We are frequently asked about our due diligence process at Sports Loft and how we decide whether a company should or should not be a member. Our decision-making process is hugely important to us as it ensures that we are working with the best companies and ones where we can genuinely help.
First, we ask “is this a company that we can get truly excited about?” This may seem subjective, but it matters. If we can’t get excited about it, how can we expect somebody at Man Utd, Sky Sports or a venture capital fund to get excited about it? Excitement drives a lot of our thinking, but it also backed up by two other aspects:
Is the company operating within a part of the sports industry that we think is ripe for change, what we call our focus areas (you can find out more about our focus areas here)
Is it the type of company that we can add value to? –Does the company have an approach and philosophy that tallies with ours and is it at a stage where we can really help them?
This post will focus on the second point. When we look at questions around approach, philosophy, stage and if we can add value, we have six criteria that we apply and we expect a Sports Loft member to meet every one (ok, there’s one of the criteria that is not as concrete as the others, but we’ll get to that in a minute):
They have to be solving a clear industry problem. We are not looking for companies that are “nice to haves”. The problems they are solving could be that a coach doesn’t know enough about a player’s physical condition so makes bad decisions. A club may not know enough about its fans and are not selling sponsorship as well as it could. It could be that fans consume content differently and a content owner is losing its audience. There are many more. In purely financial terms, a CEO that is addressing these problems can articulate the costs saved by their product or the revenue opportunities created. For example, a company like Slate is clearly solving a problem for social media managers about how to keep social posts on-brand when operating in a real-time environment with a mobile phone.
They need to have an international perspective. The companies we work with are a global bunch, hailing from Tel Aviv, Perth, London, Dallas, NY and California. All of them have clients or investors from outside of their home country. A company that has a global audience for its product will tend to have a larger addressable market and a greater opportunity to build a bigger business. Equally, with people now more prepared to do business over video conferencing and the ease of downloading software, it is easier than ever to sell internationally than ever. Our network and our audience for our blogs, events and podcasts are very international and we feel that we are best placed to help companies who operate with an equally global mindset. For example, PumpJack’s pipeline has as many domestic as international client opportunities.
High growth potential. Whilst we are not a VC fund, we want companies at Sports Loft to have high growth potential. This is because we want to be able to take great opportunities to the investors that we work with or want to see how they are going to make a financial return. It's more fun to work with great companies and in the sports tech market this normally means ones that are growing quickly. It also means that we work with product companies rather than agencies. Agencies can grow fast, but product companies can be more likely to achieve the sort of growth that we want to see. For example, a company like Zone7 is growing quickly with new client wins such as Rangers, Toronto FC and is being evaluated by four Champions League teams and attracting attention from publications like The Athletic.
World-class management teams. We work very closely with the management teams at each of the Sports Loft companies. We talk to them or Slack them almost every day. Life is too short to work with people you don’t enjoy talking to or respect. This is why the calibre of the management team is so important to us. If we are going to be introducing them to our network of investors and industry execs, we don’t want to be introducing jackasses. It also indicates the potential success of the company. A high quality management team is more likely to be successful and we want to work with successful companies. For example, Ari at FEVO has built an incredibly strong management team and it shows in their culture. Not just in the quality of the interactions that we have with them, but also in their interactions with potential and existing clients as well as investors.
Late seed / Series A / Series B. Our experience has shown that we are best able to help companies who have either raised or are set to raise, investment ranging from $3m to $20m+. This is partly because this is more of a sweet spot for the investors that we work with but also because it is a useful approximation of where these companies tend to be in their marketing, product maturity and revenue. Fundraising itself is not a metric of success so we will equally look at companies that may not have raised at this amount, potentially owner funded companies and this is where the caveat I mentioned earlier applies. If they are still at an equivalent level of maturity where we can help them. Currently, companies such as Formalytics, Spalk, Covatic and Zone7 are all about to start raising Series A rounds in the new year, whilst Greenfly is currently finalising a round of investment and FEVO has successfully raised more funds during Covid.
Must have a product in the market. We always want to see a product that our industry network could implement straight away if they want to. As one senior executive at a top-six Premier League club said, “what do we do with a Powerpoint presentation?”. This applies just as equally to how we can help the Sports Loft member companies with their storytelling. They really need a product and resulting case studies to be able to take advantage of the platform that Sports Loft’s events, podcasts, newsletters and website can offer them. For example, Satisfi’s case studies with MLB or the US Open make it much easier for us to take them to other potential clients and the same goes for Greenfly’s work with MLB or Paris St Germain.
These criteria, which coupled with the “excited factor” and our focus areas should give an insight into the types of companies that we work with. So if you are at a company that you feel meets these criteria, please do get in touch with us.