Esports is a booming business according to surges in funding for top esports teams in the past ten months. G2 Esports, Cloud9, and Team Liquid have all posted record fundraising numbers since the beginning of 2018. Additionally, the amount of funding deals in esports has more than quadrupled since 2015 according to Crunchbase.
The new-fangled sport is on an undeniable upward trajectory. In just the past six months, aXiomatic (Team Liquid’s parent company), Cloud9 and G2 Esports have received a combined $103.3 million in funding from investment entities and celebrities.
Notable esports Funding
AXiomatic saw $26 million in Series C funding in October of last year from existing stakeholders and two new investors: Michael Jordan and Declaration Capital. Yes, the Michael Jordan. Jordan reunited with former teammate Magic Johnson in becoming a Co-Owner of aXiomatic. Declaration Capital invested on behalf of David Rubenstein, the co-founder and executive chairman of the equity firm Carlyle Group.
In the same time span, Cloud9 raised $50 million in Series B funding, spearheaded by Antonio Gracias of Valor Equity Partners. Gracias joined Cloud9’s board. Other investors in the funding round include Robert Hohman (founder of Glassdoor), TrueBridge Capital Partners, and Reimagined Ventures.
Finally, yesterday G2 Esports announced they had raised $17.3 million in their Series A funding round. Everblue Management, Parkwood Corporation, and Seal Rock Partners were the major investors.
Well, that’s actually a quite simple question to answer. Esports is an extremely fast-growing industry; Crunchbase reports that market researcher Newzoo has estimated that by 2020, esports will have a market value of $1.4 billion, more than double what its share was in 2018. Valve’s DOTA 2 prize pool for the 2018 Invitational was the second highest prize pool out of niche sports like golf, tennis, and horse racing at $25.5 million. In fact, only Wimbledon had a higher pool at $43.8 million. The 2018 League of Legends World Championships drew over 200 million viewers at once, according to ESC.watch, a website that tracks views across esports tournaments.
Publishers take notice
Additionally, video game developers and publishers are catching on, creating more competitive games as they shy away from single-player titles. Activision-owned Respawn Entertainment released the battle royale game Apex Legends earlier this month to critical acclaim. Within the first week, Apex Legends had 25 million unique players as announced by Respawn CEO Vince Zampella on Twitter.
I’m so overwhelmed right now, @PlayApex broke a million unique players in under 8 hours. ❤️❤️❤️
— Vince Zampella (@VinceZampella) February 5, 2019
Not bad for a game that no one knew about until it was given a surprise release bolstered by influencer agreements and an aggressive social media campaign. Apex Legends follows several extremely successful battle royale games like Fortnite and Player Unknown’s Battlegrounds. In other words, it has iterated on systems introduced by its predecessors, and become more successful for it. Look for others to follow suit.
The World Wants In, Too
Esports has become mainstream. No longer is it the domain of parent’s dimly lit basements. Simply put, the world is starting to take notice, starting with governments and countries around the world. ESTNN reported earlier this month that China has officially recognized esports as a profession, making it easier for its residents to make a living off the sport. Additionally, the decision streamlined the process for obtaining visas to compete in the country. Astralis, a Danish Counterstrike team, were invited by the Lord Mayor of Copenhagen to the “Pancake Celebration” held at city hall to celebrate their accomplishments in the sport.
Not all Roses
Ultimately, esports has proved itself as a solid investment, but only if firms and individuals get in with the right crowd. Yesterday, the first esports tournament organizer debuted on the Nasdaq. After an IPO that raised over $20 million, Super League Gaming opened the day on the exchange at $11.00. Unfortunately, by the end of the day, the share price had fell to $8.50. According to a filing with the Securities and Exchange Commission, Super League Gaming has lost $27.2 million since 2017.
Just like any burgeoning sector, esports has had its fair share of trouble, with Super League Gaming being only the most recent example. The only recourse to investors is to choose established brands to partner with. As more esports decide to franchise teams, multiple investment opportunities will arise.