Everyone wants a piece of esports – at least that’s how it seems. In the last few years more money has entered esports than ever before. Investors are putting down tens of millions for spots in the Overwatch and Call of Duty Leagues, esports organizations are booking massive raises and new companies are popping up everyday.
But massive money entering a new space naturally screams “bubble.” Here’s what lessons new esports companies can learn from digital bubbles in the past:
“The problem we have today is the same as we had in the dot com era,” explained Scott Kelly, the CEO of Black Dog VC. “Entrepreneurs aren’t as focused on running a profitable business as they are on bringing in capital. You have to operate a business under the assumption that you aren’t going to raise capital forever and additional capital just puts kerosene on the fire.”
Kelly is a longtime investor who remembers the pins that caused the dot com bubble to burst. But now, 20 years later, many of the biggest companies in the world came from the popped remains of that bubble. Esports will hit a correction point in the future as valuations continue to drastically outpace revenue figures – but the esports opportunity is a real one.
“When you have a new industry, it becomes incumbent upon investors and entrepreneurs to make sure to do your homework,” said Kelly. “A new industry is going to go on a very high curve up, flatten and go down, then find its success point in the middle.”
Right now we are somewhere in the middle of that very high curve. When the market eventually adjusts people will act like the sky is falling but the companies that weather that period will be poised to dominate the esports industry in the future.
For now, more companies are looking for investment as revenue streams are ironed out. Some of those prospective upstarts will be at Esports Fast Pitch in Orange County, California on February 28th. Kelly talks about that event, what investors will be looking for and some of the companies he has already invested in across the esports space:
Written by: Mitch Reames
Esportz Network CEO Mark Thimmig will be speaking at Esports Fast Pitch