Reflections on crowdfunding – Social gambling – NBA goes DAO – The business of mental health – Luxury watches – Digital musculoskeletal solutions – $100M gaming fund – The “Real-world Metaverse”
Week 25
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Confessions
Republic (US fintech) is buying Seedrs (UK crowdfunding platform). I've expressed my reservations about crowdfunding as a business model in previous posts, but suffice to say that equity crowdfunding platforms (at least here in the UK) have historically struggled to achieve profitability and have been exploring mergers, acquisitions and pivoting to SEIS/EIS fund structures for some time now.
Setting aside doubts over the sustainability of the business model, fee structures and "quantity over quality" problem associated with running hundreds of deals at the same time, I have concerns over the actual mechanics of the process. This might be ignorance, or bias, or it might be valid. But I think it's worth sharing my reservations to start a conversation and see what we can learn.
Crowdfunding aggregates deal flow onto a platform and invites investors (in the form of web traffic) to browse investment opportunities. It is a "pull" dynamic whereby "users" proactively visit the site and enquire about deals that float their boat. The idea is to do clever things with technology to promote relevance and engagement with deals. But is that how investor psychology actually works?
When I worked in banking, we had to phone our clients up all day, every day, to ensure we were competing with our esteemed peers at other banks. Everyone, whether traders, sales, structurers, or research analyst, was a sales person. It was "push" model – we were pushing product, pushing ourselves to make a difference for clients and the bank, and pushing clients to help us serve them better. That meant showing up, providing market intelligence, ideas, rubbish banter, and yes, a shoulder to cry on when markets (and indeed the personal lives of our clients) hit the skids. Yes, we were dealing with benchmark bond transactions and complex derivatives, and the economics of every deal were important (deal-breaking, if you will), but it was still a relationship game.
You'd spend months pitching an idea to a client for 2-year $1 billion Eurodollar bond issue and they'd avoid the issue like the plague. Then one day, they'd call you up at 7am in the morning and mandate you on that very deal, to be done by close of business. Once you've built trust, rapport and knowledge of your clients' needs, they come to you with reverse enquiries. But you have to do the hard yards first.
In seeking to automate relationships, crowdfunding puts itself at a competitive disadvantage vis-a-vis other players – syndicates, investment clubs, regulated brokers, even shadowy introducers. It's not that crowdfunding doesn't work – it just doesn't work as well as the traditional client-advisor relationship. In an industry where trust is everything, how can a platform ever compete with a person, an advisor, a friend?
I probably sound hopelessly naive, resistant to change, perhaps even envious of fintech entrepreneurs who are building pipes to pump capital around private markets and becoming paper billionaires in the process. But I just can't get my head around replacing conversations with algorithms. Of course, the answer lies in balance – combining people and technology to provide a better experience for investors. Which is basically what crowdfunding platforms have reverted too. They've struggled to achieve profitability precisely because they spend too much money on hand-holding.
It reminds me of a scene from the (American) Office in which the philistinic yuppy-hipster pseudo-boss Ryan forces his exasperated employees to record sales made on the good ole fashioned telephone as website revenue in order to validate his disruptive, tech-led thesis.
So perhaps we’ll meet in the middle – syndicates will become more tech-orientated, and platforms will become more human-centric? That sounds about right to me. Right now, my approach with Skin In The Game is pretty old school (almost laughably so). The recipe looks like this:
Build a small, but very high quality (and engaged) community of investors.
Get to know them personally, as friends as well as business partners.
Suggest investment opportunities that are personalised and meaningful i.e. startups that appeal to investors' interests, passions and objectives.
Maybe I've got it wrong, and I should be finding a technical co-founder to write algorithms that recommend deals to investors based on their Facebook profiles... But I'm confident that if I can build a community of smart, nice, connected people – investors and founders – they will benefit, I will benefit, and the business will grow in value.
In other words, good things will happen.
Deal flow
🎰 PickGuru raises UK£2.6M in seed funding round – PickGuru, a new social gambling platform which is set to launch in early 2022, has raised UK£2.6M in a seed round. Founded by Oliver Slipper, the co-founder of sports data and analytics platform Stats Perform, PickGuru will allow friends to challenge each other in sports predictions games for cash prizes using live betting data feeds.
🏀 Crypto Investors Teaming Up to “Someday” Buy an NBA Franchise – A contingent of cryptocurrency holders are trying to pool their resources to purchase an NBA team. The 2,000 crypto investors have connected through a decentralized autonomous organization – otherwise known as a DAO – “an online group with a collective bank account and mission statement.’’
⛓ Fanaply Closes Seed Round Led By Elysian Park Ventures And Alpha Edison – Fanaply, an NFT platform partner for the world's leading sports, entertainment and music brands, has closed its first seed round. The round was co-led by Alpha Edison and Elysian Park Ventures, the private investment arm affiliated with the ownership group of the Los Angeles Dodgers, with participation from CyberAgent Capital.
⌚️ Jordan, Giannis Invest In WatchBox At $1B Valuation – Michael Jordan and Giannis Antetokounmpo are adding to their investment portfolios by investing in luxury watch marketplace WatchBox. The investment puts the startup at a reported valuation near $1B. WatchBox allows users to buy, sell, and trade luxury watches. Similar to other resellers like StockX, WatchBox authenticates the products – but differs in that it has client advisors to manage users’ watch portfolios.
🥛 Chobani files to go public through initial public offering as its yogurt sales rise – Yogurt and oat milk maker Chobani filed to go public on the Nasdaq Exchange under the symbol “CHO,” becoming the latest food and beverage company to try to join the public markets.
🧠 Wave brings some science and sanity to the business of mental health – The company just announced it closed a $2M pre-seed round late this summer. The round was led by Hannah Grey VC, with participation from K50 Ventures, Tribe Capital, Alumni Venture Group, Verissimo Ventures, Conscience VC and select strategic angels.
🏋️♀️ GRNDHOUSE raises £1.5M investment for launch of fitness studio and app – London-based online fitness platform, GRNDHOUSE, co-founded by five leading fitness trainers, has raised a financing round led by venture capital firm Passion Capital (first investors in Monzo Bank, Butternut Box, urban and other leading brand and consumer propositions), strategic angel investors and also through the Seedrs equity crowdfunding platform.
👩⚖️ ieso Raises $53M to Address Global Mental Health Crisis With Digital Therapeutics – The financing was led by Morningside, alongside new investors including Sony Innovation Fund and further participation from existing shareholders, IP Group, Molten Ventures and Ananda Impact Ventures. The funds will help take AI-enabled, evidence-based digital therapeutics through regulatory approvals and to market in the US and UK.
🦴 Sword Health rasies $163M as the fastest growing digital MSK company – SWORD Health, a digital musculoskeletal (MSK) solution, closed a Series D funding round led by Sapphire Ventures, a leading global technology-focused venture capital firm with participation from new investors Sozo Ventures, Willoughby Capital, ADQ and Localglobe, and from all major investors including General Catalyst, Khosla Ventures, Founders Fund, Bond, Transformation Capital, and Green Innovations. This brings the total primary and secondary transactions to more than $320M invested in SWORD, with the current round valued at $1.8B, catapulting it to healthtech unicorn status.
💆♀️ Unilever-Backed Supplement Firm Nutrafol Exploring Sale – Nutrafol, a maker of hair supplements, is exploring a sale and could fetch up to $1B.
Impossible Foods closes $500M in new funding amid record growth – California-based Impossible Foods secured approximately $500M in its latest funding round, led by existing investor Mirae Asset Global Investments with participation from other existing Impossible Foods investors.
🎮 Enthusiast Gaming acquires U.GG for $45M – Esports media platform Enthusiast Gaming has acquired U.GG. The purchase was roughly $45M with potential earnouts of up to $12M. The additional earnouts will be subject to achieving performance goals within a two-year period from the date of closing the deal.
🎲 Snapscreen announces $ 1.2M seed funding round led by Sharp Alpha Advisors – Technology company Snapscreen announced $1.2M seed round led by New York-based VC Sharp Alpha Advisors. Snapscreen is the inventor and exclusive operator of SnapOdds, a B2B computer vision technology product that solves the challenges of customer acquisition in the sports betting industry.
🤖 Arria NLG acquires Boost Sport AI as part of sports expansion – Natural language and analytics company Arria NLG has acquired Boost Sport AI, a sports data startup, as it looks to help groups across sports get more out of advanced stats.
💫 Niantic Raises $300M to Build Metaverse – Niantic, the creator of augmented reality gaming hit “Pokémon Go,” has raised $300M, valuing the company at $9B. The California-based company will use the money from tech-focused investment manager Coatue to build the “real-world metaverse.”
🥗 Salad Chain Sweetgreen Raises $364M in Above-Range IPO – Sweetgreen, the salad restaurant chain started in 2007 by Georgetown University graduates, raised $364M in an initial public offering priced above a marketed range.
🎮 Solana Ventures, FTX, and Lightspeed Start $100M Gaming Fund – Solana Ventures, FTX, and Lightspeed Venture Partners have teamed up to launch a $100M gaming fund called GameFi. The fund will facilitate investments in video game developers, tech companies, and other projects at “the intersection of blockchain and gaming.”
🏏 Manchester United co-chairman Avram Glazer buys T20 cricket team in UAE – After failing in an attempt to buy a new Indian Premier League Team in October, Glazer has now led an acquisition as chairman of Lancer Capital to own one of the six teams which will compete in the UAE's new league, which is set to take place in February and March 2022.
Some tweets
England Women put 20 past Latvia, which admittedly is a bit silly (albeit still impressive). But growth is often painful, and women's football is certainly growing. That's a good thing, and worth a few hiccups and negative Daily Mail articles along the way.
Cheers,
Ed
—
Edward Rhys
Founder / Skin In The Game
www.skininthegamegroup.com
🙏 A favour
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Skin In The Game is a startup investment club connecting investors with visionary sports, health, and entertainment startups. We provide a regulated platform for investors and entrepreneurs to collaborate and co-invest.
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