eSports: e is for extremely investable

Danish eSports team Astralis

Danish eSports team Astralis

I've long been bullish on the investment opportunity around eSports and as such invited Nikolaj Nyholm investor at Sunstone Capital and eSports backer and enthusiast to talk around the topic at Nordic Next this year. 

Originally, I suggested that the focus of the talk should be on the investable opportunity that eSports presents, but Nikolaj decided to instead demonstrate in the talk that eSports isn't something strange or out-worldly that needs demystifying as an investment opportunity and is simply a natural step from investing in gaming startups.

I stop using the word sport and I start using the word entertainment, and then it clicks
— Nikolaj Nyholm, Sunstone Capital

Some of the main points Nikolaj made to press this home:

  • The League of Legends Grand final 2015 was in Madison Square Gardens sold out in 22 seconds for 28,000 people
  • Every Friday night him and his 14 year old son catch a game together
  • Viewer numbers are already at Superbowl levels for the biggest tournaments
  • ESPN are signing a $500 million 4-year deal to broadcast League of Legends, also a 24 hour eSports channel is coming up for Europe

And in terms of the 'investment opportunity' Nikolaj highlighted:

  • Direct revenue per fan is still low, average NFL fan spends $60 a year, eSports $3.5 per year and fan base is growing dramatically both core and average
  • YouTube used to assist with Minecraft's growth but a change happened a couple of years ago, where Minecraft was driving YouTube numbers as the desire to watch gaming increased
  • Prize pools are growing exponentially and are crowdsourced
  • The millennials that everyone are chasing right now are right here


And it's becoming increasingly clear that investors in the Nordics are beginning to cotton on to all of this, as we've tracked 10 eSports investments in the last 18 months, with 6 of these happening in the last 6 weeks alone.

Incredibly, this has meant that of the last 7 Nordic gaming investments we've tracked, 6 of these have occured in eSports.

All of these investments bar one (Strafe at $1.53 million) are below $1.5 million, clearly demonstrating that this is a new area that's attracting investment, however, what's particularly interesting is what the investments are being made in. 

They include eSports teams, eSports news sites, streaming platforms, indicating that an ecosystem around the area is being built and most importantly, is being provided the fuel to do so.

In terms of a concrete example of the type of revenues involved of eSports teams/startups attracting capital, Breakit reported last week on Swedish Counter Strike team Ninjas in Pyjamas, revealing they'd recently attracted a new $600,000 investment on revenues of $2.1 million last year, with a rather modest profit of $83,000.

The Nordics have been at the forefront of some of the biggest global gaming successes with Candy Crush, Angry Birds, Clash of Clans, Minecraft etc, and if eSports is the natural step for investors in gaming startups, then the Nordics have a strong chance of being the natural destination for eSports activity. 

And while Nikolaj's talk was titled eSports: e is for entertainment, his presentation and the recent increased activity demonstrate that not only is it for entertainment, it's also for extremely investable. 

In the tech world, things move fast and companies are born anywhere in the world. I’m able to have an ear to the ground with The Nordic Web - the content is fresh, local, and of high quality, which is exactly what you need as a seed investor.

In fact, it’s through Neil Murray’s newsletter that I first heard about Mapillary. Several months later, I was fortunate to lead our firm’s investment in the Company to help drive the creation of a crowdsourced visual representation of our world
— Nathan Benaich, Playfair Capital