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Perspectives

The rise of eSports investments

A changing eSports industry entices private capital investors

Deloitte Corporate Finance LLC and 'The Esports Observer' have collaborated on a publication detailing the rise of eSports investments. This report chronicles the history of investment activity in the eSports industry and highlights capital planning opportunities available in the space. Explore the case studies and major takeaways in this report.

An investor perspective on eSports growth

While popular streamers such as Tyler “Ninja” Blevins have dominated the public discourse on eSports and gaming over the past year, an indication of the staying power of the industry and its future potential is the underlying story of investment dollars into space.

For eSports, 2018 was a record year in both numbers of investments and investment dollars. Over $4.5 billion was invested in the industry in 2018 alone. While this headline number is certainly significant, it’s the composition of these investors that also offers interesting insights.

For the first time, traditional private equity investors have gotten involved in a meaningful way. From 2014 to 2017 there were only nine disclosed investments into eSports businesses from private equity firms, relative to the 11 that took place in 2018. Interest among traditional investors to explore different ways to gain exposure to the industry is indicative of the maturation of the industry and its growing mainstream appeal from an investor perspective.

The eSports ecosystem offers a variety of different investment opportunities across a range of subsectors. Some are unique to the industry, such as team organizations. Others hold similarities to other traditional industries, such as consumer products and event planning, which could be more palatable to investors entering the space for the first time.

A key merit of the industry is the core demographics. In 2018, the eSports industry had a global fan base of $380 million with 37 percent representing males ages 21 to 35, and 16 percent representing females ages 21 to 35. In addition, in the United States, 61 percent of eSports viewers earn more than $50,000 per year. Investment offers exposure to this demographic that is increasingly averting its attention away from traditional media.

The current state of the industry

With increasing focus by investors and an attractive industry profile, this perspective seeks to explore the current state of the industry from an investor point of view. In doing so, this paper is divided into three parts: the rise of eSports investment, the potential rewards (and risks) of investment, and the dynamics of an eSports investment.

Welcome to the big leagues: The rise of eSports.

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Several key takeaways for eSports investments

As eSports companies consider the pursuit of additional capital, the following takeaways are important to consider to achieve a successful investment process:

  • When investing in the eSports industry, investors will look for strong management teams that have a good understanding of the space and the vision and capabilities to further expand the business.
  • To entice traditional private equity partners, eSports companies should have several years of strong financial performance to demonstrate the business concept and operational viability.
  • Sponsorship and influencer contracts remain an important diligence item across investor type and the demonstrated stickiness of these relationships will likely be an important topic during the investment process.

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Deloitte Corporate Finance LLC

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Deloitte Corporate Finance LLC

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