The year ahead: VC’s views of 2023
It’s unquestionable that venture capital has played a key role in the development of our sector’s biggest winners, and that the flows of funds can tell us a lot about where the sports industry is heading. So, in addition to setting out the Sports Loft perspective for 2023, we’ve also spoken with some of the leading VCs across the sector to ask for their views on the year ahead. Among other things, they reveal their biggest learnings from 2022, their thoughts on how well sports organisations are implementing web3 technologies, and where they see investment going in ’23.
Our thanks to:
- Anthony Bontrager, Managing director, West River Group
- António Caçorino, CEO & founding partner, APEX Capital
- Andrew Costa, Partner, RX3 Growth Partners
- Cordero Barkley, Partner, TitletownTech
- David Gow, Managing director, Homefield Ventures
- Jordan Fliegel, Managing director, TechStars
- Konrad von Moltke, Principal, WISE Ventures
- Lance Dietz, Partner, KB Partners
Let’s dive in.
What’s been your biggest professional learning from 2022?
Jordan, TechStars NYC and TechStars Sports: “We knew it was coming, with rising interest rates and a public market correction. But man, when the angel/SPV market cools off, it’s crazy just how fast it turns. The difference between the first half and second half of 2022 was night and day with regards to our portfolio companies seeking capital from angels and syndicates. Obviously funds which raised before the slow down still have record amounts of capital to deploy and LPs will expect them to do so, however the situation for angels has definitely changed.”
António, APEX Capital: “That no matter where the markets are going, or how short liquidity can be, the best investment rounds will always be oversubscribed. So it is fundamental to have a very clear value proposition as an investor, and make sure it stands out.”
Kondrad, WISE Ventures: “Venture investing has a longer-term investment horizon than experiences over the past several years (ie SPACs) have indicated, and it’s helpful to have patient and highly strategic capital, as well as a flexible mandate and processes in place. Also, although considering the strength, depth and complementary nature of investor syndicates is important, there’s no substitute for doing your own due diligence on every new investment.”
Anthony, West River Group: “I would say that rather than ‘learnings’, 2022 was full of reminders or affirmations that (a) as investors we must acknowledge and embrace volatility and the risks associated with it as this is our business and what we are paid to do; (b) moral hazard remains a big concern as funds increased their sizes and stacked new funds on top of others; and (c) first principal investing, operating fundamentals and rigour should always be the default whether you're a VC or a CEO.”
Andrew, RX3 Growth Partners: “Across the consumer sector, we’ve seen a healthy discipline emerge to replace some of the excesses fuelled by cheap capital. Coming out of this correction, the companies that survive will have a more concentrated value proposition for consumers. While painful in many instances, this will breed widespread optimism in what's been a largely overheated sector.”
What surprised you the most in the world of sports, media and tech in 2022?
Lance, KB Partners: “I’m still a bit surprised at how quickly the Peloton story unravelled this year, after a robust pandemic-era growth spurt. I think many people believe they saw it coming, but it’s still quite surprising. It definitely speaks to the importance of business fundamentals and balancing growth with durability.”
Kondrad, WISE Ventures: “The ability of founders and operators to take a critical look at their own business models and quickly adjust to the new normal of macroeconomic uncertainty, a shaky exit environment and a tough hiring market, while still growing their businesses, is impressive and admirable.”
Anthony, West River Group: “When it comes to blockchain the world still focuses on the crypto element rather than the infrastructure component, which in my opinion is more valuable. Blockchain technologies can be of tremendous benefit to multiple industries and this should be our focus in 2023 and beyond. My fear is with the recent collapse of crypto and the scandals surrounding it, that blockchain will suffer a black eye in the near term.”
David, Homefield Ventures: “We continued to find interesting companies in the ‘eater-tainment’ business. We were not focused on the category, but kept coming across some really strong business models of companies building food & beverage and social experiences around a sport.”
Which areas of technology have progressed quicker than you expected? What has been slower?
David, Homefield Ventures: “I am intrigued by companies reducing latency to enable in-game, real-time betting. The tech has progressed well, and the category feels ripe for exponential growth.”
Lance, KB Partners: “Sports teams and leagues are now doing more with AR/VR than before. Various teams are experimenting with gameday experiences and fan engagement, while multiple leagues are testing viewing experiences and partnering with AR/VR gaming companies. I’m excited to see how this evolves!”
Anthony, West River Group: “AI, specifically generative AI and neuro-linguistic programming (NLP) have progressed substantially the past year, which I find really exciting given their broad applicability. With our data-centric investment thesis, it’s a clear area that we’re focusing on. On the slower side, I’d point to foundational blockchain technologies finding their way into new vertical markets.”
Jordan, TechStars: “We've seen explosive growth in the wearable tech/player performance space – examples include our portfolio companies PlayerData and Kairos. Here, the age old wisdom still holds true: find a growing market with so-called ‘800 pound gorillas’ that are not loved by their customers and who charge exorbitant prices with archaic tech stacks, and go compete.”
Cordero, TitletownTech: “VR is progressing faster than I expected, pushed forward as headsets improve and more experiences are created. Shameless plug for our portfolio company StatusPRO and their NFL PRO ERA launch on Meta and PlayStation VR. Watching the types of experiences that StatusPRO has been able to create with this launch has been fascinating. The announcement that GOLF+ is partnering with the PGA is further evidence that there is more happening in this space than meets the eye. We’ve seen a slow-down in the standalone NFT space, but leagues, teams and brands will use NFTs or digital collectibles to engage fans and curate unique experiences.”
How much progress do you feel has been made in applying Web3 solutions to sports?
António, APEX Capital: “This year has seen a lot of testing in the Web3 world, but only the solutions with real utility have been able to survive. On the other side, sports has proven to be a sector with real use cases for Web3 solutions – and one of the first to adopt them for the long run.”
Lance, KB Partners: “I think the adoption in sports has progressed nicely. Every major sports league has signed an NFT partner (some more than one) and multiple teams have done Web3/NFT drops. There’s so much room for sports use cases, especially if you can remove user/application friction, and we’re constantly meeting people building in the space across ticketing, fan engagement, collectibles and more.”
Cordero, TitletownTech: “The digital collectible space and the blockchain-enabled NFTs is a space that will continue to evolve. I’m happy to see we are past the Bored Ape hype phase. But sports have a way of allowing fans to have personalised and customised experiences that other markets can’t replicate. And there’s potentially a way for the collective parties in the space to monetise this.”
Jordan, TechStars: “I don’t think we’ve seen much progress outside of collectables. However, I remain optimistic about the long-term opportunity in the daily fantasy sports space, when applied to web3.”
How do you think the ways that fans will engage with content, their teams and their sports will further change in 2023?
Kondrad, WISE Ventures: “Fans crave authentic community, the ability for self expression and seamless multi-screen experiences. Furthermore, there appears to be an insatiable desire for behind-the-scenes looks at lives of professional athletes. As a result, teams, leagues and players who let fans into their own worlds will be those who resonate the most and ultimately build the strongest and most genuine following. Businesses such as Tagboard and Slate that empower teams, brands and media properties to be content creators and seamlessly integrate with other systems will continue to make inroads in the sports ecosystem.”
Andrew, RX3 Growth Partners: “For the avid fan, content and connectivity is plentiful and at their fingertips. Teams and leagues will continue to invest in these consumers, but these ‘super fans’ are in the minority. Technologies that can engage casual fans and bring them to new sports or clubs – through mediums such as fantasy or curated content – serve a larger TAM and will offer greater benefit to sports organisations.”
David, Homefield Ventures: “The line between broadcast and streaming will continue to thin as fans gain greater control over their viewing experience, including being able to choose their commentary provider and level of analytical content.”
Anthony, West River Group: “We’re already seeing the massive impact streaming services are having on traditional sports which has historically been the domain of traditional broadcasters. This shift in distribution channels, especially to those that are very data driven in their approach to audience building and engagement, continues to have sports meet their audience where they are. This has increased the dialogue between the two and the result is a much better fan experience and longer attention spans with the content. Our investment in Tagboard is emblematic of this trend and I expect to see more of this in 2023 and beyond.”
Jordan, TechStars: “Fans are drowning in information, there are simply too many sites, too many podcasts, too many inside experts, it's just hard to know where to go to get the information you want, or to have that delivered to you when it's relevant. I think companies like Locker (Spotify of Sports) and Buzzer are just making it easier to get the news you need and catch the key moments of a game, without having to subscribe to 10+ different streaming services.”
Cordero, TitletownTech: “Teams, leagues and brands are going to continue to push the boundaries of the available technology. Fans now expect a team’s app to be their homebase, and the leagues that have figured out how to engage their superstar personalities (athletes, coaches, owners, fans etc) are making progress with changing fan behaviour.”
Which sectors and new areas will your firm focus on in the coming year?
Cordero, TitletownTech: “Within sports, we like companies that are using data to democratise the fan, athlete, or venue experience. We also like companies that may start in sports and can pivot into other industries. Think of it as sports as a conduit or Sports+. We tend to invest in companies that can bring tech to the Midwest and Wisconsin or work with some of our LPs or partners.”
António, APEX Capital: “Moving into a fund structure, our focus will be mostly early-stage scalable solutions across the sports, media and entertainment sectors. Everything where we and our athletes can add value beyond capital and brand. Outside of VC, we are looking at minority stakes in European sports properties as well as new or alternative sports.”
Lance, KB Partners: “We remain opportunistic and driven by founders across human performance, next-gen media, gaming, sports betting and the live experience. We’ll continue to explore where these categories intersect – these intersections, driven by new user experiences and demand, are really interesting to us.”
Anthony, West River Group: “I believe 2023 will herald a reset in the private equity markets, that will continue to see rationalisation occur on valuations and how companies build and operate their businesses. As a result, it’s a good time to be investing in the VC asset class. For WestRiver, specifically our technology investment focus, the leveraging of AI and machine learning across large data sets will continue to be the foundation of what and where we invest. Key areas include knowledge management, sales enablement, fintech, web3, security and digital media. These are all areas where we believe disruption will continue to occur.”
Andrew, RX3 Growth Partners: “We’ll continue to focus on outstanding management teams with category defining brands. The interplay between consumer and technology will continue, with many traditional consumer companies leveraging new technologies to harness recurring revenue. We are later stage investors in health, wellness and active lifestyle brands but are seeing this thesis expand into consumer-centric media, healthtech and some B2B2C concepts that fit our value-add capabilities.”
Konrad, WISE Ventures: “We will look to go deeper into specific sub-verticals, including mental wellness, the youth sports ecosystem and experiential real estate. WISE will also continue to evaluate investing in emerging leagues and sports, as a way to build further synergies with our venture capital and growth equity portfolio, as well as with the Minnesota Vikings, Orlando City SC and Orlando Pride.”
Give us your hot take on sports in 2023. Biggest sporting win? Biggest sports biz flop?
Jordan, TechStars: “Tom Brady returns to the Patriots and we (I say we because I'm from Boston) win the Super Bowl next year, Brady then retires and reunites with Giselle, and all is as it should be in the world.”
Konrad, WISE Ventures: “Biggest sporting win: Kevin O’Connell (Minnesota Vikings' Head Coach) wins NFL Coach of the Year.”
Anthony, West River Group: “As a Seattle-ite, I’ll say the biggest sporting win and biggest sporting biz flop are one and the same, which is the trade of Russell Wilson from the Seattle Seahawks (winner) to the Denver Broncos (flop). Depending on which side you’re on, this is either the most astute deal or worst trade in sports history. History will decide, but right now the Seahawks were the absolute winner here.”
Cordero, TitletownTech: “I'm looking forward to the NASCAR street race in Chicago in July! And I have my Green Bay Packers winning the Super Bowl –if Aaron Rodgers doesn’t retire.”
Andrew, RX3 Growth Partners: “My Bills will win the Super Bowl. Global event: F1 Vegas will redefine the highest echelon of fan opulence and experience. Upset: If the Bills lose the Super Bowl. Flop: Pickleball has all the fan momentum, but the monetisation efforts will be interesting to monitor.”