Sports Betting Conversations. Entrepreneurs in Sports Betting
Where are sports entertainment and sports media heading over the next couple of years? Will sports betting become #1 industry in the United States? The DataArt team met with Wayne Kimmel, a sports tech venture capitalist and the Managing Partner at SeventySix Capital, to discuss the trillion-dollar industry, investments in sports betting startups, the latest acquisitions, and prominent sports tech companies.
SPEAKERS
Russell Karp, Senior Vice President in the DataArt Media and Entertainment practice, focusing on sports betting.
Wayne Kimmel, Managing Partner at SeventySix Capital. SeventySix Capital invests in passionate, innovative, and friendly entrepreneurs launching game-changing startups in sports betting, esports, and sports tech. They leverage the experience to give entrepreneurs access to the financial and social capital their network of executives, influencers, and professional athletes offers.
Kevin Twitchell, advisor in the DataArt Media and Entertainment practice.
Matthew Shatz, advisor in the DataArt Media and Entertainment practice.
Watch the full video or read a shortened text version below.
Russell Karp: When you first got into the venture capital world, did you have your site set on sports, or was it just the most interesting investment opportunity at that point?
Wayne Kimmel: It was amazing! It was the mid-90s, I got out of law school, and I had friends doing this thing called “entrepreneurship.” I didn’t know; I couldn’t even spell that word; it was like some French word I didn’t know. And I certainly didn’t know what a “venture capitalist” or an “angel investor” was. A “venture capitalist” sounds like a Star Wars thing; what is that? And so, I didn’t even know what this stuff was, but I did see passionate, energetic young people like me, doing big things, wearing jeans and T-shirts and telling the suits what was up about this website thing and the internet, and that’s amazing!
The problem was I wasn’t one of those entrepreneurs who had an idea. But I felt I was good at or could become really good at helping others and helping entrepreneurs become successful. So, I learned about the world of investing, not knowing frankly enough that starting a venture capital fund was quite impossible on your own as a 29-year-old. I just went and did it, and that was my entrepreneurial piece, but I was more entrepreneurial on the venture side and not specifically on building a business. I was building the business of my venture capital fund and then looking to help others.
Kevin Twitchell: Your energy is amazing! You seem plugged into what consumers are thinking and what they’re doing. You’re always looking around; you have a really smart team. How does consumer behavior dictate a lot of your investments? What are you seeing that then you say, “oh, we got to be in that”?
Wayne Kimmel: That’s important. If I’m not passionate about a company that we’re investing in, if I don’t believe in the entrepreneurs themselves, then it’s not for us. The greatest idea in the world may be something that is in an area that just wasn’t, and it’s hard now in a good way because I love sports. So, I’m excited about this. But in the past, when it would, it could have been a health tech company that was doing X, Y, and Z, and I just wasn’t that into it; so, how can I really invest in that entrepreneur and then get behind them all the way? But now, when we see something really exciting, we’re like, “what if this actually works?” Because we invest in startups, in ideas, we invest in these entrepreneurs, who are literally trying to make the impossible possible. It’s so cool when the impossible becomes possible!
That’s the most amazing feeling ever! I’ll give you an example. When I first met with Brian and Brent Musberger at the South Point in Las Vegas, which I had never been to before as a casino, I didn’t realize what a big place this was and how much money was bet in their sportsbook. They took me in, showed me this studio they put in the middle of a sportsbook, and said, “We are going to build the CNBC of sports betting.” I was like, “Wow, whoa, wait!” CNBC put a studio in the middle of this New York Stock Exchange, and they’re reporting directly from the floor, just like these guys were going to go do, and I was like, “Wow, that’s crazy in a good way.” I want to get behind them; that’s something I can help with. My experience, my relationships, and my contacts could be helpful to help building this business. It’s not just the money; it’s more than that. When SeventySix Capital myself, when we get involved in companies, it’s about doing a lot more!
And going back to another piece that you said, we have to look out into the future and not only what the consumer wants today; it’s what we believe the consumer potentially would want in the future, and it’s one of those things where the great entrepreneurs are able to see around corners, to see into the future.
Wayne Kimmel
Managing Partner at SeventySix Capital
They’re the ones that can. I’ll use the great Wayne Gretzky; they’re the ones who skate to where the puck’s going; they know where it’s going. And now, where it’s going, they know where it’s going before it was even hit, or even you took a shot as they go there. So, that’s the thing; and my God, it’s so exciting to support, help, whatever you want to call it, an entrepreneur! Cheer for them! I love cheering for them as well, when they’re doing something that seems so hard and so out there, and that others are not completely 100% into the fact that, “Oh yeah, sports betting and media — that’s coming together.” People at first were like, “That doesn’t make any sense.” Meanwhile, look at the world we’re in today! Deals are being done left and right with media and sports betting companies.
Matthew Shatz: SeventySix Capital is a pretty well-known entity at this point. What do you do to make sure that entrepreneurs are aware of the use and that the next great entrepreneur might call you as opposed to another VC?
Wayne Kimmel: That’s one of the most important things we think about at SeventySix Capital every day, how are we putting ourselves in the middle of traffic; how do we make sure we are talking to all of the entrepreneurs or as many of the entrepreneurs around the world who are looking to innovate and change and transform the sports industry. So, we put ourselves out there as much as possible: we do shows like this, and again, thank you to all of you and DataArt for having me as part of this.
From our perspective, that’s just reminding people of what we do talking to others in the industry. We have our own SeventySix Capital leadership series, and we do a lot of traditional media and social media. We are always reaching out to the entrepreneurs we’ve already invested in and some of the CEOs and executives that work with us, and they refer us to opportunities. We talk to the other investors in the industry, and we want to figure out ways we can all work together to build this industry because, in SeventySix Capital, we can’t do it all ourselves. We specialize in getting involved at the very early stage of a business when it’s quite frankly an idea, but when that business grows to become a 10–20–30–40-million-dollar business, we need the bigger guys to come in; we need other types of investors to come with us. So, some of those investors will invest with us early in the life cycle of these businesses, and some will introduce them to the companies later in their life cycle.
A great example is our company Nerd Street Gamers, one of our Esports companies. It was a company that was truly an idea. John Fazio had this idea of creating physical and digital in a physical facility with the greatest technology inside of them as well as online tournaments for Esports players, where young people can play video games. If the four of us and one of our other friends came together and created a team for League of Legends, and it’s a five-on-five game, we need to find another five, and if the five of us want to play another five, where do we go to play if we want to play in person? Because we can’t all hook up our computers together. I don’t know how to do all that, but if there was a place where the five of us and five other people want to play basketball, you guys are men in Manhattan or whatever, you can find a court and play, no problem; but from an Esports perspective where do you go? So that’s one of the things I was like, “Wow, he’s solving this huge infrastructure issue across the Esports industry.” So, we took that company from a little tiny company; we brought in Comcast as an investor, and they became a great partner of ours. Then we brought In5 below the retailer that works; their customers are young people. Wait, young people play video games. Oh, perfect! So, they then said, “Well, we’ll put a hundred local hosts in our Esports facilities next door to our stores all across the country.” So, we’re opening up a hundred Esports facilities right now all across the U.S. We just opened up our second in California. We’re about to open up our third, and then we’re doing something even bigger for our fourth. We’re super excited about that; we have ones in Texas, Saint Louis, Philly, and just all over the place; we’re opening them up, and it’s so exciting to see what’s happening now. But at the same time, we’re growing this business and just brought in Founders Fund. They were the fund behind Facebook, SpaceX, Palantir, and most recently, Airbnb. And so, this was so exciting that they’re now investors with us, helping build this business they’re leaning in as main Esports investment.
That’s so exciting, but we got it. We did our part at the early stage, and then we brought in others to help us expand and grow these businesses and hopefully turn them into successful businesses. And there’s one main cool thing; there’re so many cool things about Nerd Street Gamers. But the one amazing thing that I love more than anything is we’re trying to provide access to all; we’re trying to diversify, enabling everyone to have an opportunity to play a video game at the highest of levels, to be able to get a college scholarship at the over 200 colleges that offer scholarships today for kids who play video games. Yes, you guys understand that, but to a lot of people, that’s like, “Whoa, that’s crazy that you can go to college because you’re good at playing video games,” and then at the same time to become a professional. And some of the professional players make millions of dollars. Guys like Ninja, he has his own sneaker deal with Adidas. Who would have ever thought? But that’s the world we’re in right now and then, by the way, we go and go back to betting. There’s a lot of betting that goes on in the Esports world, but that’s something that has an opportunity to turn into something here in the United States; that’s a big opportunity! Because those traditional sportsbooks don’t know the difference between League of Legends and Overwatch, or just throw in any other game you want, they don’t. They know they’ll kill you, they’ll take all your money in basketball, football, and the traditional sports, but when it comes to this other stuff… and that’s where young people, that’s where entrepreneurs have an opportunity to build amazing companies that no one has ever seen before.
Russell Karp: It seems like Apollo wants to push the Yahoo brand into sports betting. Do you have any comments on that? I’m just curious to get your perspective.
Wayne Kimmel: They’re private equity guys, they stuff, buy it, try to dress it up a little bit, and then they’ll try to flip it. And they will. And I’m sure they’re going to try to make a run with Yahoo, and it’s like going to the second-hand store or something. They call it thrift shop, but then there’s also like an even higher level, where I’m trying to think of what. Anyway, basically, they’re trying to look; they’re going to dress this up. They’re a multi-bazillion-dollar fund, one of their partners owns the SeventySixters, and it’s great what they’re going to do, but they’re big companies. They’re taking two legacy businesses — Yahoo and AOL. Who has AOL mail or Yahoo mail anymore? It’s great, and they’re going to try; and there, quite frankly, I know some good people over at Yahoo Sports, and that’s awesome that they’re going to try.
We’re all about getting behind that entrepreneur, that person looking to literally bust up the industry, to do something that no one’s ever done before. And those are the kinds of companies that are able to move faster
Wayne Kimmel
Managing Partner at SeventySix Capital
They’re able to maneuver through all the different things happening out there right now instead of having to move a large ship and what’s going to happen. It may be a great opportunity in the future. They may look to start buying; they could be in a perfect situation where they could buy some startups moving in the future. But for them to be a dominant player, you got to bring in some major new thinkers and people looking out into the future. But if they look, it typically doesn’t happen, but the one thing is they have so much money, and they’re so smart, that maybe they can do what most private equity firms can’t do.
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By Russell Karp,
Vice President of Media and Entertainment Practice at DataArt
Originally published at https://www.dataart.com.
