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Message: August Esports Investments Recap
 
Teams:

August saw a number of strategic investments in the esports industry. Five teams raised additional funds to scale their businesses including STILL8’s $4.5M USD investment and former NBA player Kevin Garnett backing Triumph Esports. Allied Esports Entertainment finally closed the business combination first announced in December 2018. BITKRAFT Esports Ventures led two more investment rounds to get their esports investment count up to seven for the year so far. Millennial Esports cemented its global restructure and refocus on esports racing by acquiring motorsport simulator manufacturer Allinsports and raising investments from former Formula 1 drivers.

During the month of August, The Esports Observer tracked $35.25M in disclosed investments excluding the business combination of Allied Esports Entertainment. Financial terms were not disclosed for all deals highlighted in this article.

Allied Esports Entertainment Deal Finalized

Allied Esports Entertainment (AESE), a special purpose acquisition company (SPAC) known as Black Ridge Acquisition Corp. before the deal, finalized its business combination with esports property and production facility owner Allied Esports and World Poker Tour operator WPT Enterprises. Both assets had been acquired from previous parent company Ourgame International. Ourgame CEO Frank Ng will serve as CEO of AESE.

With the closing of this transaction, the previously announced equity investments of $5M each by Mexican media company TV Azteca and U.S. property company Simon Property Group have been realized. Lyle Berman—a member of the board of directors of both Black Ridge Acquisition Corp. and its sponsor Black Ridge Oil & Gas, and the largest shareholder of the sponsor—invested $3M. Furthermore, Morris Goldfarb, chairman and CEO of American clothing company G-III Apparel Group, invested $2M. In total, Allied Esports Entertainment raised $18M; the source of the remaining $3M has not been disclosed by Allied Esports.

In addition to equity investments, TV Azteca and Simon Property will enter strategic alliances with AESE. Simon Property will integrate gaming venues and production facilities in its properties around the U.S. In May, TV Azteca and Allied already collaborated to create a PLAYERUNKNOWN’S BATTLEGROUNDS esports series called NATION VS NATION, which featured 40 competitors in a “USA vs. Mexico” format. The tournament’s Mexican broadcast reached over 2M viewers.

Going forward, TV Azteca and Allied will expand their work together through a number of projects including building a flagship esports venue in Mexico and creating a 24-hour digital esports channel for the Mexican market.

Roundhill’s Take: The SPAC transaction, which was initially announced in December 2018, has finally closed. As a result, the public markets have another “pure-play” esports company, joining the likes of Super League Gaming and Enthusiast Gaming. According to Company IR, Adjusted EBITDA is projected to turn positive in 2020, at a projected $8.7 million. 

STILL8 Pushing Expansion

South Korean esports company and Team Griffin parent STILL8 raised ₩5B KRW ($4.5M) from Korean investors Dunamu & Partners, and Murex Partners. To date STILL8 has raised a total of ₩23B ($19M) from investors including Kakao Ventures, Partners Investment, STIC Investments, TS Investments, and Neptune.

STILL8 is planning to cooperate with fintech firm Dunamu, an affiliate of Dunamu & Partners, following the investment. Existing STILL8 investor Kakao Ventures is one of the major stakeholders in Dunamu.

Both Lee Beomsuk, CEO of Murex Partners; and Kang Dongmin, vice-president of Murex Partners; are familiar with STILL8’s growth potential as they were with Partners Investment when the firm invested in STILL8 before they established Murex Partners.

Proceeds from the funding round will be used to continue investing in building Team Griffin’s brand and expand into new games and geographies. The current investment is a bridge funding supporting the scaling of the business while looking for further investments in 2020.

Roundhill’s Take: STILL8 looks to continue optimizing its Team Griffin brand outside of South Korea. This follows its move in July to partner with Huya for Team Griffin’s Chinese streaming, a contrast to similar deals signed with rival streaming platform DouYu by STILL8 on behalf of Gen.G and SKT T1. Competition for content is increasing between Chinese platforms, as it is in North America, following Ninja’s move from Twitch to Mixer.

FaZe Clan Adds Next Celebrity as Investor

American rapper and songwriter Kiari Kendrell “Offset” Cephus joins the likes of music artists such as Canadian rapper Aubrey “Drake” Graham (who invested in 100 Thieves in October 2018), DJ Steve Aoki, pop-rock band Imagine Dragons (who invested in Rogue parent company ReKTGlobal), and Canadian rapper Daystar “Tory Lanez” Peterson (who invested in Luminosity Gaming) in backing an esports organization.

The musician made an investment in esports organization FaZe Clan. Financial terms of the investment were not disclosed.

In April, NBA player Meyers Leonard invested in the organization. Both investments are a combination of equity investment and strategic alliance to help build the FaZe Clan brand in the intersection of esports and entertainment

Roundhill’s Take: As esports monetization progresses, leading gaming organizations continue to focus on establishing themselves as content, media, and apparel brands. From a strategic perspective, bringing on Offset as an investor can help widen the brand’s reach. It is not difficult to imagine a scenario where brand loyalties evolve well beyond the scope of gaming and esports.

Teams Find Backing From Mexico, India, and an NBA Legend

Pittsburgh Knights, an esports organization backed by the NFL’s Pittsburgh Steelers, raised an investment from Mexican esports investment fund Esports MX LATAM. The proceeds of the investment will be used to carry out the Pittsburgh Knight’s current business strategies including global expansion and joint ventures. The Esports MX LATAM fund and the Knights are also partnering to set up an affiliated esports team in Mexico.

Full service esports company and parent organization of Overwatch Contenders participant Triumph Gaming, Triumph Esports, raised an investment from 15-time NBA All-Star Kevin Garnett though his event management and production company, Big Ticket Sports. Triumph Esports will add an esports experience to the established three-on-three basketball tour Hoop It Up, that is organized by Garnett’s Big Ticket Sports.

Indian esports organization Global Esports received a multi-million dollar seed investment from Venture Catalysts, an Indian incubator and seed investor. Besides fielding teams in Overwatch, Fortnite, Counter-Strike: Global Offensive (CS:GO), Dota 2, PLAYERUNKNOWN’S BATTLEGROUNDS (PUBG), Tom Clancy’s Rainbow Six Siege, Apex Legends, and PUBG Mobile, the company also owns and runs the Indian national team for the Overwatch World Cup.

BITKRAFT Led Investments

In-game advertising platform Anzu.io announced that it has raised a $6.5M Series A funding led by BITKRAFT Esports Ventures. Other investors in the round were British advertising and public relations company WPP and Axel Springer Digital Ventures, the venture capital arm of media and technology company Axel Springer.

Catering to a more casual audience is BITKRAFT’s seventh investment of the year, The Ready Games maker Ready. The casual mobile games esports tournament platform operator closed a $5M Series A funding led by BITKRAFT. Other investors in the round included Comcast Ventures and Eldridge Industries.

Millennial Esports Focusing on Racing Esports

Allinsports, an Italian motorsport simulator manufacturer, was acquired by Millennial Esports, who purchased a 51% stake in the company for $6.25M. Millennial has the option to purchase the remaining 49% in a six-month timeframe beginning 18 months after the closing of the first transaction. Allinsports’ eRacer simulator will be used in Millennial Esports’ upcoming World Fastest Gamer competition.

As part of a $15M investment via a non-brokered private placement of convertible debentures, former Formula 1 drivers and race winners Brazilian Rubens Barrichello and Columbian Juan Pablo Montoya invested in Millennial Esports. The two race drivers will take on ambassador and special advisor roles to help the company with insights and credibility.

Other Investments

Credit: Statespace

Statespace, developer of the AI-based esports training app Klutch, raised $2.5M in seed funding led by FirstMark Capital, an early investor in Riot Games and Discord. Other investors in the funding round included Expa, Lux Capital, and WndrCo. Investment.

Tournament operations platform Matcherino received $1.5M in a Series A-1 investment from Galaxy Digital’s Galaxy EOS VC Fund and Wells Fargo Strategic Capital. While the Series A-1 funding round has raised more than $4.1M to date including investments from aXiomatic Gaming and Seven Peak Ventures, the company has raised more than $7.7M in total.

Roundhill Investments is a registered investment adviser focused on developing innovative financial products designed to offer exposure to investment themes that appeal to the next generation of investors. To learn more about the company, please visit roundhillinvestments.com.

The Roundhill BITKRAFT Esports & Digital Entertainment ETF (“NERD ETF”) is designed to offer retail and institutional investors exposure to esports & digital entertainment by providing investment results that closely correspond, before fees and expenses, to the performance of the Roundhill BITKRAFT Esports Index (“NERD Index”).

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus. Read the prospectus carefully before investing.

For current fund holdings, please click here.

Investing involves risk, including possible loss of principal. Esports gaming companies face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources, or personnel, may have products that face rapid obsolescence, and are heavily dependent on the protection of patent and intellectual property rights. Such factors may adversely affect the profitability and value of video gaming companies. Investments made in small and mid-capitalization companies may be more volatile and less liquid due to limited resources or product lines and more sensitive to economic factors. Fund investments will be concentrated in an industry or group of industries, and the value of Fund shares may rise and fall more than more diversified funds. Foreign investing involves social and political instability, market illiquidity, exchange-rate fluctuation, high volatility and limited regulation risks. Emerging markets involve different and greater risks, as they are smaller, less liquid and more volatile than more developed countries. Depositary receipts involve risks similar to those associated with investments in foreign securities, but may not provide a return that corresponds precisely with that of the underlying shares. Please see the prospectus for details of these and other risks.

The Roundhill BITKRAFT Esports Index is the first rules-based index designed to track the performance of the growing market of electronic sports, or “esports”. The Index consists of a modified equal-weighted portfolio of globally-listed companies who are actively involved in the competitive video gaming industry. This classification includes, but is not limited to: video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware companies.

Source: https://esportsobserver.com/august-esports-investments-recap/

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