
Forget Going Pro, Los Angeles eSports Pivots Toward Amateur Leagues
Two companies betting on the Los Angeles eSports market aren't throwing in on glitzy, state of the art stadiums or sinking big bucks into the pros: They're banking on the average Joe.
The video game industry has been red hot, surpassing $120 billion last year. Many in the marketplace think the next area for growth is in the amateurs; a vast pool of recreational players who can, if provided the infrastructure, make hay for investors as competitive players.
Southland stalwarts like Blizzard Entertainment and Riot Games both have investments in the unpaid ranks, building programs around blockbuster offerings like Overwatch and League of Legends.
But companies without game development programs have found a way in.
Santa Monica-based Super League wants to anchor its tournaments and one-off events with geography, drawing crowds to local sites set up for tournaments at the local Buffalo Wild Wings, or maybe even a Dave & Busters. The company already has, launching the program four years ago.
In the age of wireless internet, any place with a strong connection is a potential tournament site.
Matt Edelman, Super League's chief commercial officer, wants to convert the millions who watch competitive gameplay on Twitch or YouTube gaming channel into Super League community members.
Think recreational league sports at the local YMCA or community center.
"Super League is not in the pro eSports business. We have really focused on the fact that every viewer, every player is a participant. And that's not the way it is in traditional sports," Edelman said. "Every single person who goes to a League of Legends event also plays the game. How do I get to play in person? That's where Super League comes in."
The cost structure includes games for as little as $5 or leagues that cost about $80.
Newzoo, a games and eSports analytics firm with offices in San Francisco estimates there are more than 2.5 billion gamers world wide.
Gaming has long offered the advantage of remote competition, allowing communities to grow nationally and even overseas. But Edelman wants to capitalize on the lure of local community, and the chance for digital friends to share a laugh and a high five in person.
The company also streams these events on services like Twitch, offering packages that beam the most captivating gameplay moments to a user's computer screen or television. It's like NFL Red Zone for gamers.
Super League is playing with the on-location model, holding 275 events in the U.S., Canada and Mexico. The company announced last month that it had partnered with Chinese-based Wanda Media to bring its model to more than 700 locations in the Middle Kingdom. Super League has not invested in brick and mortar locations, but has amassed a hoard of users, and sponsors who advertise through signage or commercials on gaming highlight videos.
The pro ranks are also sinking more focus into physical locations. Blizzard's Overwatch League will require teams, like the Los Angeles Gladiators, to play more games in their chosen city.
Nerd Street Gamers wants in on the Los Angeles market, too. It finished a round of funding last October, bolstering it with $12 million to help it bring its gaming centers, branded Localhost, nationwide. Fellow Philadelphia company and discount retailer Five Below provided the capital, following a long line of investors including Comcast, SeventySix Capital, Elevate Capital, and angel investor George Miller. The deal is a bet on the value of amateur eSports.
CEO and founder John Fazio said the appeal is largely because of its high school district, which is ranked the largest in the country.
"Those schools are full of kids who would love to take advantage of these kinds of opportunities," he said.
Fazio's company plans to build a massive gaming center where players can compete, and friends can watch. The facility, located in Hawthorne, is a planned 26,000 square-feet or, as the company reports, the size of five-and-a-half NBA regulation basketball courts. Loaded with 375 gaming PCs, it would have capacity for 120 teams and has planned its opening for summer 2020. It's the gamer equivalent of a basketball court or a soccer field. The company announced the arrival Feb 12 of a Southland addition to its previously established foothold in Huntington Beach located at 1524 Transistor Lane.
"I think the growth has accelerated. Right now is what's kind of crazy is we've seen growth with really just investment at the professional level," Fazio said. "We're taking hundreds of thousands — if not millions — of students and turning them into esports fans, if not future professionals."
He noted that developers have closely controlled the leagues they've created for college eSports teams, of which there are more than 250 nationwide. The casual gamer with competitive aspirations, he said, is where his company can find opportunity.
Both companies have their eye on the high-school market, too, but Santa Monica-based PlayVs has focussed their efforts on cornering that market. The company has been raking in investments, including $50 million in funding announced last September, designed to spread its platform to all 50 states.
Sari Kitelyn, director of eSports and project development at Full Sail University, a for-profit college with a focus on eSports, is keeping her eye on the unpaid ranks.
But the market remains in flux. Super League is still growing, recording year-over-year growth in of 350,000 or 129% during the third quarter. Nerd Street Gamers doesn't release financials because it is privately held, but received seed funding from Major League Baseball slugger Ryan Howard and is backed by Comcast.
Whatever the growth potential, Super League and Nerd Street Gamers have already made the commitment, investing in the amateurs in hopes of making big league dollars.
"I think this is the biggest area of market opportunity," Kitelyn said.
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Los Angeles is home to around 5,000 startups, the majority of which are in their young, formative years.
Which of those thousands are poised for a breakout in 2021? We asked dozens of L.A.'s top VCs to weigh in. We wanted to know which companies they would have invested in if they could go back and do it all over again.
Boiling
<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vbWVkaWEucmJsLm1zL2ltYWdlP3U9JTJGaW1hZ2VzJTNGcSUzRHRibiUzQUFOZDlHY1EwRjdlRzlxY3JFd1lNVS12T2VTWng1NFd6VFdWUktaMFpyQSUyNnVzcXAlM0RDQVUmaG89aHR0cHMlM0ElMkYlMkZlbmNyeXB0ZWQtdGJuMC5nc3RhdGljLmNvbSZzPTEwMDImaD1jOGIyM2Y5YWNhNGNhNDY3NzZhNmUzNTU3MWI2YzAzNjcwOTU1Nzg0ODQxZDdiZGIyZjAxMzUxNjdkN2I5NWY2JnNpemU9OTgweCZjPTE2MDM4MjI5MTgiLCJleHBpcmVzX2F0IjoxNjY1MTY5NTcxfQ.iTVRhSe0UulUxSyMUZ4QA7_0njADdWe3QEJ28-xW6m0/img.jpg" id="a03b9" class="rm-shortcode" data-rm-shortcode-id="03faa4898896a9ce5be09d51dc104b73" alt="Pipe logo" />Pipe
<p><a href="https://www.pipe.com/" target="_blank">Pipe</a> provides financial services to help cloud service companies tap into their deferred cash flows, allowing them to continue growing without taking on debt or giving up ownership. For subscription-based businesses, this makes it "as if all of your customers converted to annual plans overnight," according to the company.</p><p>Founded by Harry Hurst, Josh Mangel and Zain Allarakhia, the company <a href="https://dot.la/pipe-taps-60-million-seed-extension-2646245409.html" data-linked-post="2646245409" target="_blank">raised $66 million of seed funding earlier this year</a> in a deal led by Craft Ventures and Fin Venture Capital.</p>Clash App Inc.
<p>Created by former Vine-r Brendon McNerney and entrepreneur and marketing expert P.J. Leimgruber, <a href="https://www.clashapp.co/" target="_blank">Clash App</a> is a short form video platform similar to TikTok, but without built-in sound libraries. It's geared toward empowering creators with innovative monetization options and inclusive communities.</p>XCLAIM
<p><a href="https://www.x-claim.com/" target="_blank">XCLAIM</a> has created an electronic platform where bankruptcy claims that take a notoriously long time to process can be digitally traded. Founded in 2018 by Matthew Sedigh, who has operated in the corporate restructuring field for more than a decade, the company says "rather than wait years for the bankruptcy court process to issue payment distributions, creditors can now access immediate liquidity by selling their claim to interested buyers." Earlier this year, it raised a $4 million seed round led from Luma Launch, First Round Capital and Freestyle Capital.</p>Simmering
<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vbWVkaWEucmJsLm1zL2ltYWdlP3U9JTJGaW1hZ2VzJTNGcSUzRHRibiUzQUFOZDlHY1JlR3QzLWlHSmFtYVJnLXNwSXVYcDc5N0xOdnpTYWhYYVloQSUyNnVzcXAlM0RDQVUmaG89aHR0cHMlM0ElMkYlMkZlbmNyeXB0ZWQtdGJuMC5nc3RhdGljLmNvbSZzPTYwNiZoPWU3NzNhYTkwODZkNmE4OWQwMWU0ZjZkODk0ODU1ZWEyZDIzMmU3YTYyNzJjYTU3Mzk3MmI0NmQ0NjAxMDY3YzMmc2l6ZT05ODB4JmM9MjQ3NDg5MDE0MiIsImV4cGlyZXNfYXQiOjE2NzAzMzU0NjB9.iqCUfvVUI22AGAz-QYPiS7XFb26sw3mGaU8seorLqxQ/img.jpg" id="44f84" class="rm-shortcode" data-rm-shortcode-id="cbdc9b0cdf21d3873eef2a40647ae810" alt="Freck Beauty logo" />Freck Beauty
<p><a href="https://freckbeauty.com/" target="_blank">Freck Beauty</a> manufactures beauty products intended to make the user feel seen. Remi Brixton, the company's chief executive officer, founded the startup in 2015 when she was in search of a freckle makeup product. When she couldn't find one, she launched her own, the FRECK OG. The East Los Angeles-based company raised an undisclosed amount of seed funding in a deal led by KarpReilly and Stage 1 Fund earlier this year.</p>The Skills
<p><a href="https://www.theskills.com/" target="_blank">The Skills</a> wants to be the <a href="https://dot.la/the-skills-2649267338.html" target="_self">master class on sports </a>and life. The Los Angeles-based startup launched two months ago and offers classes from gold medal Olympians — including swimmer Michael Phelps and volleyball player Kerri Walsh Jennings — and Grand Slam tennis Champion Maria Sharapova. In December, it closed a $5 million seed round backed by Boston-based Will Ventures, Global Founders Capital, 8VC, Maveron, Hack VC and Correlation VC.</p>Mapped
<p>Founded by Shaun Cooley, former chief technology officer of Cisco's Internet-of-Things (IoT) and Industries division, <a href="https://www.mapped.com/" target="_blank">Mapped</a> provides IoT services in El Segundo.</p><p>The company raised $3 million of seed funding in a deal led by Greycroft earlier this year, putting its pre-money valuation at $9 million. </p>DataPlor
<p>Created in 2016 by Geoffrey Michener, <a href="https://www.dataplor.com/" target="_blank">Dataplor</a> indexes micro-businesses in Mexico (and will soon be expanding to other countries in Central and South America) and sells the data to larger companies.The company relies on contractors in those countries to collect the information from local businesses. It raised $4 million from ff Venture Capital, Quest Venture Partners and Space Capital earlier this year and expects to use it to expand into more Latin American countries. </p>Grow Credit
<p>Launched by serial entrepreneur <a href="https://joebayen.medium.com/a-black-founders-guide-to-raising-a-2m-institutional-seed-round-a8687f95087f" target="_blank" rel="noopener noreferrer">Joe Bayen</a>, <a href="https://growcredit.com/" target="_blank">Grow Credit</a> helps customers improve their credit score by providing credit for subscription services like Netflix and Spotify. Their MasterCard can help consumers with thin or damaged credit scores and the small line of credit can be upgraded for a fee. The company closed a $2 million seed round earlier this year with participation from Mucker Labs.</p>Outer
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