Building a Unicorn In Sports: The 3 Common Themes

Breaking down the 3 common themes of $1 billion-dollar companies in sports.

I now own equity in over a dozen sports companies.

The thing is…

Most of them will fail, but statistically speaking the more investments I make the greater the chance one of them becomes a unicorn ($1B+ company).

And this got me thinking…

What does a billion-dollar sports company look like?

Let’s Dive In 👇

Capital + Acquisitions

The biggest companies in sports all do two things at some point…

1. Raise a lot of venture capital

2. Start to acquire companies

Look at the funding amounts for companies valued over $1B:

• Fanatics: $4.9B

• Sorare: $737M

• Zwift: $620M

• FanDuel: $416M

• BetKing: $337M

• Hudl: $228M

• Pixellot: $218M

• Overtime: $215M

Also keep in mind…

Around 50% of billion-dollar sports companies eclipsed that valuation in the last few years.

The story is similar for acquisitions:

• Fanatics: 9

• Mindbody: 9

• DraftKings: 8

• Teamworks: 6

• Hudl: 5

• TeamSnap: 4

But interestingly…

Nearly all of these companies started small.

Niche, Niche, Niche

I’ve talked about this before so I won’t go too deep…

1. The biggest and most successful sports companies started small.

2. They then aggressively raised money to scale into more niches.

3. From there they typically started making acquisitions and/or partially cashed out by taking PE money.

4. A handful have then had the honor of the IPO process.

Consumer (B2C) have their differences compared to business-to-business (B2B).

B2C Sports Blueprint

Whoop is the perfect example.

They focused relentlessly on creating the best possible product then brought on golfer Rory Mcilroy as an investor and brand ambassador when they were finally ready.

He would wear the wrist brace on tour and post his heart rate data after tournaments.

This did a few things:

1. allowed Rory to test out the technology and have equity upside

2. created awareness for the brand

3. enabled scaling from sports to the general population

Whoop did the same thing with Patrick Mahomes in football and Kevin Durant in basketball.

The result?

Whoop is now a multi-billion dollar company (and the use of wearables to track biometric data has become normalized).

I expect to see this model replicated more in the future — with heavy use of marketing costs (and even equity) on professional athletes.

B2B Sports Blueprint

Hudl is a great example.

They started perfecting their video software product with the football team at the University of Nebraska.

Ambitions at the start were about giving the Huskers an edge.

Once perfected, it was time to create a real business and scale to other college football teams, then high school + pro teams, and eventually other sports.

They’ve raised a lot of money to not only scale — but also acquire complementary assets and new products.

And while both Whoop and Hudl are American companies — the potential is now there globally.

Global Sports Unicorns

Here’s what’s interesting…

When you look at the top 5 cities with the most sports tech investment over the last year you might notice something:

Over 90% of the funding is because of 1 major company.

Paris (Sorare), Mumbai (Dream 11), Jacksonville (Fanatics).

Looking at investment figures across the globe tells a different story:

• North American companies received $6.5B in funding last year (161% increase YoY).

• Asia-Pacific received $3.2B (+370% YoY).

• Europe received $1.9B (+325% YoY).

North America received over 50% of the funding, with the Asia-Pacific region growing the fastest (in large part to India).

Sports monetization is taking shape globally.

Going Forward

With so much capital entering sports at the later stages ($6B so far in 2023) we’ll continue to see more unicorns.

The bigger players (both companies and PE firms) are going to look to acquisitions.

CONSOLIDATION IS COMING TO SPORTS.

And if you want to build a unicorn:

• obsess over your product

• obsess over your customer

• start niche, then expand

Someone who knows a thing or four about starting a sports company is today’s podcast guest.

Podcast 🎙

Sports Entrepreneur, TV Analyst, and former MLS player Kyle Martino.

Martino’s portfolio includes Street FC, Football Cafe, Over Under Initiative, and Goalpher.

You’ll enjoy this episode as we discuss:

• Glaring problems in youth sports

• His journey from athlete to entrepreneur

• Building a “pyramid” of complementary companies

Check out the podcast episode here.

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Thanks for reading today!

Have an awesome weekend.

Peace,

AP