing director, Scrum Ventures: Be flexible Michael Proman. Scrum Ventures Key investments: Proman manages a sports and entertainment fund formed in December by Japanese VC firm Scrum Ventures. Its investments include Boom Entertainment , which creates gaming products for sports and casino brands; and Tappp , which uses tech to place bets on-screen during live sports streams. What he advises founders: It's inherent in founders' DNA, but having the ability to make adjustments and be practical is critical. Sub-optimal market conditions require investors to step up and play a more active/supportive role so make sure your cap-table is comprised of the type of partners that have the ability to do the intangibles and GSD. If all you want is money, go to a bank or befriend some high net-worth individuals. Wayne Kimmel, managing partner, SeventySix Capital: Focus on building your network Key investments: SeventySix has had a sports tech and gaming focus since 2016. It's invested in 25 sports companies and sold four in the past couple of years, including sports betting broadcast and content company Vegas Sports Information Network, Inc., which sold to DraftKings; and sports-betting startup Vigtory, which sold to FuboTV, now called Fubo. His advice to founders: Entrepreneurs should strive to be experts and dynamic leaders; surround themselves with people smarter than them; and build a network in the sports, tech, and sports betting industries. Lloyd Danzig, managing partner, Sharp Alpha Advisors: Show investors you're someone to invest in Key investments: Sharp Alpha Advisors centers on sports, gaming, and entertainment, with investments ranging from the newly relaunched SlamBall league to the digital-lottery company Jackpot.com . His advice to fundraisers: It's more important than ever to stand out and to show investors that you are someone whose future earnings they want to own a stake in regardless of what you happen to be building at the time. Sign up for notifications from Insider! Stay up to date with what you want to know. Subscribe to push notifications