Why we focus on growth stage companies

Every month at Sports Loft, we meet with about twenty-five to thirty new companies. Very few of them are right for Sports Loft. Sometimes we say “no” because we don’t feel we can help the company, sometimes it’s because the product doesn’t get us excited and sometimes it’s because we don’t have a good chemistry with the founders / CEOs (life’s too short to work with people you don’t enjoy being with). However, the most common reason is because the company is too “early” for us. To some, this sounds like a cop-out, and after a week where we’ve met two really exciting companies that really made us debate whether they were too “early”, I wanted to use this post to lay out our criteria a bit more about what makes a company “ready” for Sports Loft.

When asked what stage of company we work with, my normal answer (and that you’ll find the same answer elsewhere on this website) is that “we look for companies at late seed / Series A / Series B”. This, I admit, is rather vague as those terminologies can vary hugely between geography, different company CEOs and investors. A Series A could be $15m for one company and $3m for another. But equally, there is a sweet-spot that we are after, as there are certainly companies that are more mature than we would work with – we’re not looking for Google, Apple or Intel but we are looking for companies that are on the verge of being significant players in the sports, media and entertainment industry. So, what more practical definitions can we use?

1.      Do they have a product in market and is it something that can be implemented by a customer straight away? This is important, as there is no point in us putting a product that is not yet working, no matter how great it could potentially be, in front of a customer if they can’t use it. As the CMO of one Premier League football club put it, “What do I do with a powerpoint presentation?” This doesn’t mean that the product has to be perfect, and many clients like to be able to influence the product roadmap, but it does have to be working and capable of adding value from day one.

2.      Do they already have customers and users? If the answer is “yes”, and a significant number of them, then it gets interesting. Customers provide case studies that can be used with potential clients and that we can use as reference points with the teams, leagues, brands, agencies and content owners that we talk to. Whilst lots of people talk about wanting to “be first”, the reality is that organisations that serve thousands of demanding fans often want to see that it has worked for others before jumping in – as one large rightsholder put it, “we don’t need to be first to the party, but we do need to be best dressed.” From our own perspective, the feedback from potential and existing customers is one of the most important parts of our due diligence when evaluating potential Sports Loft members – if there are no customers, then we can’t do the due diligence properly.

3.      More later stage companies will tend to have more developed teams. This is important as whilst we work with the CEOs and Founders, we’ve found it more effective to also have point people in their different teams to help us get things done – so somebody on the marketing team, somebody on the sales team, somebody who is thinking about how they build their staffing structure etc... Earlier stage companies will tend not to have those people and the CEO can’t do everything and can sometimes become a bottleneck.

4.      Do they have something to talk about? High growth companies have great stories, but those stories come from genuine experiences born out of working with customers, learning from mistakes, building teams, and trying new things – all things that are gained from getting things done over time. If they don’t have these experiences, then what do they talk about when we put them on a podcast or livestream? What is interesting about their story when we line them up to be interviewed? Equally, they need to be at a stage where they are willing and excited to be telling those stories – and if they are still very early stage then they might not be ready to do so.

5.      When the companies are more mature, they tend to be more interesting to the investors that we work with. In many cases, early stage companies are better off with angel investors so that by the time they have more metrics, and evidence they are more appealing to institutional capital. Whilst many VC funds seem to be going earlier and earlier, there is a lot of truth that the funds and strategic investors will look for more maturity and these are the sorts of investors that we most frequently introduce our member companies to.

But why should the stage matter to us so much? There are lots of great accelerators and incubators that actively seek out the early stage companies to work with. There are also lots of seed and pre-seed funds. There are lots of great angel investors. They don’t worry about some of the points that I’ve made above. But for us, it’s about where we know we can add the most value to the companies – and experience has shown that it’s the companies that have the product in market, that have growing teams, that have customers, that have something to talk about and are at an attractive stage to the investors we work with. However, there is also another side to this, and that is that as the companies mature there are more potential interaction points for Sports Loft which in turn give us more data points to have unique insights into these companies – and as we start to invest into the companies at Sports Loft, those data points enable us to make better decisions.

for us, it’s about where we know we can add the most value to the companies"

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