What better way to learn about the future than hearing firsthand from investors?
We talked to several C-level execs and top managers from relevant PE and VC funds in sports and tech for insights on ticketing trends, sports betting, ChatGPT, Amazon’s “Thursday Night Football” broadcast, and more.
Expectations for growth are high, especially in sports betting, but our expert respondents are also watching the personalization of fan experiences, the continued development of connected fitness, and more notable investment in women’s sports.
What trend drove your firm’s investing thesis in 2022?
Meredith McPherron (CEO & Managing Partner, Drive by DraftKings): In 2022, the world became increasingly gamified, with apps and websites from learning to fitness to parenting, handing out badges, points, and awards for even the smallest advances. Drive by DraftKings’ portfolio companies Nextiles, Spren, and Whoop, monitor everything from biometrics to body composition and movement to help optimize performance.
The gamification of everyday life and the rise of legalized sports betting opened virtually every experience to a wager opportunity. Also on the frontier, competitive games have blended principles from Web2 and Web3, offering a consumer experience rich with new creative expression, immersive play, social interaction, and access to newly found micro markets and gaming economies.
Brian Kopp (Partner, Ryan Sports Ventures): The interplay between sports technology, media, and properties. We see numerous opportunities to add significant value to companies through our experience, access, and investment flexibility. Another key trend is using advanced data collection and analysis to impact all elements of sports — game play, coaching, athlete performance, injury management, fan engagement, and team operations.
Keith Bank (CEO & Founder, KB Partners): The core infrastructure of sports betting — including AI-based odds and analytics solutions, streaming infrastructure for powering micro wagering, and a portal for women bettors.
Angela Ruggiero (CEO, Co-Founder, Sports Innovation Lab): Data from Sports Innovation Lab shows that the women’s sports fan community is one of the fastest-growing markets, making it a can’t-miss investment that I not only recommend professionally but also put personal capital behind. This included my participation in the WNBA’s $75 million fundraise (the largest in women’s sports), Athletes Unlimited’s $30 million fundraise, media platform Just Women’s Sports, and women’s athletic apparel company Goal Five, among others.
Wayne Kimmel (Managing Partner, SeventySix Capital): Entrepreneurs and startups in sports betting, gaming, and sports tech — we partner with them to transform the sports industry through technology, data, and analytics.
Lloyd Danzig (Founder & Managing Partner, Sharp Alpha Advisors): We focused on data and machine learning to optimize fan experiences and how sports can create social connections.
Zach Yoshor (Associate, ADvantage): Blockchain is a trend we followed closely because collectibles within sports are a natural entry point for consumers into the blockchain. We believe it has a permanent place in the sports ecosystem — the goal is to find long-term-thinking crypto experts with the capacity to execute.
What widely adopted 2022 trend will you carry through 2023 and beyond?
McPherron: The personalization of the fan experience was a trend that saw broad adoption in 2022 and will continue to see this for many years.
Ticketing platforms offer a unique hub for teams to improve their direct-to-fan experiences, and we are excited about the potential surrounding our investment in FEVO, making it simple for groups to purchase tickets together.
Jordan Fliegel (Managing Director, Techstars Sports Accelerator, Powered by Indy): Fan engagement and ticketing. We have been thrilled with the progress we have seen from our pre-seed investments (via the Techstars Sports Accelerator) in Project Admission, SeasonShare, and Weplayed, among others.
AI applications will certainly have a moment in 2023 on the heels of GPT and paranoia around AI replacing everything. Sports data/media — behind the proliferation of sports betting across the US — will also have plenty of investment and M&A interest.
Kopp: Amazon’s “Thursday Night Football” broadcast with multiple streams was a huge step forward for the sports industry. We see this trend continuing in 2023, driven by unique broadcast deals like MLS/Apple and NFL Sunday Ticket/YouTube TV. These new streaming partnerships should lead to several opportunities for data integration and customized user viewing experiences.
We also see the continuing blend of digital and live experiences to reach the widest possible audience of sports fans around the globe. Tagboard, our most recent investment, is a great example of how a new production approach is connected to the changing nature of sports media consumption.
Bank: People have gotten used to doing things remotely — not just work. We think interactive fitness platforms and software solutions for those who want to exercise at home will continue growing in 2023. There is a large ecosystem of companies trying to sell into this trend. Gyms are looking for new offerings, efficiency, and cost savings.
Ruggiero: Sports betting is an exciting engagement avenue still growing rapidly. According to data from Sports Innovation Lab’s latest report, the sports betting market has one of the highest community growth scores, which is encouraging in the face of upcoming obstacles to user acquisition, retention, legalization, and technology.
State revenue provides incentives to keep this market moving, and operators like DraftKings and FanDuel are committed to capturing new fans through gaming innovation. Further, mobile sportsbooks as media rights holders is an interesting idea that we’re watching closely.
Danzig: Sports betting will grow even more interwoven into media and entertainment. With a watchful eye on responsible and sustainable gaming practices, sports will invite an even larger audience, generate significant additional revenues, give breath to new sports and leagues, and bolster long-term retention and engagement.
Yoshor: In 2022, people returned to gyms, studios, and fitness centers, bucking the at-home fitness trends of 2020 and 2021. And Peloton, a company that once drove a large portion of the sector’s market valuation, crashed in public markets. But despite Peloton’s reckoning, we are bullish on the at-home connected fitness market in the long run.
In 2023 we expect to see a convergence of the at-home with the IRL experience — omnichannel fitness, getting your personalized workouts wherever you are.
What trend are you most bullish on going into 2023?
McPherron: It’s hard to ignore the potential of generative AI based on recent developments. Delivering truly personalized consumer experiences to thousands or millions of people is challenging at scale. Generative AI, where sports media and gaming content can be tailored to the interests of the individual, holds great promise for the future of content creation with expansive potential within the arts, graphics, and storylines. We also believe this will materially impact both fan engagement and efficiency for creators.
Jay Adya (Managing Partner, Elysian Park Ventures): The biggest growth opportunity in sports: women. We’re bullish on leagues and sports with a global purview (soccer, MMA, cricket, tennis, etc.) and on bringing Elysian’s 60+ portfolio companies — 20% outside the U.S. — to operationalize better and commercialize such entities.
Fliegel: Personal health and wellness — quantified self, sleep, meditation, nutrition. The early adopter/power users and initial startup focus often starts with competitive athletes and in the sports performance domain but has a broader market outside of sports.
Kopp: 2023 is when tracking data usage will become common for teams at all levels and broadcasts worldwide. The success of several new leagues in the past few years, like the NWSL and other innovative women’s leagues, has us optimistic about it in 2023.
Bank: In-game micro-wagering. The “watch and bet” solution is more appealing to fans and bettors than a “bet and watch” solution. It creates loyalty, increases viewing times, and is a more compelling product. It will also lead to a greater diversity of bets and a greater handle for betting companies. More viewing means more ad revenue and a stickier product.
Ruggiero: I love the potential of at-home digital experiences. As cord-cutters join cord-nevers in selecting nonlinear options, the leagues and networks that invest in technology to improve the at-home experience for fans should be rewarded with a market advantage. The entire digital arm of sports — OTT, social platforms, and any other technology that creates interactive features and community in the digital worlds — is a bull market in 2023 as brands and properties seek to capture the Fluid Fan.
Kimmel: Sports betting will continue to lead the way in changing the landscape of the sports industry. The opportunity is to integrate massive amounts of data into the overall experience and personalize it for each user. We also are significant investors and believers in the importance of regulatory technology in sports betting. Companies like U.S. Integrity and Odds On Compliance are critical to ensure everything is up-and-up.
Danzig: We are very excited about the convergence within competitive entertainment. User experiences, including sports betting, streaming, ticketing, merchandise, video gaming, and collectibles, are being rolled into unified digital storefronts backed by powerful flywheels that deliver superior customer satisfaction.
Yoshor: Sports data and analytics are scaling down to the everyday consumer, the youth, and amateur athlete. We’ve seen nearly ubiquitous adoption of analytics platforms by the pros and some second-tier leagues — cheaper tech will let it scale to millions of amateur athletes worldwide.
Betting is still in its infancy, and the largest states have yet to institute regulations. While the world of sportsbooks and operators is less likely to open up to new entrants, we see a blue ocean of opportunities for companies providing underlying infrastructure, consumer products, and services for betting operators throughout this year.
What trend are you most bearish on for 2023?
Adya: We’re partially bearish on NFTs, as we think the real value for NFTs lies in an enhancement and augmentation of fan engagement (i.e., digital fan club) opportunities. We’re also unlikely to invest meaningfully in pure-play VR or AR since we’re not yet convinced of the mass-market appeal outside gaming.
Fliegel: Athleisure. Logistics like manufacturing, shipping, non-recurring revenue, and fleeting are hard to pull off even with great product execution.
Kopp: While we are not bearish on the NIL space in college sports, it is an area that needs more maturity and structure for investors.
Bank: NFTs. The pricing/cost got out of control, the utility is questionable, and it could be a fad that will fade over time. We much prefer hybrid models of physical combined with digital.
Ruggiero: Cryptocurrency, from a sponsorship perspective. Once a hot market, the fallout from FTX and others destroyed a trust that will be slow to repair. The sector is volatile, and sponsorships based on volatile sectors will move slower amid heavy skepticism.
Audience fragmentation is also another major concern. As media rights continue to rise, the content fans want is now in more places and behind more paywalls. It makes it very challenging for consumers and could ultimately erode interest in live sports and push fans to look for alternatives on the platforms they subscribe to.
Kimmel: There will be significant changes through augmented reality, personalization, and the gamification of the viewing experience of sports in person, on your mobile device, and at home.
Danzig: 2023 will be an especially difficult year for management teams that haven’t recalibrated their strategies to market conditions. Investors will demand capital efficiency, excellence in execution, scalable unit economics, and a path to long-term profitability, while companies that focus exclusively on top-line growth at all costs will struggle.
Yoshor: While blockchain will have a lasting impact in sports, fitness, and gaming, the market is sure to reset from the unwarranted hype seen throughout 2022. Gone are the days when the blockchain slide was a fundraising clincher. Now companies will have to show real reasons to build on blockchain.
What specific company, trend, or market dynamic do you believe is not receiving enough attention?
McPherron: We believe FEVO, a technology platform driving social commerce in live events and merchandise, is flying under the radar. Over the years, they have quietly carved out a dominant market share across North American sports and live event group ticket ordering.
Live experiences like sporting events and music festivals are fundamentally social, and they are better managed via a collaborative platform where you can purchase, socialize and split payments for tickets and related merchandise together, and their platform has applicability across broader social commerce.
Adya: Consolidation will likely happen within the sports industry, particularly within sports technology. Companies are going to be bifurcated as aggregators/platforms or point solutions. While both have value, the next wave of M&A will involve aggregators seeking to acquire point solutions to round out their technology and product stack.
Fliegel: Fractional investing platforms — e.g., Angellist, Masterworks, Cadre — have democratized, digitized, and simplified investing in other industries. I think there remain great opportunities to own fractional ownership in pro sports teams, sports memorabilia, and even vertical opportunities such as thoroughbred race horses, which is being done by Irish company Stride Racing.
Kopp: Sportable is a comprehensive ball- and player-tracking solution that delivers highly accurate, real-time information through a portable system. As more broadcast options become standard in sports, delivering advanced real-time data should gain more attention and create new business opportunities.
Bank: Real-time video streaming at broadcast scale in total synchronicity. Phenix Real Time Solutions solves this problem.
Ruggiero: Despite being one of the savviest investments today, women’s sports still do not receive attention equitable to their market opportunity. Sports Innovation Lab data shows immense ROI for participants, and signs everywhere point to a positive trajectory. Fans are showing up, athletes are getting paid more, and investment is happening.
The Barclays Women’s Super League now receives $20.8 million annually from BBC and Sky Sports, as Arsenal’s sellout match against Tottenham at Emirates Stadium set a WSL attendance record of 47,367. Serena Williams dominated the news cycle last summer during her run at the US Open. Naomi Osaka made $51.1 million as the top-earning female athlete in 2022, Angel City FC raised money at a valuation of more than $100 million before ever taking the pitch, and the Premier Hockey Federation announced it’s raising its salary cap to $1.5 million per team for the 2023/24 season.
The women’s sports market is a golden opportunity.
Kimmel: The industry is rapidly evolving and innovating. There is a need for knowledge and expertise in emerging sports areas for teams, leagues, family offices, and brands to merge the two.
Danzig: AI-powered recommendation engines. People are largely accustomed to receiving shopping recommendations from Amazon and music recommendations from Spotify, but we have only begun to scratch the surface.
Yoshor: Human longevity. We’ve seen countless companies addressing an aspect of longevity, be it mental health or physical wellness, but we haven’t seen much that takes in all the data consumers capture to guide them into healthy living. There’s still loads to be done from a tech perspective here, but this topic impacts everyone globally and needs to be considered from a more holistic and personalized angle.
Keeping an eye on what’s coming in sports helps decision-makers plan and execute. As we continue to analyze the sports industry through our Pro platform, do not hesitate to reach out and discuss the potential for deep-dive topics and new features for the site.