How the Pandemic Has Changed Fans' Experience for Good
The COVID-19 pandemic has separated friends, family and colleagues and halted most in-person shared experiences. On the flip side, over the past year gaming, sports and entertainment companies have found new ways to help keep us engaged, connected and entertained. Millions of fans are now more engaged online through new interactive and social gaming experiences, virtual concerts with VIP fan sections and rebroadcasts of sporting events and concerts that feature more interactive and on-demand components.
In the future, a mix of in-person, virtual and hybrid events will create opportunities for companies to keep experimenting with new technologies and creating novel revenue streams as we emerge into a post-pandemic world.
Challenges Led to Innovation
At Fenwick, we have seen a number of business and technology trends emerge or accelerate over the past year among our company clients, which include Twitch, Jam City, 100 Thieves, Riot Games, Peloton, Instagram and Facebook. Chief among the industry shifts are:
- Increased Fan Engagement and Fan Interaction
Companies are offering new opportunities for fans to engage and interact virtually. The chat feature, now an integral part of the esports experience, provides a way for fans to converse in real time. For instance, through Twitch, the world's leading live streaming platform, fans can participate in esports competitions and attend virtual gaming conferences, offering an outlet for gamers to communicate with one another virtually. Shared viewership and other social components are bringing fans closer to the action and making viewing more social.
- More Opportunities for Monetization and Microtransactions
Subscription or membership models, a quick sidebar chat with a professional athlete, inviting fans into a private virtual room to interact with a celebrity and enhanced in-app purchases all offer new revenue generation opportunities. VIP experiences such as exclusive concerts, "meet and greets" and other intimate gatherings can be monetized digitally as well as in person.
- Continued Growth of Mobile
Mobile gaming in particular experienced record-breaking numbers and growth last year. As gamers seek more ways to interact with each other and make games more social Jam City — one of the biggest U.S. mobile game companies — is investing in creating more narrative role-playing games and strategy games, hiring a range of Hollywood talent.
Mobile will also continue to grow as more live events go paperless and cashless, requiring attendees to download an app for e-ticketing and other cashless, touchless and contactless transactions. The continued expansion of 5G and AI will enable even more opportunities for streaming and personalization via mobile.
Mobile devices will also house vaccine passports to the extent they are adopted. These are digital codes verifying an updated COVID-19 vaccination that may soon be required to access concert venues and other public places. The passport will likely be stored via QR code or in a digital wallet.
- Increased Use and Consumer Adoption of VR/AR
Virtual and augmented reality technologies (VR/AR) have continued to gain traction during the pandemic and helped replace some in-person fan experiences. During the 2020 Shanghai League of Legends Championships, Riot Games realized that bringing fans closer to the action was no longer feasible due to COVID-19. With the help of XR (a blend of VR, AR and mixed reality technologies) the company was able to offer a broadcast that gave the fans a more intimate virtual experience. VR/AR technology is in its nascency but will keep maturing over the next several years.
- Expanded Personalization of Influencers
100 Thieves saw content creator and online star Valkyrae become the fastest-growing female streamer of the year in 2020 after she started playing the online multiplayer social deduction game "Among Us." Her popularity continues to skyrocket: according to streaming information database Stream Hatchet, she was the most the world's most-watched female streamer in Q1 2021. This is just one example of the many ways celebrities found new ways to engage with fans during the pandemic, broadcasting from their kitchens and living rooms through Instagram and Facebook.
Peloton's popularity exploded last year, in part, with the help of professional athletes, actors and musicians. Every day users rode with them to compete and/or enjoy the ride.
Legal Trends
With the rise of new digital media, entertainment and gaming technologies, along with the growth and diversification of global audiences and the advent of entirely new business models, we are seeing novel legal challenges and opportunities. Many are related to:
* The production and livestreaming of interactive shows
* Messaging and video chat-related companies that operate chat services for younger users, in particular privacy concerns and questions around content moderation
* An array of regulatory issues have cropped up in the booming esports industry around franchise and licensing agreements, sponsorship and player contracts, and streaming and fan engagement. Issues include FTC disclosures of paid influencer relationships, whether esports agencies collect data offline, online and through new technologies including biometrics, and whether esports agencies are required to be talent agencies under applicable law
* For companies streaming video, CVAA (Century Communications and Video Accessibility Act) compliance and accessibility requirements and FCC registration
* Securities, financial regulatory and intellectual property issues involved with digital assets (including NFTs)
The Long-Term Effects of the Pandemic
We anticipate many of the innovations we saw during the pandemic to further accelerate in this new era. Even as live events return, we expect they will be at lower capacity and feature more hybrid experiences.
Many exciting innovations will continue this year as companies continue to adapt to a sports, gaming and entertainment world that will not return to what it was before the pandemic.
About the Authors
Andrew Klungness, Partner, Santa Monica
Andrew is a co-chair of Fenwick's consumer technologies team, as well as a principal member of its fintech/blockchain group. He works with clients in a number of verticals, including ecommerce, consumer tech, fintech, blockchain (NFT, DeFi, Layer 1, and others), marketplace, CPG, mobile, AI, social media, games, and edtech, among others. Andrew leads significant and complex strategic alliances, joint ventures and other collaboration and partnering arrangements, which are often driven by a combination of technological innovation, industry disruption, and rights to content, brands or celebrity personas. He also structures and negotiates a wide range of agreements and transactions, including licensing, technology sourcing, manufacturing and supply, channel partnerships and marketing agreements. Additionally, Andrew counsels clients in various intellectual property, technology and contract issues in financing, M&A and other corporate transactions.
Jennifer Stanley, Partner, San Francisco
Jennifer, who leads Fenwick's copyright group and games industry group, is a top advisor to cutting-edge companies in the video games and interactive entertainment industry. Serving as a
"primary care" counselor to companies, Jennifer advises clients on intellectual property,
technology and media transaction strategy; copyright registration, protection and dispute
resolution; and business model analysis and risk management. Her practice encompasses a wide range of industries, including: Advertising, Content (digital streaming, movies, distribution), eCommerce and retail, eSports, Fashion and jewelry, Gaming, Hardware/devices, Influencers (YouTubers, etc.), Sharing economy (food, travel, transport), Talent, and Virtual reality (VR) and augmented reality (AR).
Jennifer is a go-to authority for games and esports matters. She regularly authors thought leadership and is an in-demand speaker in the space.
Vejay Lalla, Partner, New York
Vejay helps clients navigate the convergence of technology, advertising, media, ecommerce and entertainment, and advises on the potential impact for his clients from a commercial, intellectual property, regulatory and privacy standpoint. He regularly advises venture-backed companies across numerous industries, including games, media-tech, marketing-tech, blockchain, fintech, proptech, augmented and virtual reality, artificial intelligence and machine learning, fashion, retail, beauty and consumer product companies over their entire lifecycle. In addition to his startup practice, Vejay has deep industry knowledge in advertising, media and entertainment focusing on content distribution and licensing arrangements, and talent/influencer deals both in traditional media and digital distribution.
About Fenwick
Fenwick is one of the world's top law firms focused on technology and life sciences, with leading Games and Digital Media and Entertainment practices. The firm has been involved with advertising, media, entertainment and games companies – advising on their challenges and helping capitalize on their opportunities – since the genesis of the digital revolution.
The firm opened its Santa Monica office in early 2019 to better serve more than 300 clients in the Los Angeles region, which include innovative startups, established companies and venture capital investors. If you'd like to connect with one of our attorneys, please click here to contact Zaharit Chen, Business Development Manager.
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In order to gauge the local startup scene and who’s leading the proverbial pack, we asked more than 30 leading L.A.-based investors for their take on the hottest firms in the region. They responded with more than two dozen venture-backed companies; three startups, in particular, rose above the rest as repeat nominees, while we've organized the rest by their amount of capital raised as of January, according to data from PitchBook. (We also asked VCs not to pick any of their own portfolio companies, and vetted the list to ensure they stuck to that rule.)
Without further ado, here are the 26 L.A. startups that VCs have their eyes on in 2022.
1. Whatnot ($225.4 million raised)
Whatnot was the name most often on the minds of L.A. venture investors—understandably, given its prolific fundraising year. Whatnot raised some $220 million across three separate funding rounds in 2021, on the way to a $1.5 billion valuation.
The Marina del Rey-based livestream shopping platform was founded by former GOAT product manager Logan Head and ex-Googler Grant LaFontaine. The startup made its name by providing a live auction platform for buying and selling collectables like rare Pokémon cards, and has since expanded into sports memorabilia, sneakers and apparel.
2. Boulevard ($40.3 million raised)
Boulevard’s backers include Santa Monica-based early-stage VC firm Bonfire Ventures, which focuses on B2B software startups. The Downtown-based company fits nicely within that thesis; Boulevard builds booking and payment software for salons and spas. The firm has worked with prominent brands such as Toni & Guy and HeyDay.
3. GOAT ($492.7 million)
GOAT launched in 2015 as a marketplace to help sneakerheads authenticate used Air Jordans and other collectible shoes. It has since grown at a prolific rate, expanding into apparel and accessories and exceeding $2 billion in merchandise sales in 2020. The startup sealed a $195 million funding round last summer that more than doubled its valuation, to $3.7 billion.
The Best of the Rest
VideoAmp ($578.6 raised)
Nielsen competitor VideoAmp gathers data on who's watching what across streaming services, traditional TV and social apps like YouTube. The company positions itself as an alternative to so-called "legacy" systems like Nielsen, which it says are "fragmented, riddled with complexity and inaccurate." In addition to venture funding, its total funding figure includes more than $165 million in debt financing.
Mythical Games ($269.4 million raised)
Seizing on the NFT craze, Mythical Games is building a platform that powers the growing realm of “play-to-earn games.” Backed by NBA legend Michael Jordan and Andreessen Horowitz, the Sherman Oaks-based startup’s partners include game publishers Abstraction, Creative Mobile and CCG Lab.
FloQast ($202 million raised)
FloQast founder Michael Whitmire says he got a “no” from more than 100 investors in the process of raising a seed round. Today, the accounting software company is considered a unicorn.
Nacelle ($70.8 million raised)
Nacelle produces docuseries, books, comedy albums and podcasts. The media company’s efforts include the Netflix travel series “Down To Earth with Zac Efron.”
Wave ($66 million raised)
A platform for virtual concerts, Wave has hosted performances by artists including Justin Bieber, Tinashe and The Weeknd. The company says it has raised $66 million to date from the likes of Warner Music and Tencent.
Papaya ($65.2 million raised)
Sherman Oaks-based Papaya looks to make it easier to pay “any” bill—from hospital bills to parking tickets—via its mobile app.
LeaseLock ($63.2 million raised)
Based in Marina del Rey, LeaseLock says it’s on a mission to eliminate security deposits for apartment renters.
Emotive ($58.1 million raised)
Emotive sells text message-focused marketing tools to ecommerce firms like underwear brand Parade and men's grooming company Beardbrand.
Dray Alliance ($55 million raised)
Based in Long Beach, Dray says its mission is to “modernize the logistics and trucking industry.” Its partners include Danish shipping company Maersk and toy maker Mattel.
Coco ($43 million raised)
Coco makes small pink robots on wheels (you may have seen them around town) that deliver food via a remote pilot. Its investors include Y Combinator and Silicon Valley Bank.
HiveWatch ($25 million raised)
HiveWatch develops physical security software. Its investors include former Twitter executive Dick Costollo and NBA star Steph Curry’s Penny Jar Capital.
Popshop ($24.5 million raised)
Whatnot competitor Popshop is betting that live-shopping is the future of ecommerce. The West Hollywood-based firm focuses on collectables such as trading cards and anime merchandise.
First Resonance ($19.4 million raised)
Founded by former SpaceX engineer Karan Talati, First Resonance runs a software platform for makers of electric cars and aerospace technology. Its clients include Santa Cruz-based air taxi company Joby Aviation and Alameda-based rocket company Astra.
Open Raven ($19 million raised)
Founded by Crowdstrike and Microsoft alums, Open Raven aims to protect user data. The cybersecurity firm’s investors include Kleiner Perkins and Upfront Ventures.
Fourthwall ($17 million raised)
When an actor faces the camera and speaks directly to the audience, it’s known as “breaking the fourth wall.” Named after the trope, Venice-based Fourthwall offers a website builder that’s designed for content creators.
The Non Fungible Token Company ($15 million raised)
The Non Fungible Token Company creates NFTs for musicians under the name Unblocked. Its investors include Jay Z’s Marcy Venture Partners and Shawn Mendez.
Safe Health Systems ($15 million raised)
Backed by Mayo Clinic Ventures, Safe Health develops telehealth software and offers tools for enterprises to launch their own health care apps.
Intro ($11.6 million raised)
Intro’s app lets you book video calls with experts—from celebrity stylists, to astrologists, to investors.
DASH Systems ($8.5 million raised)
With the tagline “Land the package, not the plane,” DASH Systems is a Hawthorne-based shipping company that builds hardware and software for automated airdrops.
Ettitude ($3.5 million raised)
With a focus on sustainability, Ettitude is a direct-to-consumer brand that sells bedding, bathroom textiles and sleepwear.
Afterparty ($3 million raised)
Along similar lines as Unblocked, Afterparty creates NFTs for artists and content creators such as Clay Perry and Tropix.
Heart to Heart ($0.75 million raised)
Heart to Heart is an audio-focused dating app that “lets you listen to the story behind the pictures in a profile.” Precursor Ventures led the pre-seed funding round.
Frigg (undisclosed)
Frigg makes hair and beauty products that contain cannabinoids such as CBD. The Valley Village-based company raised an undisclosed seed round in August.
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Curbside Technologies is a software development company founded by CEO Michael Marmo in 2020. Marmo told dot.LA he comes from a family of waste haulers. He said that though he originally began his career in entertainment and advertising (with stints at Yelp and as a media buyer at ad agency Mindshare), he went to work at his family’s transfer station and the job stuck.
Marmo said he began experimenting with software to streamline his family’s business, using what would eventually become Curbwaste’s platform to “basically solve the things I hated doing” in waste management.
Originally based in New York City, Marmo said the company is “bicoastal” with roughly 50% of its staff in New York and 50% in Los Angeles. Marmo divides his time between the east coast and Los Angeles, where the bulk of Curbwaste’s investors are based – including Manhattan Beach’s B Capital Group, which co-led the seed round with Santa Monica-based Mucker Capital.
B Capital invested in Curbwaste as part of its early-stage Ascent Fund 2. Curbwaste has raised $7.2 million since its launch two years ago following this round, Marmo said.
Curbwaste founder and CEO Michael Marmo
Courtesy of Curbside Technologies
“We love to see [the] acceleration of tech adoption in these online industries that will create massive software opportunities over the next decade,” B Capital General Partner Gabe Greenbaum told dot.LA. “Mike's this fourth-generation waste management operator with deep industry relationships, and we love backing insiders that have unfair insights and the problems that they're solving, which really helps drive empathy and trust with customers.”
To fuel its growth plans, Curbwaste hired ServiceTitan’s former head of international strategy and operations Vach Hovsepyan to serve as chief operating officer. Marmo said Hovsepyan joined the company earlier this month.
Marmo told dot.LA Curbwaste is in the process of closing a deal with its first Los Angeles client “in the near future.” He wouldn’t disclose the name of the company but said he expected the deal to be closed by this fall.
Los Angeles operates on a commercial franchise model for garbage removal, where private companies handle waste disposal through contracts with various cities. This can lead to disparate results for property owners, but it’s a great deal for Marmo. It means each individual franchise owner is a potential new buyer of Curbwaste’s software.
B Capital’s Gabe Greenbaum told dot.LA he expects more mom-and-pop waste removal companies will begin to embrace B2B software like Curbwaste’s platform as younger professionals take over businesses, similar to Marmo’s trajectory.
“What you're seeing is that there's a massive transformation in this particular industry to start to buy software,” Greenbaum said. “There's over 15,000 small and medium and mid-market waste management companies in the U.S. that are still running their business on internet 1.0 tech or paper and pad,” he added, noting B Capital discovered this during diligence research before investing in Curbwaste.
Marmo said there are pros and cons to the franchise model of removing trash. One hurdle is that it leaves logistics management up to the individual owners. Challenges include differences in routes, traffic and the regulations detailing how each type of waste has to be disposed of in certain areas, plus ever-evolving environmental guidelines.
B Capital Group general partner Gabe Greenbaum
Courtesy of B Capital Group
“The industry as a whole is way more complex than I think most people understand,” Marmo told dot.LA. “There's a lot of moving parts. Logistically, it's very complex. It's very labor intensive [and] capital intensive,” Marmo said, adding that Americans generate about 292 million tons of trash every year, and that number is only expected to grow.
“What the software is able to do is compartmentalize all the different moving parts, and then allow you to analyze the business and come up with optimal solutions to bring efficiency to what you're doing,” Marmo added. “Data basically breeds transparency.”