We’ve been saying it for a while at SportsTechX: 2021 has been a mega year with over US$12 billion invested in sports tech startups globally.
For context, this was higher than the previous three years combined. This strong momentum continued in 2022; through May, we’ve seen investments exceed US$4.9 billion, which is already more than any year since 2016 – except for 2021, of course.
So what is driving all this growth? Here’s a look at the top three sports tech investing trends.
NFT and Web 3.0 in sports
More than US$2.3 billion was invested globally in NFT and digital collectibles-related startups in 2021, with an additional US$940 million invested through May 2022. This compares to less than US$30 million in 2020.
It truly seems like a multi-billion dollar industry sprang up almost overnight when NBA Top Shot burst onto the scene in January 2021. Since then, we have seen a flurry of activity of different types. An example of this is the Premier League’s recent announcement of Consensys as an official partner of NFT in a whopping four-year, $589m deal, which equates to around $147m a year. particularly important. For context, Dapper Labs pays the National Basketball Association (NBA) and the National Football League (NFL) approximately US$20 million per year each.
In June 2022, sentiment is definitely not as bullish. Outside of the world of sports, the NFT Apes and A-list Punks collections have fallen significantly in value in the face of a bear market. Incoherent Goblins now take center stage, making it even harder to make sense of it all. Nihilistic projects like these seem to mock the mantra “usefulness, use, use” that was the oft-repeated key to success. But those with a longer-term view, which is not driven by the speculative nature of the market, will know that there is still potential to be unlocked.
NFTs were perhaps the first use case for understanding the possibilities of what Web 3.0 technology is creating in sports. Smart contracts, decentralized applications (dApps), and often-vaunted virtual worlds and metaverses are creating a world of opportunity, literally and figuratively. We have already seen successful use cases. The Australian Open has found a unique way to make fans own part of the court. You can already buy land in a sports metaverse. And earn money while you take steps.
Thus, many applications are already visible and there are more: fantasy sports, movement to win, game to win, creation of multi-level membership groups among fans to unlock rewards, etc. Only time will tell which attempts will lead to the best results, but for now there’s certainly plenty of room to play. In the meantime, Nifty Sports is a good place to filter out all the noise.
In December 2020, Peloton stock peaked at US$171 per share and its market capitalization at US$50 billion. In June 2022, at the time of writing, it had fallen below US$10 per share with a market capitalization of US$3.3 billion. Ouch.
Arguably, this is not the company’s biggest problem. Major staff layoffs, senior management changes, lawsuits, production issues and slowing demand have led to talks of a cut-price sale to Amazon, Apple or another pocket-sized giant. deeper down the alphabet.
So why are they interested in the Peloton? Besides the allure of a discounted acquisition, there are still positives to the business. Strong commodity, strong NPS scores and healthy demand, even if it’s down. But above all, the general sentiment for the connected fitness market is extremely healthy.
The virtual fitness market is estimated to reach US$79 billion by 2026, from US$11.4 billion in 2021. Investments in fitness tech startups – spanning both hardware and software – exceeded US$2.6 billion in 2021 and stands at US$740 million in 2022. As consumer-driven markets like China and India increasingly take the When it comes to fitness, this rapid growth is unlikely to slow down any time soon.
The “Peloton for X” sub-industry still looks strong as investors back similar models in other areas, from rowing to boxing to stairlifts. And the models continue to evolve. Artificial intelligence (AI) based training combined with nutritional planning, all personalized for the user, has become the norm. It’s also become clear that people don’t want to train exclusively at home; the social layer of fitness cannot be purely digital.
As gyms reopen their doors to fitness enthusiasts, the future is likely to be something of a hybrid. It will be up to these new solution providers to learn from Peloton’s mistakes and not sweat too much.
Fantasy sports and betting
The legalization of sports betting in the United States has changed the game for a few segments of sports technology. For starters, there is a glut of new sportsbooks on the market, from casinos to major broadcasters to fantasy sports giants. This means that there are many tempting offers to entice punters. Then there’s the impact on the sports media industry, as broadcasters look for new ways to tap into a more engaged audience. It’s a pretty simple idea: if you have more at stake, you’re more likely to watch the game. And if you watch more, you are more likely to place more bets.
Where money flows, innovation follows. And there is so much room for innovation in derivative businesses: affiliate programs, recommendation engines, statistical analysis platforms, news, social forums, etc. Each of these presents huge opportunities for startups and large players alike, as effective solutions can scale very quickly.
The implications for the rest of the world are quite significant. Fantasy sports is the ideal gateway for sports betting, with DraftKings and FanDuel having already demonstrated how a smooth transition can be made. This is particularly relevant in India, where fantasy sports have become a growing fascination over the past five years, especially games to win.
Market goliath Dream11 was reportedly valued at over US$8 billion in 2021 in its last funding round, doubling its valuation from a previous round earlier in the year. With over 140 million users, the company has also set up an innovation lab and a dedicated sports technology fund. With optimistic investors on board, expect a lot more from this team. MPL and Winzo are other names familiar to those who follow this sector. Elsewhere, there has been a conversation around legalizing sports betting in India for some time now, and Brazil has already taken the first steps. Expect many lessons learned from the US market to transfer to these sports-crazed nations. Ethical considerations seem to have been parked for now as money talks, whatever the cost.
About the Author: Rohn is a serial entrepreneur with over 15 years of experience founding and mentoring several startups after beginning his career as a management consultant. He is currently co-founder of Berlin-based SportsTechX, the leading market intelligence company for all things sports and innovation. Rohn has been a speaker at over 25 conferences, has served as a mentor and judge at prominent accelerators and startup competitions, and is a guest speaker at MBA programs.
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