Investing in Sports Feature

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The online gaming sector has witnessed a flurry of investments in sports and gambling related companies in recent months as investors get a taste for what the confluence of the two sectors might mean in terms of returns.

The move that grabbed the headlines back in October was the announcement from Sportradar that its latest investor was Revolution Growth, the venture capitalist fund that includes such luminaries as Ted Leonsis, mark Cuban and basketball superstar Michael Jordan among its founders.

Revolution has taken an undisclosed “strategic” stake in the sports data and betting product provider Sportradar. In proclaiming the deal, Leonsis said of Sportradar that it was “ahead of the curve in understanding the crucial role data plays in creating innovative content and products that captures audiences”.

He added: “With superior technology and development that is already providing the fastest, most accurate data feeds, Sportradar is well-poised to capitalize on the rapidly expanding, multi-billion dollar global sports market.”

Of course, with all this aimed at the US market, there was little by way of any mentions for gambling in all this. But Sportradar founder and chief executive Carsten Koerl’s comments to the effect that knowledge of the US sports and media market on the part of Revolution “will help us to develop cutting-edge real time data products that will change how sports are consumed in the future” could be aimed just as much at the gambling sector.

A more explicit investment in the provision of sports data services to the gambling industry comes from the recent news that Sportradar rival Betgenius has also seen a new investor take a position in the firm.

The company also announced in October that Three Hills Capital had taken a £10m stake in the newly renamed Genius Sports Group via a combination of debt and equity. Betgenius said the deal was designed to help the company grow via product diversification and to bolster its plans in new territories and to help finance potential strategic acquisitions.

Mark Locke, chief executive, said Three Hills were excited by the Genius Group’s objectives of matching its business plans with the “anticipated movement sin the sports and betting industry sectors”.

Mauro Moretti, founder of Three Hills Capital Partners, said the deal represented a unique opportunity. “The sector’s increasing regulation will with no doubt leave as winners the most internationally established and best technically prepared players such as Genius Sports Group, and create consolidation potential in the near future.”

The last slice of news came from sports-betting technology platform provider FSB Technology which again in October announced it had secured a further round of funding from new strategic investor SportsMedia Technology.

Though the company remained tight-lipped over the exact size and nature of the investment, it is believed to run into the millions of pounds.

SMT is another sports data provider, with a focus on the US where, as McDowell told GamCrowd, it collects data “on an industrial scale”. “This is about fan engagement through better data visualisation,” he added.

McDowell stressed how the issue of funding for his company had dominated his time in the past year, even as the company made great strides in terms of signing up new customers. This funding round took the best part of a year,” he says. “The last one in 2013 took 21 months to put together.”

“When you are trying to run a business, one of the key jobs is to make sure that you have money in the bank,” he points out.

He said this investment round was all about funding the expansion of the business, which has singed nine new contracts within the past year. “Now it is about delivery,” he added.

“We still need to make sure we are using the cash wisely, but we don’t want to be too stingy,” he says. “This is one of the big things with funding. At some point you have to hit the accelerator. 

But too many companies try and scale up before having a product that works. But at the other end of the spectrum, other companies have the product but don’t grow at quite enough pace. It’s a high-wire act. It’s a game of balance.”

One of the companies involved in advising on the Three Hills investment in Genius Sports Group was Oakvale Capital, the investment and advisory firm. One of its principals is Daniel Burns who also chairs Genius. Sandford Loudon from Oakvale said that what had helped with the Three Hills deal was the excitement being generated by the sports, data, technology and gambling mix represented by companies such as Genius Sports, Sportradar and, with the FSB Technology deal, Sports Media Technology.

He foresees a bright future, not only for Genius Sports but also for FSB Technology and other companies operating in the sports-betting/sports data B2B area. “Sports in the fastest-growing vertical,” he says. “There has been a massive shift from retail to online betting. Sports is a vertical people want to be in. There are now more markets, more events and people need faster and more reliable data. Plus it’s a regulator-friendly product.”

He adds one last point. If it sometimes seems difficult to attract investors to straight gambling products, this is often not the case when sports is thrown into the mix. “There aren’t enough investors in the gambling industry,” he said. “We want to attract outside investment. We need more angels and VCs in this space. And sports can do this. It can attract investors.”

Taking Loudon at his word, it seems likely we can expect more investment in the space where sports meets data and gambling.