The sport tech sector is booming with record numbers of new start-ups entering the market and investment levels soaring. In 2021, more than $12.7 billion was invested in sport technology firms making it a record year for the industry.

The sector is now worth in excess of $18 billion globally and, according to the latest research by Research and Markets,  many investors have been attracted by a predicted compound annual growth rate of 17.5% from 2021 to 2026.

The pace of growth has been dramatic when compared to the early part of the previous decade when US$6 billion, less than half the 2021 figure, was invested globally between 2011 and 2015.

In the decade that The STA Group has been operating in sport tech, we’ve seen a seismic shift in how investment and exit strategies have evolved, it used to be that the majority of founders expected to wait several years to get the financial backing required to scale operations. That is no longer the case.

Today, the rise in investor activity has been driven by the ongoing technological transformation across the global sports industry and facilitated by the launch of dedicated sports tech accelerators and venture funds.  This has, in turn, turbo-charged the funding received by super early-stage start-ups who can now attract multi-million dollar investments.

Typically, Series A rounds raise approximately $2 million to $15 million, but this number has increased rapidly due to high tech industry valuations and an increase in unicorns. In 2021, the median Series A funding was $10 million. 

Its clear start-ups are scaling faster than ever before and there are many instances which prove this. For example, in February 2021, soccer-focused non-fungible token (NFT) platform, Sorare, banked $40m at Series A stage and a whopping $680m six months later during one of Europe’s biggest ever Series B rounds. This resulted in a valuation of $4.3 billion.

It isn’t just investment which is increasing in the sector, so are M&A and buyouts. Sports tech is a sector which ‘eats its young’ and, Big Tech, in particular, is acquiring rather than investing, not least because it enabled them to fast-track innovative services as a turn-key solution.

Data from Refinitiv reported by the Financial Times showed that tech companies inked a record 9,222 transactions to buy start-ups worth less than a billion dollars in the first nine months of 2021. That was double the previous record registered in 2000 during the dotcom boom. 

Whilst these deals, to some degree, are driven by eliminating competitors, a greater motivation today is the acquisition of proprietary technology, expansion and diversification of products and services, and most crucially, access to talent, which has never been in such scant supply. On a cautionary note, it is all very well bulk-buying payroll, but start-up employees didn’t sign up for a corporate environment, meaning it can be too big a leap for many.

However, for today’s sports tech start-ups, the picture has never been so bright. We are delighted that so many exciting young brands will be in attendance alongside industry behemoths (and future investors) at The Sports Technology Awards on 12 May. We’ve always maintained that innovation isn’t driven by size, it is driven by vision, and there’s no shortage of that in our sector.

Photo by Proxyclick Visitor Management System on Unsplash

The last 18 months has seen cryptocurrency companies become some of sports’ biggest advertisers and sponsors as part of their drive to push mainstream adoption of digital asset classes.

From Crypto.com’s 20-year, $700 million naming rights deal to the LA Lakers arena, to Coinbase’s wide-ranging deal with The NBA, and the 17 Premier League clubs who have sponsors in this space, crypto brands have invested billions of dollars into sport properties in record time.

With sports sponsorship from blockchain companies projected to reach US$5 billion by 2026, according to a recent report by Nielsen, crypto and associated technologies look set to play an increasingly significant role in the global sporting ecosystem.

This is in part because sport is proving to be a rich territory for crypto companies; according to recent poll by Morning Consult, US sports fans are about twice as likely as non-sports fans to say they are familiar with cryptocurrencies, and 24% of respondents said they were sports fans who owned crypto.

The growing impact of crypto companies’ investment in sport properties was highlighted by February’s Super Bowl, where the halftime ads were dominated by leading companies like Coinbase, Crypto.com, eToro, and FTX. Coinbase alone spent nearly $14 million on its ad and registered a record 20 million hits on its landing page in one minute after it aired.

By the end of 2021, the global crypto market had roughly 295 million users – a threefold increase from the start of the year. Whilst the degree to which this growth can be attributed to the industry’s sport-related sponsorships is hard to quantify, but mainstream adoption is happening and crypto is growing in popularity.

Blockchain and cryptocurrency technologies continue to polarise opinions amongst financial analysts and experts. Many critics – often of an older demographic – dub crypto nothing more than a Ponzi scheme; conversely, I’ve seen respected commentators suggest that an investment portfolio without a percentage of crypto is the poorer for it. Certainly crypto is no longer the preserve of personal users and the number of institutionalised investors is growing. In 2021, venture capital firms invested $32 billion into crypto- and blockchain-related firms, and 43 crypto-native companies reached the $1 billion valuation mark.

Regardless of where you stand in the debate, the rise of crypto assets grants opportunity and excitement for the sporting world and shows no signs of slowing down. In the UK, cryptocurrency sponsorships are being viewed as an alternative to deals with betting brands as the government prepares a widespread ban on gambling advertising in sports.

Globally, as well as the high visibility naming rights deals, there are many different – and exciting – application opportunities such as fan tokens (which formed part of Messi’s PSG contract), collectibles, payment services and ticketing platforms.

Indeed, sport has only scratched the surface of what is possible using blockchain technologies and the investment levels seen so far are predicted to grow substantially. If your brand or organization has been mulling over this technology, now is definitely the time capitalise on the crypto charge.

It seems that sport is awash with NFTs (non-fungible tokens), with every daily trade bulletin containing stories of brands launching them, companies supplying them or sports stars investing in them. But what are they?

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Eating The Big Fish: How New Governing Bodies are Sport’s Latest Challenger Brands  

Casey Harwood: Commercial Director; Engage Digital Partners

We love to hear the opinions and thoughts of our network, and here are the thoughts of Casey Harwood, Commercial Director of Engage Digital Partners. In this piece, Casey looks at how sports’ challenger brands can – thanks to the increased prevalence of Private Equity in the sector – ‘Eat the Big Fish’ successfully.

 

Adam Morgan’s 1999 book, ‘Eating The Big Fish – How Challenger Brands Can Compete Against Brand Leaders’, remains as relevant today as it was then. Today, the agent of change has been the democratisation of content, with COVID19 accelerating it, combined with the new dynamic being brought to bear by Private Equity.

You don’t have to look far to see how this trend has been headlining over the past year or so; following a successful stint in F1, CVC is increasingly invested in rugby. Similarly, around 20 private equity firms have expressed an interest in a $300m stake in the Bundesliga; whilst the powerhouse that is Silver Lake, the technology investment specialists, is involved in a range of interests from UFC to City Group.

Successful rights holders in today’s market are the ones which have invested in a measured, content-led fan engagement plan, monetising it along the way to give greater self-sufficiency in an OTT world and thus converting to higher valuations in the future.

In these interesting times, the saying that ‘hungry stomachs make for keen minds’ has rarely been more apt, but far from being a negative force in driving commercial & financed backed partnerships – sometimes between surprising bedfellows, what the brands entering these partnerships are learning is that 2+2=4 or more; whatsmore this isn’t just about Private Equity.

One sport which is the standard bearer for this is horse racing. Given its footfall – the largest in the UK after football – where were the ‘hungry minds’ here? In short, several rights holders realized that despite the sport’s scale, access to data and off course focus, the betting companies were doing a better job engaging fans’ hearts, minds…and wallets, and action was needed to reclaim its market – by working together.

The initial journey in redressing this came in the form of World Horse Racing (WHR), a joint venture between VRC, Ascot, Goodwood and the Breeders Cup. Focussing on D2C digital platforms, despite having no direct access to the uber-valuable live rights or instant highlights, the World Horse Racing Channel is now the fourth largest digital social channel in the sport.

The team collaborated on creations that went beyond the congested delayed-highlights packages that are the mainstay of so many digital strategies. By delivering fresh, audience-friendly long and short-form content, WHR is gaining followers at double the rate of its rivals, including Racing.com and Sky’s At The Races. With 200,000 fans & subscribers added in 2020, WHR will be the frontrunner in the sector in less than three years from launch.

This has been achieved through a strong blend of content, stakeholder alignment, seed investment and the right agency partners. The Hong Kong Jockey Club (whose annual turnover is a staggering $30bn) has now joined the partnership; a reflection on the potential of a global push in 2021.

What underpins all brands in the challenger space in sport is that each one has an outstanding handle on its own data … and private equity & investors value data very highly.

As we move into 2021, expect to see more ‘new or quasi’ governing bodies arrive on the landscape as the marriage of challenger brands and investment becomes more mutually attractive.

Be assured as this happens, the days of standard-issue TV, highlights-masquerading-as-digital-content and the ROI on content seen as only as a simple ‘minimum guarantee’ are over.

Which of us didn’t watch with increasing dismay as the promised golden year of sport rapidly lost its shine? However, as with most things, it’s an ill wind that blows nobody good and 2020 proved pivotal, positively, for some key parts of the sector.

In many respects the biggest learning from 2020 was that a tech-forward mindset is a crucial facet of a successful sports brand or organization in today’s market. When the live sport hiatus hit, the brands which could pivot to esports, maintain fan engagement through creative and targeted activation, and create and broadcast content through tech-led remote production, emerged as the industry’s success stories. The factor uniting these bodies is that technology runs through their corporate DNA; they didn’t turn to tech to solve problems in the short-term, technology had been woven into their thinking over many years. They all understand risk, tolerate it, and have an instilled open-to-innovation brand ethos, which proved to be their strength in testing times.

2020 was a year where the technology landscape was skewed by short-term fixes, the key one being artificial crowd noise. Impressive though these were, not least in the speed with which they emerged, will they still be a feature of live sport in 18 months’ time?

ROI is King

More useful is to consider how the past 12 months has revocably changed our thinking in terms of tech. Financially, times have been very tough, so every line on the P&L is under scrutiny; whether the talk is of athlete performance, fan analytics, engagement, content, broadcast, venues, digital etc… what now unites our approach to these is a greater need to see demonstrable return on investment. This is being achieved through speed of service, rationalization of human resource, cost savings in areas such as travel, or increased revenue through improved insights.

Key Trends

AI

Without doubt, Artificial Intelligence has come to the fore and is proving exceptionally effective at unearthing new insights and challenging thinking. It is a rare organization which hasn’t committed to a data harvesting on several fronts and AI is making that data more valuable.

Esports

The most notable movement expediated by the pandemic was probably esports. After years of discussion and debate around its relationship with ‘traditional’ sports, the genie is truly out of the bottle. What is now clear is that any sport which isn’t reviewing an esports strategy for 2021 is likely to be found wanting for a second time.

Venues 

With the gradual return of crowds to live sport, venue design is going to come under scrutiny. Whilst the vaccine is fundamental to this, it is likely that even if fans’ thinking hasn’t changed, venue operations managers will be cautious about optics; crammed F&B areas, questionable toilet facilities and transactions in cash might not prove acceptable in sports’ ‘new normal’.  Technology, such as in-seat ordering and blue light hygiene, can address many of these issues but will require investment to adopt.

Safety and Security

The other challenge for venues, and one to which they were sensitive to prior to this year, is that of safety. Fans must be able to return to live sport confident that better controls are in place to ensure their security. It has been proved, tragically, that human diligence alone is insufficient to achieve this, so venues will be turning to technology to ensure their events are delivered in the safest way possible. As fans flock back to live events, venues will be upgrading on many fronts.

The other security issue which increases is the threat from cyber-attack. Whilst many brands and sports people were victims, 2020’s highest profile casualty was Manchester United, which appeared to deal with the issue in an exemplary fashion. This shows that as hackers get smarter and data hauls get bigger, the hazard is greater. Whilst this isn’t sports tech per se, it is a huge consideration of technology’s importance in the business of sport.

Remote Production

The world moving to working from home has made us reflect on the necessity of having people in specified places to do their jobs. Exciting strides have been made in remote production over the past few years and wise broadcasters – as well as rights holders with robust OTT assets – adopted these to great effect. The pandemic certainly influenced us to think differently in this regard, and hopefully we’ll see it make an impact in the areas of sustainability and environmental awareness too. If it does, the types of outside broadcast mobilizations traditionally seen for major might eventually be consigned to history for good.

Performance 

Over the past few years, what has been a surprising facet of the sector is the lag in marrying great apparel and footwear to cutting edge, integrated software, sadly, the current climate is likely to further discourage this development. Conversely, technologies elevating and enhancing performance are advancing like never before. Improved biosensing has brought about the advent of individualized training prescription, optimized in response to changes in an athlete’s biochemistry, for example, through realtime access to hormone levels. Meanwhile athlete health and injury prevention remain a focus – not least of all with the latest news in rugby; several technological innovations emerging around head injury prevention and coaching tools enabling insights into conceptual areas, such as ‘bravery’, make the sector vibrant but undoubtedly much, much more is needed.

With everything that we’ve witnessed in 2020, it’s clear that the sports technology sector remains vibrant and diverse, and continues to evolve. 2020 has thrown the bottom line into sharp focus and if there is to be one take out, ensure your brand steps up the tech-thinking in 2021.