Pixellot, an AI-automated sports production and analytics solution provider based in Israel, recently announced a $161 million Series D round; this surpassed the $100 million WSC Sports raised earlier this year to become the largest funding round in Israeli sports tech history. PSG, a Boston-based growth equity fund, led the round. While the valuation was not disclosed, a source familiar with the term sheet said it was both in line with the mid- to high-single-digit revenue multiples typically awarded to mature sports-tech companies and a significant step up from the June 2020 Series C round.
PSG was drawn to Pixellot’s vision to accelerate sports democratization. “We see this [solution] as a revolution in the ability to deliver any event, to any sports fan in the world, in a cost-effective manner,” Ronen Nir (managing director, PSG) said.
The size of the potential target market (the company currently operates in 60 countries across 17 different sports), the vast number of applications for the technology and Pixellot’s standing as a category leader all played into PSG’s investment thesis. So did the company’s investor-friendly business model.
“Because the majority of [their] customers are the media rights owners rather than the end consumer, [the company] does not necessarily have to invest in the consumer distribution and marketing” of the broadcasts, Nir said.
JWS’ Take: Historically speaking, television networks have spent heavily on high-quality production for prominent professional leagues. Less popular pro leagues and sports played at lower levels were largely witnessed by just those in attendance, as the costs associated with shooting, editing and delivering live video were prohibitive.
Pixellot eliminates the need for costly cameras and the time-intensive labor typically associated with high quality video production. Once a rights owner has deployed the company’s hardware and software infrastructure, “the cost of producing the marginal sports event is zero,” Nir said. “That obviously opens up a huge capability of delivering sports, basically 99.5% of sports events in the world, which are not produced today, to the end consumer.”
Amateur sports comprise a sizable portion of Pixellot’s current business. Play-On, the largest streamer of high school sports in the U.S., is the company’s largest client. “They are sort of a hand-in-glove partner,” Alex Michael (co-head, LionTree Growth) said. Wherever Play-On sells its solution, he added, it is effectively including Pixellot produced content. Play-On was acquired by KKR earlier this year. LionTree served as an advisor on Pixellot’s capital raise.
Pixellot has found a niche in youth sports because its technology is helping to solve a prime parental directive. Many parents likely can’t attend every one of their kids’ contests. “But it’s probably the most important thing for your children to have you watch the game,” Nir said, “and it’s probably one of the most important things for you as a parent.”
The company has also found a foothold within the secondary sports market (think: minor leagues, lower-level college athletics). These are properties that would traditionally “forgo capturing [games and practices] because they would be prohibitively expensive to [cover] in a high-quality way,” Michael said. But now with a solution like Pixellot, rights owners at all levels can essentially “receive the same type of coverage and video capture, distribution and analysis as the biggest and best pro leagues.”
More recently, the late-stage startup has begun working its way upstream. “Increasingly tertiary [professional] leagues and even top tier teams for their practice fields [are now using Pixellot] systems for that capture and analysis,” Michael said. The company has high-profile clients in La Liga, Serie A and the Bundesliga.
While clubs in those three leagues rely on Pixellot for coaching and training purposes (think: video analysis), other rights owners use it to engage existing fans, attract new fans and create revenue generating opportunities. Some are offering streams of games or practices for a fee. “If the content provider wants to monetize [the video], they certainly can,” Michael said.
The automated production solution can be used for other purposes, too. For example, Genius Sports and Sportradar leverage the technology to assist with data capture. “If you can effectively pull data out of the ground in close to real time, then you increase the TAM,” Michael said.
Money has been pouring into the automated video tech business over the last 18 months. In addition to investments cited in Pixellot and PlayOn, Sportradar bought Synergy Sports (which includes Keemotion), and Veo raised $80 million. Second Spectrum (acquired by Genius Sports), Hudl, TrackMan and GameChanger Media (acquired by Dicks) are also competing for video and data capture and analysis market share.
Investors are bullish on the space, because they recognize the technology needed to achieve an automated, high-quality live stream has finally advanced far enough to become commercially viable at scale. For reference, Nir said the company produces 30 times the number of hours of live sports content as ESPN does on a monthly basis.
Growing digital consumption and the professionalization of youth sports are also viewed as tailwinds for the industry. “Even with some diminishing participation, people have shown almost an inelastic spend against the athletes who do,” Michael noted.
The pandemic was an accelerant for AI-automated video and analytics providers. Pixellot reached important scale “on the basis of being able to offer a streaming video solution to all of these high schools, especially at a time when parents literally weren’t able to go,” Michael said.
While pandemic restrictions have lifted, people’s desire to “consume all levels of sport” has not, Michael said.
Neither has Gen Z’s interest in emerging sports. “That is a thematic plus,” Michael said. “Then you layer on betting and exhaustive interest in [player] tracking, performance and improvement, you get a nice storm that is leading to growth in this type of product.” Annual revenues, which Nir said are in the tens of millions, are expected to climb at least 50% YoY in 2022.
Pixellot plans to use the newfound capital to enhance technological capabilities, extend its geographical reach and add additional sports, Nir said. Asia and Latin America are viewed as markets with both growth potential and momentum.
(This post has been corrected in the first paragraph to reflect that PSG is a Boston-based fund.)