Is Venture Capital dead? – Mental health & Neurotechnology – Automated cocktails – Celebrity coaches – Predictions markets – Blockchain-based Metaverse – Tiger's SPAC
Week 30
Skin In The Game is a weekly newsletter dedicated to investing in sports. We highlight the startups and investors shaping the future of sports and its adjacent markets.
We also run a regulated startup investment club connecting investors with visionary sports, health, and entertainment startups – a platform for investors and founders to collaborate and co-invest.
Get in touch if you want to find out more.
Confessions
A very astute investor recently said something interesting to me. I was waxing lyrical about the opportunity to build a specialist venture capital business around sports and its adjacent markets. He agreed that investing in sports is underdone and holds great potential. But he followed up with a statement that surprised me:
"Venture capital is dead."
I’m not embarrassed to say this took me aback. Ostensibly, venture capital is alive and kicking, and kicking hard. The market continues to expand as excess liquidity in the financial system seeks blockbuster returns. And the cultural context is ripe for VC to explode into popular consciousness in the coming years.
Think about it; 10 years ago, how many of your friends were entrepreneurs? How many are today? Entrepreneurship has become a fully-fledged mythology, a Hero's Journey that confers personal growth, social status, and sometimes, immense financial wealth upon those willing to cross the threshold. No wonder everyone's at it.
Venture capital can't be dead, can it? That depends how you define it, which was the point my friend was trying to make. Back in the day, at the dawn of the “modern” VC industry in the 19th Century, venture capital was risk capital in the purest sense. It was an alternative funding source for people who couldn't get finance from banks and other conventional lenders. Venture investors got equity on the cheap because startups had no other option. They were the lender investor of last resort.
These days, with many asset classes riding sky-high and inflation prowling outside the tent, nothing comes cheap. Startups are raising massive rounds at eye-watering valuations. Higher prices, lower returns. VCs have been forced to adapt, diversifying risk across a basket of potential unicorns in order to leverage statistical power laws that facilitate compelling risk-adjusted returns for LPs. Startup investing has become portfolio management in trainers.
The venture capitalists of yesteryear weren't just comfortable with risk – they actively sought it out. They knew that with risk (sometimes) comes reward. These days, there is less risk. It's easier to source, value, and de-risk startups through machine learning algorithms, accelerator programmes and operational best practices. Venture investing in technology companies has become commoditised – as the barriers to investing have come down, new entrants have flooded in looking for a piece of the action.
This is the eternal story; capitalism’s broken record. It happened with tulips. It happened with the Dot Com boom. It's happening with crypto. Given the right macroeconomic backdrop and enough time, investors exhibit a herd-like tendency to overvalue risky assets and underprice their volatility. But it's not just mindless mimesis and hot air. As once-obscure industries become ubiquitous they become easier to access and analyse. The risk diminishes and the eventually, even the Belgian Dentist jumps in. The crypto boom will claim many personal fortunes – but it will make some, too.
Of course, VCs pay for progress. The greater the demand for an asset, the higher the price, the lower the return. Venture debt offers an antidote – a way for startups to fund expansion and minimise dilution. I am still getting my head around this and intend to write about it soon – please get in touch if you have the time and inclination to educate me.
Let’s just say, completely uncontroversially, that the venture industry has become corporatised. VC firms hire MBAs and people with Master's degrees in Entrepreneurship. They have adopted obscure job titles that mimic the rigid hierarchies of investment banks and management consultancies. Their websites parrot generic corporate values (always be very wary of someone who tells you they are transparent). They even wear a uniform of sorts… Patagonia gilet and Brooks Brothers chinos anyone?
The industry has become almost absurdly imitative. Investment methodologies, valuation techniques, even websites are interchangeable. The underlying cause is economic – money is everywhere and commoditisation is in full swing. Venture Capital is becoming just... capital.
Under the bonnet, the way that VCs operate has changed too. They are often constrained by strict investment mandates and risk management practices. Or they can only invest alongside other firms. Or they seek to micromanage founders and in order to promote a more conventional vision of the disruption they claim to value. But the real reason that venture is dead – supposedly – is that VCs’ love affair with risk has fizzled out.
As companies stay private for longer, VCs are getting more active in late-stage financings. By the same token, private equity firms are sweeping in to play in late-stage venture deals. The two are meeting in the middle, merging into a kind of nondescript Private Capital. Blockbuster late-stage deals are home to an eclectic cast of characters including Corporate Venture, hedge funds, UHNWs, and banks (crowdfunding is auspicious in its absence). There is no room for bonafide venture capitalists and risk-takers who lack the firepower to compete for access and allocations. Just capitalists, who can channel the vast wealth of the global economy into an elite group of institutionally endorsed startups. As Sam Lessin has observed:
“All signs seem to indicate that by 2022, for the first time, nontraditional tech investors – including hedge funds, mutual funds and the like – will invest more in private tech companies than traditional Silicon Valley-style venture capitalists will.”
I'm playing around a bit here, over-simplifying for the sake of argument. Not all late-stage VCs are risk-adverse company men, and not all early-stage VCs are visionary startup whisperers.
In researching this piece I drew on the thoughts of Sam Lessin, who has written eloquently about the mass extinction event facing venture capitalists. His nuanced response to the problem makes so much sense to me:
"You will know you are doing real venture capital when you aren’t competing with other investors to finance a deal but are instead offering to invest in people, industries and ideas that don’t yet have access to capital. That is where money can be most useful, and also where returns can be the highest [...] Specialists will exist, but they won’t be investing in the things that have defined the VC playbook of the recent past, like software and marketplace and e-commerce businesses. They will have moved on to new opportunities at the current frontier."
This reads like a Jerry-Maguire style mission statement, the kind you won’t find on a late-stage VC’s website. And it’s precisely what we're building with Skin In The Game; a specialist, early-stage investment platform powered by thought leaders in sports, health, and entertainment. A frontier business designed to help other frontier businesses.
I’m done playing devil’s advocate. Venture capital isn't dead; it's just different. We’re seeing more and more pre-seed, seed-stage, and micro VCs emerging, and more financial institutions looking to crash the pre-IPO party. Late-stage is getting later, and early-stage is getting earlier. Perhaps that's how it should be? After all, there's something for everyone out there… you just need to know where to look.
Deal flow
🧠 Inside PsyMed Ventures’ New $25m Fund For Psychedelics And Mental Health Startups – It started as a shared interest in the science around mental health, psychedelics and a podcast featuring like-minded people, and culminated in a venture firm focused on advancing new approaches to mental health treatments. San Francisco-based PsyMed Ventures recently launched a new $25 million investment fund. The money will go to early-stage startups, primarily those working on psychedelics, to help treat mental ailments. The fund will also invest in startups working on neurotechnology, digital health and precision psychology, all early, but fast-growing fields of technology in mental health.
🦄 Eccles, Bullpen, Sequoia, Kaszek Invest in Draftea $13.2m Round – Draftea, a socially geared daily fantasy sports platform that is currently in its beta-testing phase and preparing for launch in Mexico, attracted investor interest from some industry heavyweights, including FanDuel co-founder Nigel Eccles and venture capital funds Kazsek, Sequoia Capital, and Bullpen Capital.
🤩 Masters, an app for training with celeb athletes, closes a $2.7M seed funding round – Masters is an app that lets users train with some of the world’s most famous athletes and learn the tricks of their trade via four-week guided, on-demand training programs. The startup has now closed a $2.7 million seed funding round led by Sweet Capital (the King.com founders fund), with participation from Mucker Capital, Goodwater Capital and Luxor Capital. In addition, a number of athletes also threw in some angel cash, including Shaun White, Bam Adebayo, Kai Lenny and A’ja Wilson, as well as professional tech angel investors including Anton Gauffin, Jakob Joenck, Henrik Kraft, Greg Tseng, Prerna Gupta, Hank Vigil, Janis Zech and Andreas Mihalovits.
🇦🇪 UAE-based fitness startup Fit On Click raises $1.5M Pre-Series A – Fit On Click has closed a $1.5M Pre-Series A funding round led by Arrow Capital. It continues its growth journey through Ventures Lab, the Venture Builder program launched last year by Modus Capital and Hub71. The lead investor in the round, Arrow Capital, will act as Fit On Click’s financial and strategic advisor.
🇺🇸 The first venture fund investing exclusively in Black-founded healthcare companies – Newly launched Jumpstart Nova is based in Nashville with an outpost in LA. It aims to eliminate processes baked into the venture capital world that its founders believe make it harder for minority founders to access funding.
🧢 US sports betting geo-compliance firm Xpoint gets Bettor Capital's investment ahead of launch – Geolocation and compliance technology company Xpoint, which specializes in the US sports betting and iGaming markets, has signed an investment partnership with Bettor Capital.
🍽 Fledge Capital announces 25% investment in USN sports nutrition brand – Independent investment company Fledge Capital has announced a 25% shareholding in sports and workout supplements brand Ultimate Sports Nutrition (USN).
🇬🇧 North East Venture Fund backs startup bringing sport science to workplace wellbeing – Gateshead-based startup ART Health Solutions has secured an £800,000 funding boost from the North East Venture Fund (NEVF) to develop an employee wellbeing app. Founded by sport scientists Dr Phill Bell and Dr Paul Smith, ART Health’s One Wellbeing app aims to bring sports science to workplace wellbeing.
🔮 TradeX, predictions market startup, raises $1m Seed round – Gurgaon based TradeX, a predictions market platform, has raised a Seed round of $1 million from TDV Partners, SoMa Capital and marquee investors like Maninder Gulati, Anupam Mittal, Rajesh Shawney, Hitesh Chawla, Cem Garih, Justin Mateen, Fethi and few others.
🌌 Vault Hill Raises $2.1m Pre-Seed Fund – Vault Hill, the world’s first-ever human-centric blockchain-based metaverse has completed a $2.1 million pre-seed round. The rounds were led by Master Ventures with strategic investments from R-930 Capital, Unreal capital, Spring Dawn Ventures, Evan Luthra, Herd Ventures, Lithium ventures, Girnas Capital, Ferrum Network, Trustswap amongst other angel investors.
🎮 Gaming startup Rooter raises $25 million from Lightbox and others – Rooter, a game streaming and e-sports platform, has raised $25 million (Rs 185 crore) in a Series A funding round led by Lightbox, March Gaming and Duane Park Ventures. Four other funds – 9Unicorns, ADvantage, Capital-A and Goal Ventures – also invested in the round, along with IeAD Sports & Health Tech Partners.
🧠 NESTRE Health & Performance Announces Pre-Seed Capital Raise – The neuro-strength solutions company focused on improving and strengthening mental and cognitive fitness and insights has raised $1.6M. Investors include Pro Football Hall of Fame wide receiver Calvin Johnson Jr. and former Detroit Lions teammate Rob Sims, Toby Redshaw, former VP of Verizon 5G and Infoworld Top 25 Global CTO and Information Week Top 50 Global CIO, Minority Entrepreneur Institute (backed by former NFL Hall of Fame linebacker Derrick Brooks and current NFL player Jaylon Smith), Florcy Morisset, former strategy lead at Netflix and Dell Technologies, Moaz Hamid, formerly with Palm Inc., Microsoft, and Google, now Founder and Managing Partner of mvmt (movement) Ventures, former Nike executive Mark Hochgesang, of Oregon Sports Angels, as well as global sports and health tech accelerator, leAD Sports and global real estate developer and owners of Tottenham Hotspurs, Tavistock.
🥛 Remilk raises $120M for animal-free dairy – The Israel-based company that makes animal-free dairy proteins by precision fermentation raised $120 million in a Series B, expanding its financial resources more than 10-fold. The round was led by Hanaco Ventures. Other investors include Precision Capital, Rage Capital, CPT Capital, Intercap, OurCrowd, Aliya Capital, Chartered Group, Indorama Ventures, Tal Ventures, Fresh Fund, Idan and Gil Ofer, Izaki Ventures and Paradigm Shift Fund.
🚸 Kiddo Announces $16M in Growth Investment to Address the Growing Need for Remote Patient Monitoring and Care Coordination for At-Risk Children – Good Parents, creators of the Kiddo remote patient monitoring (RPM) and continuous care platform for paediatric patients, closed a $16 million Series A growth investment led by Clearlake Capital-backed Vive Collective.
📦 Joe Wicks-backed Gousto wins $100m investment – The meal-kits business backed by fitness guru Joe Wicks has been boosted by a $100m (£74m) injection from Japanese investment giant Softbank. It values the company at $1.7bn.
👨👩👧👧 Little Otter Raises $22M Series A to Combat the Mental Health Crisis Plaguing Today’s Youth – Little Otter, the first digital mental health company to provide tools and treatment for both children and their families, closed a $22 million Series A. Little Otter is based on the principle that the children’s mental health crisis can only be addressed by treating the whole family through scalable, precision technology available to everyone. The round was oversubscribed and led by CRV, with participation from Torch Capital, Vast Ventures, Hinsdale, Boxgroup, _Able, Carrie Penner Walton, G9, Springbank Collective, along with strategic angels.
🏕 Hipcamp Buys UK Booking Brand Cool Camping – Hipcamp, a San Francisco-based startup that offers campsites for booking, has acquired Cool Camping, an online travel agency in the UK, according to regulatory documents released during the Christmas break.
🇺🇸 One-on-one coaching platform CoPilot closes on $5.8 million Series A – CoPilot Systems closed its $5.86 million Series A. Chicago-based Hyde Park Venture Partners led the round and was joined by several repeat investors from CoPilot's previous seed round, including Los Angeles-based TenOneTen Ventures LLC, Alpha Edison and San Francisco-based Maven Ventures. New investors in the company's funding include Washington, D.C.-based seed funder Rise of the Rest and Chicago-based Sandalphon Capital LLC.
🎾 Tennis Clubs Go Social Via Backing From Tavistock, Dassler Family – Social-focused tennis app Break the Love has raised $2.5 million in seed money from a diverse slate of investors – including Lake Nona Fund, an early-stage venture capital fund primarily backed by the Dassler family of Adidas fame and Tottenham Hotspur owner Joe Lewis.
🍸 TendedBar to expand automated drinks and biometric payment service with $5M fundraise – TendedBar, which partners with Trueface to provide biometric payments, has raised $5 million in a Series A funding round to support its launch of automated bartending services into concert, entertainment and sports venues across America. The investment was led by Base Capital, with participation from Platform Ventures and private investor Craig Musgrove. The company plans to use the funds to fuel its expansion of automated cocktail service with safe access, less time waiting in lines, and an improved overall experience.
🇲🇾 Galaxy Racer to invest $10m into Malaysia’s esports ecosystem – Dubai-based esports, gaming and lifestyle organisation Galaxy Racer has announced a projected investment of around $10m into the Malaysian esports ecosystem.
🏈 Eli Manning Enters Private Equity as BVP Looks to Expand Into Sports – NFL quarterback turned broadcasting phenom Eli Manning is entering private equity, joining Brand Velocity Partners as a partner. “With private equity you get a chance to find companies that are doing well and that you can help build on, that have a great upside,” Manning said.
💰 Michael Andretti Heads Up SPAC To Raise $200 Million Through IPO – Andretti has set his eyes on acquisitions largely outside the racetrack focusing on a stable of companies that range from electrification of the auto space, autonomous technology, racing, luxury/performance products, auto aftermarket, auto service, and retail, or other disruptive technologies. The SPAC created for this purpose has set a target of raising $200 million.
🇰🇷 DRX acquires esports organisation Vision Strikers – South Korean esports company DRX Corp has acquired eDreamWork Korea, the parent company of esports organisation Vision Strikers. DRX will now operate teams in League of Legends, VALORANT, WarCraft 3 and Tekken.
🏃♀️ FitLab Raises $15M, Acquires Fitplan, Ragnar, and Electric – An integrated operating company of performance lifestyle brands, FitLab raised $15M in Series A funding. Adding to its new growth capital, the company has acquired digital fitness app Fitplan, adventure running series Ragnar, and action sports brand Electric. Investors in the latest round include Two Styx Capital, Cava/Capital, Snoop Ventures, Audie Attar of Paradigm Sports Management, and Courtney Reum of M13.
🇺🇸 Playfly Sports acquires sponsorship sales agency Premier Partnerships – Philadelphia-based sports marketing firm Playfly Sports has further strengthened its portfolio with the acquisition of Premier Partnerships, a naming rights, sponsorship sales, valuation, and consulting agency.
🏈 NFL owners vote to increase stake in On Location ahead of Super Bowl – NFL owners last month reportedly voted to increase the NFL’s stake in On Location Experiences from 13.5% to nearly 45%, a “major move to re-establish the league’s sway over the events and business” that lead up to the Super Bowl.
🎮 Esports set for greater investment and commercial activity in 2022 – The Esports Survey Report found that much optimism stems from their expectations for esports-dedicated investment funds. The survey suggests the investment increase, which had previously been expected from traditional sports teams and leagues, athletes and celebrities, is now believed to be coming from the world of targeted private finance.
🏴 Andy Murray -backed padel firm nearly doubles in value to £18m – An Edinburgh-based business backed by Scottish tennis star Sir Andy Murray has nearly doubled its valuation in just a matter of months to £18 million, based on the terms of its last two funding rounds. The company, which aims to create hundreds of courts in the UK for fast-growing sport padel, has been valued at £18m in a £3m fundraising involving retail and institutional investors.
📖 Investor Roundtable II: Too Fast, Too Furious – Sports industry investors provide their thoughts on the past year and their outlook on the not-so-distant future.
🏌️♀️ Tiger Woods Launches Sports-Focused SPAC – Tiger Woods is raising $150 million to make a move in the wellness sector. The golf legend’s SPAC, Sports & Health Tech Acquisition Corp, filed for an IPO on Thursday with plans to acquire a company in sports and health technology. The SPAC will target companies with $600 million to $1 billion in enterprise value. Unlike scenarios in which an athlete joins a SPAC with a relatively small investment to help bring attention to the venture, Woods is a lead investor in the project.
❤️ Emotional wellness app Mine’d raises $3.5M led by Listen Ventures – Mine’d, a digital platform and wellness network that connects consumers with emotional health experts and community, has raised a $3.5 million seed round led by Listen Ventures. The round was also funded by WNDRCO and Able Partners, Joyance Partners, Route 66 Ventures as well as angel investors Ed Baker, the former vice president of growth at Facebook and Uber, and Jillionaire from Major Lazer. Mine’d features interactive and short-form live and on-demand classes for users based on a wide range of topics, including dating, breakups, career, and purpose.
⌚️ Fitness tech company Myzone hits $102m valuation after BGF investment – Myzone, global manufacturer of wearable fitness tracking technology, has secured a $17.2 million investment from BGF, the UK’s most active growth capital investor.
Some tweets
After a decidedly dodgy and stress-inducing run, Leeds have started winning! So I officially like football again. Wonder how long that will last…
Yours in sports,
Ed
—
Edward Rhys
Founder / Skin In The Game
www.skininthegamegroup.com
A favour
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And if you can spare the time, get in touch with your thoughts. Whether entrepreneur, investor, exec, or sports fan, your input will help me to improve what I’m doing and serve the Skin In The Game family better.
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.
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.