The science (and art) of investing – Biomarkers and metabolic fitness – Investors of the NFL – The $18 billion sports merch startup – Proprietary microbiome science – VR gaming – Super coffee
Week 10
Skin In The Game is a weekly newsletter dedicated to sports investing. We shine a light on the startups and investors shaping the future of sports and its adjacent markets.
We also run a regulated angel syndicate connecting investors with visionary SportsTech startups – a platform for investors, founders and execs to collaborate and co-invest.
Confessions
Angel investing is hard to pin down. It combines elements of corporate finance (structuring), mathematics (probability), economics (behavioural finance) philosophy (mimesis), psychology (stoicism), and a bunch of other disciplines. Despite the best attempts of some VCs and crowdfunding platforms to mechanise the process, it remains stubbornly, intrinsically human. Is it a science, or an art form, or neither, or both? Einstein, who transcended the false dichotomy of science and art throughout his life, observed:
“After a certain high level of technical skill is achieved, science and art tend to coalesce in aesthetics, plasticity, and form. The greatest scientists are always artists as well.”
This is how I feel about investing in startups. There seems to be a threshold of competence, after which technical skills have little bearing on results. Something elemental takes over. Call it intuition, or gut feel; great early-stage investors seem to have a sixth sense, a suspicion that nascent things are somehow interesting and worth investigation.
Einstein himself employed a similar technique, using images, feelings, and even “musical architectures” to solve problems of great cosmic significance, before explaining them with words and equations. As improbable as it sounds, he thought in music:
“The theory of relativity occurred to me by intuition, and music is the driving force behind this intuition […] My new discovery is the result of musical perception […] If I were not a physicist, I would probably be a musician. I often think in music.”
Venture capital firms don’t tend to market themselves in this way. They claim they can hack probabilities, skewing power laws by adding operational value to startups. Having met my fair share of VCs over the years (some brilliant, some dubious, some so-so), I’ve always been skeptical about this modus operandi, and the data seems to bear out my skepticism. Turns out VCs repeatedly overvalue their contributions to startups compared to the perception of the founders.
Firms tend to position themselves and compete with one another for deals based on operational expertise, network effects, and financial firepower. One well-regarded London firm even “invites” portfolio companies to move into their offices so they can play a hands-on role in guiding them to greatness. This doesn’t sound like assistance – it sounds like surveillance.
In his book “Anti-fragile”, Nassim Nicholas Taleb uses the term Iatrogenics to draw our attention to treatments that do more harm than good. He goes on to coin a term for people who can’t resist its gravitational pull – Interventionistas. We encounter them everywhere: self-appointed experts who do more harm than good by meddling in complex systems.
What if we flipped the iatrogenic method? What if the answer to generating great investment returns lies not in trying to help startups, but in getting out of their way? Such an approach would have major implications for the investment process. It would mean increasing friction at the front end (with a focused thesis, rigorous due diligence, and meticulous deal structuring), and decreasing friction at the back end (letting visionary founders get on with what they’re good at). It would mean making one big decision, rather than lots of little ones, thus reducing the scope for error.
This inversive method reminds me of “Via Negativa”, espoused by Taleb as an antidote to the unintended consequences of intervention. He argues that instead of looking to improve something by adding to it, we should look to see what we can remove. And he uses a stunning metaphor to bring this concept to life:
“Michelangelo was asked by the pope about the secret of his genius, particularly how he carved the statue of David, largely considered the masterpiece of all masterpieces. His answer was: “It’s simple. I just remove everything that is not David.”
If Einstein can think in music, who’s to say investors can’t think in sculpture? The masterpiece lies within the founder, and it’s our job to remove everything that is not the masterpiece. The French writer and pioneering aviator Antoine de Saint-Exupery said pretty much the same thing when he argued that:
“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”
These words challenge us to consider the bigger picture; our projects, relationships, thought patterns, and behaviours. But very few people – especially those working in finance – are willing to embrace simplification. It’s gruelling for people with big brains and even bigger egos to accept that expensive educations and intellectual horsepower might be subject to the law of diminishing returns. And it’s hard to justify to clients who are used to being sold on complicated products and associate complexity with value. What I am trying to say is, investing in startups is “simple, but not easy”. Not “easy, but not simple”.
Back to the multi-disciplinary nature of investing. That’s why I’m here, and it’s why you’re reading this newsletter. Not only is it wonderful fun to scour seemingly incongruous fields for inspiration (like reading a book about mythology and realising it has implications for understanding founders); it’s incredibly powerful to pull together different people and leverage their expertise to de-risk opportunities.
Picking winners from the Great Startup Soup is always going to be tough for one person with one education and one experience of life. To me, it makes far more sense to club together with experts within a given industry (e.g. sports) and leverage the collective intelligence of the group to drive value creation for investors, founders, and the industry as a whole. For athletes who are used to obsessing over performance and searching for an edge, this probably sounds quite familiar and obvious. But in the world of investing, silos are everywhere.
We need difference. If we were all the same, life (and investing) would be boring. We could not give birth to anything new. Just as genetic diversity serves as a way for populations to adapt to changing environments, so too intellectual diversity enables us to adapt to new market conditions, to thrive under uncertainty. Only together can we evolve.
Thankfully, the process of evolving together is getting easier. Just as crowdfunding made it a doddle for punters to bet on a myriad of of startups (of varying quality), a new breed of fintech platforms is facilitating the formation of niche angel syndicates defined by their focus, passion, and expertise. Platforms such as AngelList, Odin, and Vauban offer syndicates the opportunity to invest on a deal-by-deal basis, something that was hideously complicated and expensive to do in yesteryear. They’re lowering the barriers for domain-experts to collectivise and monetise their expertise.
Before settling on Skin In The Game, I seriously considered calling the business “Gymnasium” (I even put together a slightly esoteric / unhinged pitch deck filled with iconography from Ancient Greece):
Historically, the gymnasium was a place of exercise and communal bathing, but it was also a venue for philosophical pursuits. I recently joined a gym in Wiltshire that offers exactly this – during my first (incredibly painful) session I noticed a pile of strange and interesting books lurking in the waiting area, competing for my attention with the menacing-looking dumbbells and medicine balls. The owner of the gym is an amazing guy who has responded to an acute brain haemorrhage and paralysing stroke by rebuilding his life and dedicating himself to helping others become healthier, happier and more fulfilled. He’s building a business that’s more than a business.
There’s a gap in the market for gyms and training platforms that are unashamedly holistic, offering personal development alongside spinning and Body Pump. Equally, I like the idea of an angel investing syndicate that functions on multiple levels – financial vehicle, social network, and venue for personal transformation. I’m talking about a platform for growth – both financial and personal – where members can collaborate with like-minded people (and indeed, unlike-minded people) to develop as human beings. That might sound idealistic and hyperbolic, but it’s what I’m building with Skin In The Game.
Deal flow
🚴♀️ Rouvy Secures $6m Investment – The Pale Fire Capital investment group is acquiring a major stake in VirtualTraining, the Czech company behind the Rouvy indoor cycling and running software application.
🏈 NFL stars Trent Williams, Fred Warner seek to score big by investing in Silicon Valley tech startups – Williams and Warner are interested in financial tech, consumer tech and health care.
🩸 Metabolic Fitness Platform Ultrahuman Raises $ 17.5m to Improve Biomarker Technology – Health technology startup Ultrahuman has raised $17.5m from Alpha Wave Incubation (AWI), Steadview Capital, and existing backers Nexus Venture Partners, Blume Ventures, and Utsav Somani’s iSeed fund.
👕 The $18B sports merch startup – Fanatics has raised a $325m round that values the firm at $18B, increasing its valuation ~3x from a year ago. In the process of growing its multi-sport merchandise monopoly, the firm has built up an email list of 83m sports fans. It plans to use the funding to expand into other digital products (I love how vague this is).
🏌️♀️ Michael Jordan Banks On Golf Instruction With Investment In Game Improvement Software Player V1 Sports – Jordan’s Black Cat Ventures has invested an undisclosed amount in the video capture teaching technology. V1’s CEO Bryan Finnerty also helms the venture capital firm Opportunity Seed Capital which specialises in the sports and technology sectors (sound familiar?).
🤖 Arevo raises $25m, completes world’s largest continuous carbon fibre composite additive manufacturing facility– The company has closed a $25m financing round led by Khosla Ventures and with new participation from venture capital firm Founders Fund. This has received very little press but strikes me as really interesting (deep-tech + high heavyweight investors).
⏰ Humanity launches ‘slow your ageing’ app and raises $2.5m – The UK-based startup has raised $2.5m from 65 (yep that’s right) health-tech and consumer-tech investors including Alex Tew and Michael Acton-Smith (co-founders of Calm), Taavet Hinrikus (co-founder of Wise, founding team of Skype), Robin Thurston (co-founder of MyFitnessPal), One Way Ventures, 7Percent, Seedcamp, Breega, Alexander Ljung (CEO and co-founder of Soundcloud), and legendary health tech investor Esther Dyson.
🚣♂️ Fitness Newbie Hydrow Hints At Sandbridge X2 Backing – Early-stage fitness business fundraiser Hydrow is hinting at yet another investor, one with a much bigger purse: Sandbridge X2, the investment guru targeting specialty global consumer growth products. An estimated combined value of $1bn is speculated.
🩺 DayTwo Raises $37m For Expansion of Chronic Disease Solutions – DayTwo, the leader in precision nutrition with the world’s most advanced proprietary microbiome science, raised $37m in new funding to accelerate its expansion of chronic disease solutions for employers, health plans, and health systems.
☕️ Super Coffee, Backed by J. Lo and A-Rod, Nabs $500m Valuation – Kitu Life, the startup behind Super Coffee that counts Jennifer Lopez and Alex Rodriguez among its investors, has more than doubled its valuation to over $500m with its latest round of funding. Henry Ellenbogen’s Durable Capital Partners led the $106m round.
🍔 Australia’s v2Food aims to expand its plant-based meats to Europe and Asia with €45M raise – V2Food is one of many new contenders in the alternative protein space, founded in Australia but now setting its sights on Europe. With €45m in new funding it may be finding its way to plates in the Eurozone soon.
🏋️♂️ Third Space announces partnership with KSL Capital Partners – KSL Capital Partners has acquired a majority interest in Third Space, the luxury health and fitness brand, from Encore Capital.
📱 Studio BE Raises $500k To Expand Well-Being Platform – Studio BE, a women-owned digital well-being solution for corporations, and individuals, has closed a $500k seed funding round. The round is led by 1855 Capital and Ben Franklin Technology Partners of Northeastern Pennsylvania.
🇳🇬 Nigerian e-sports startup Gamr raises round of seed investment – Nigerian competitive e-sports startup Gamr has secured seed investment to deliver new opportunities to Africa’s estimated 750m gamers.
🏏 Games24x7 makes strategic investment in sports startup CricHeroes – Multigaming platform Games24x7 has made a strategic investment in CricHeroes, a digital player-focused platform targeted at the under-penetrated grassroots cricket ecosystem in India.
⚽️ Irish start-up Output Sports takes aim at global soccer market – UCD spin-out Output Sports is looking to raise at least €3m as it eyes expansion in the global soccer market.
🇩🇪 Germany-based Sport Alliance raises €60m to digitalise the fitness industry – Sport Alliance, a Hamburg-based startup providing software solutions and services to gyms and fitness suites, has secured €60m in a fresh round of funding from PSG.
🏀 Basketball star Baron Davis talks investment in CBD-focused House of Wise – Baron Davis is a two-time NBA All-Star, serial entrepreneur, investor, and digital content creator, being the founder of Sports Lifestyle in Culture, a content creation platform for athletes, and UWish, a multimedia company that elevates and celebrates a diverse set of voices and experiences. In 2021, he announced his investment in House of Wise, a line of CBD supplements that support women’s health and wellness. Clearly, this guy doesn’t spent a lot of time in front of the TV.
🕶 ForeVR Games Turns Real Sports into Virtual Reality Experiences – The LA-based VR gaming startup has raised an additional $7m on top of its $1.5m seed round, valuing the company at $8.5m. The round was led by Bessemer Venture Partners with other investors including Galaxy Interactive, All Star Capital, Mark Pincus and Emmett Shear.
💪 TitletownTech, 49ers Enterprises and Haslam Sports feature in US$5.2m StatusPro VR funding round – Sports technology enterprise StatusPro VR has raised $5.2m in seed funding, with KB Partners and TitletownTech (the investment vehicle established by Microsoft alongside the Green Bay Packers) leading the round. StatusPro is accelerating the expansion of products aimed at reshaping professional game preparation, as well as creating enhanced fan-engagement platforms.
🧒 TeamGenius Secures $1.1m Seed Round – TeamGenius, a Minneapolis-based youth sports evaluation software company, has secured a $1m seed round led by Great North Ventures, with additional participation from MATH Venture Partners and Groove Capital.
💉 Blavatnik Piles Into Biotech to Build on $38 Billion Fortune – First it was aluminum in Russia. Then oil, then plastics. Pop stars and sports followed. Now comes biotech. Len Blavatnik, a man who a decade ago was frequently labeled (to his immense displeasure) an “oligarch”, is constantly reinventing.
Some tweets
Summer is fading and the Paralympics are coming. Two more weeks of glory and despair, with the very best of humanity on display to inspire, humble, and challenge us to do more with what we have. I’m off to the gym!
Cheers,
Ed
—
Edward Rhys
Founder / Skin In The Game
www.skininthegamegroup.com
🙏 A favour
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And if you can spare the time, hit me up with your thoughts. Whether entrepreneur, investor, executive or sports fan, your input will help me to improve what I’m doing and serve the Skin In The Game community better.
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Skin In The Game is an angel investing group connecting investors with visionary SportsTech startups. We provide a regulated platform for fans, athletes, entrepreneurs and brands to collaborate and co-invest. By investing in SportsTech we can unleash the full potential of sports, enriching the lives of people everywhere.
SKIN IN THE GAME LIMITED is registered in England and Wales under Company Number 13200102 and with the FCA as an Appointed Representative with FRN 946089. SKIN IN THE GAME LIMITED is an Appointed Representative of Finex LLP which is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”) with firm reference number 507537.