Startups focused on gaming platforms, fantasy sports, competitive gaming, and more are attracting increasing investor attention.
Investment in esports startups continues to break records, and at the current run rate is on track to reach new highs in 2017. Both deals and funding to eSports startups have generally trended upward since 2013, though deals did see a small 1.2% dip (from 84 to 83 deals) in 2016.
Last quarter, Q2’17, esports startups saw a quarterly deals record of 35 investments worth $873M in disclosed equity funding, the second-highest quarterly funding amount since 2013.
We define esports broadly to include software and hardware companies developing technologies related to competitive gaming facilitated by electronic systems, particularly video games played on computers or consoles by professional gamers. These technologies range from the development of competitive games to those providing coverage of esports tournaments, among others.
Using CB Insights data, we dug into deal and funding trends to esports startups, 2013 – 2017 YTD (9/1/17). This research brief covers:
ANNUAL FINANCING TRENDS
This year-to-date has seen 90 esports deals worth $1.2B, already ahead of full-year figures in 2015 (which saw 84 deals totaling $942M). At the current run rate, deals are projected to hit a new record of 136 deals totaling $1.9B — representing a 64% uptick in deals and a 23% increase in funding from last year.
In 2015, esports startups saw a record of 84 deals totaling $942M in disclosed equity funding. While deals in 2016 dipped to 83, funding hit a new record, growing 60% to hit $1.5B.
The largest investment so far in 2017 went to Singapore-based unicorn Sea. The startup operates an online gaming platform across Greater Southeast Asia (GSEA) that focuses on game curation, localization, user community building, and esports activities. Sea also operates a separate e-commerce platform, as well as a digital financial services platform.
Sea’s most recent disclosed round was $550M Series E in Q2’17, which saw participation from Farallon Capital Management and Hillhouse Capital Management, among others. The investment brings the company’s total disclosed funding to $722M raised since Q2’08.
In Q2’16, a $170M Series D round resulted in a $3.75B valuation for the company.
QUARTERLY FINANCING TRENDS
At a quarterly level, Q2’17 saw 35 deals, beating the previous quarterly record of 31 deals in Q3’16 and Q1’17.
The top deals in those quarters went to DouyuTV, a live broadcast platform for video games, and DraftKings, a Daily Fantasy Sports (DFS) gaming platform, respectively. DouyuTV raised a $226M Series C from Qingdao Phoenix Capital and Tencent Holdings, while DraftKings raised a $100M in a second tranche of Series E funding from Eldridge Industries.
Q3’16 holds the quarterly record for funding, with $934M invested — meaning the quarter singlehandedly accounted for 62% of the full year’s funding.
The high dollar total was driven by a number of sizable transactions, including DouyuTV’s $226M Series C and the International e-Sports Federation‘s $150M Corporate Minority round from Alibaba Group.
Though the year’s last quarter saw the lowest amount of deal activity since 2014, deals have rebounded drastically over the last two quarters, growing 170% from Q4’16 – Q2’17.
ANNUAL FINANCING TRENDS BY STAGE
Early-stage (seed / angel and Series A) deals have accounted for over half of total deal share annually since 2013. Early-stage deal share in 2017 YTD is at 63%, down from the high of 73% set in 2015.
The top early-stage deal in 2017 YTD was a $75M Series A investment to Chinese game broadcasting platform Huya. Investors included Banyan Capital and Morningside Ventures, among others.
Mid-stage (Series B & C) deal share has reached an all-time low of just 5% this year-to-date, down from 11% in 2016.
Deals falling into our “Other” category (which includes corporate minority, convertible notes, private equity, and growth equity rounds) have increased from 16% to 26% between 2016 and 2017 YTD.