Stadium Live Studios, a startup building a digital playground for Gen-Z sports fans, recently closed on a $10 million Series A raise. KB Partners and Union Square Ventures co-led the funding round; Dapper Labs, Kevin Durant’s 35 Ventures and Blaise Matuidi’s Origin Fund also participated.
A pre-revenue business constructing a sports-centric virtual world may sound like a particularly risky investment. But early-stage investing is inherently risky, says Lance Dietz (partner, KB Partners). “For us, it is a matter of getting conviction around the risk-reward tradeoff of a particular investment, the potential upside compared to the valuation you’re investing at,” Dietz said.
According to Dietz, Stadium Live’s $32 million post-money valuation was considered an “incredibly attractive” valuation for a company in this sector at this stage. “We were seeing opportunities in this category over the last year or two, at similar or higher valuations, with much less progress—and sometimes just an idea and a deck,” Dietz said.
But it was the market opportunity, team and traction achieved to date—the app currently has 500,000 registered users—that led KB Partners to conclude Stadium Live met its risk-reward ratio. “We’re going into this believing that it has the potential to be an iconic company, something that generations will associate when they think about sports, entertainment, gaming or the metaverse,” Dietz said.
Union Square Ventures’ managing partner Andy Weissman expressed a similar sentiment. “While pre-revenue, they have proven they can attract hundreds of thousands of users. More so, we believe the reason why is a combination of important things. [The] team’s insight into the nature of what a novel mobile digital world could look like, for whom and why, and [also their] deep understanding of new experiences for fandoms.”
JWS’ Take: While KB Partners was able to gain conviction on risk-reward, the jury’s still out on exactly how impactful the metaverse will be. While some are convinced the concept is the next iteration of the internet—perhaps a $50 billion opportunity by 2026—others insist it is a fad.
It does not matter either way to Union Square Ventures. “I’m not sure I could define for you what the metaverse is,” Weissman said. “User experiences, on the other hand do, and we love how Stadium has a wholly differentiated user interface and a community. Nothing else in the world looks like [it].”
KB Partners’ investment thesis also does not include a consensus on the topic. Its investment in Stadium Live is a broader bet on the intersection of sports and gaming. The Chicago-based VC firm views the app’s functionality as a “form of social gaming that has some components, features or experiences of the metaverse, depending on how you define it, that is initially based around sports,” Dietz said.
KB Partners has been looking to invest at the intersection of the two categories for some time. “You look at some of the offerings in sports and gaming, like NBA2K or more recently, Web3 and sports experiences like Dapper Labs, and it suggests there is a really large opportunity if you build something engaging,” Dietz said.
Stadium Live has seemingly started to do just that. Co-founder and CEO Kevin Kim said the average active user spends 35-40 minutes a day on the app.
The VC firm also appreciated how Stadium Live taps into trends surrounding the way young fans want to interact and engage with sports content. They want an immersive experience that feels as if they are enjoying the game with others—even if they are not watching the actual game. “[Gen-Z] want[s] something that embraces community, is more social and interactive versus a one-way experience,” Dietz said.
Stadium Live is trying to build that dynamic digitally. Stadiumverse users can navigate around different rooms, chat with fellow fans, battle those individuals in bite-size fantasy games and “flex with different avatar looks” all while tuned into a live video stream. The interaction between viewers “is also a big part of the experience,” Dietz said.
But Stadium Live doesn’t stream the actual games. While that might seem problematic for a startup striving to deliver a first-screen sports-viewing experience, Kim said 90% of its users are under the age of 25, and Gen-Z “isn’t watching games anyway”—at least, they’re not sitting down and watching the full game the way previous generations did.
“They don’t even have the TV turned on,” Kim said. “They watch on TikTok or any highlight videos that might be out there on social. We want to become [the destination for] that, but with a gamified experience.”
Also, the company could eventually strike a partnership that would give it the ability to stream portions of some live games in app.
Instead of full live games, the Stadiumverse often hosts interactive “watch parties” during sporting events where content creators will react to big moments and shift the conversation accordingly—and that conversation may only be tangentially tied to sports. Kim explained that for Gen-Z, the sports category expands into “what LeBron listens to, what LeBron wears. It is very personality and culture driven.”
Short-term, the company intends to monetize its audience by selling user memberships, premium digital items and integrated brand partnerships.
But the long-term vision is a sports metaverse “where we have teenage casual fans coming onto the platform, spending a lot of time and connecting with different brands, leagues or organizations,” Kim said. Media companies, gaming studios and larger tech entities would all likely find the ability to reach a captivated Gen-Z audience valuable too.
For those of legal betting age, licensed sports betting or micro-betting operators could be among the brands featured on the platform. Betr co-founder Joey Levy is an investor in Stadium Live Studios.
The same could be said about cryptocurrency or NFT marketplaces. The company is using NBA Top Shot moment giveaways to see how users respond to crypto and NFTs. Kim said the demo is generally “very skeptical about all of these things.”
Stadium Live is not the only company looking to solve the challenge; GreenPark Sports is among its direct competitors. However, its target user tends to skew older and towards the existing crypto or NFT communities.
The company intends to use the newly raised capital to build out its product on Android, which is expected to double the user base and lower CPIs on R&D related to building the metaverse platform and growing the engineering team. Kim believes the company—which has been relatively capital efficient, having spent less than $3 million prior to the latest raise—will need to raise another round before it breaks even. “[Our] focus is to have a better understanding on user behavior and unit economics by the next funding milestone,” he said.