There’s an innovation revolution happening in sports, and VC firm Sapphire is helping pay for it

T.Click here for Overtime, which pays promising high school athletes six-figure deals to stream their games. There is also Tonal, which manufactures smart home his gym.

Through these startups, Sapphire Sports, whose parent company Sapphire Ventures has over $10 billion in assets under management, has committed $300 million to an innovation revolution that is disrupting the entertainment and culture of fitness and sports. The funding includes his $181 million in new funding, which was announced Wednesday by a heavyweight in the sports investment community.

It’s a strange time for startups, with many companies plummeting in value due to rising interest rates and inflation, said Doug Higgins and Michael Spirito, managing partners of Sapphire Sports. forbes They want to take advantage of the current climate.

“Entrepreneurs are becoming more rational about their expectations of recognition at every stage,” Higgins said. Forbes. “If companies think it’s worth the price as it was a few years ago, they can wait patiently.”

Sapphire Sports is one of the few companies to buy equity in a startup with funding from a limited partner. Courtside Ventures said it raised her $100 million for a third sports fund, attracting investors including her Shaquille O’Neal, a Basketball Hall of Famer. Chicago-based KB Partners said it will complete a $127 million funding round at the end of 2022.

Sapphire has brought back many investors who joined its first sports investment fund in 2018. Among them are Bane, who is co-chairman of Capital and the Boston Celtics of the NBA.blackstone groupBX
David Blitzer, executive and co-owner of the Philadelphia 76ers. Intersect Ventures owns the Indiana Pacers. The NHL’s Tampa Bay Lightning owns his Jeff Vinnik.Adidas; Sinclair Broadcasting GroupSBGI
and Anschutz Entertainment Group.New investors include Madison Square GardenMSG
Sports and Major League Soccer franchise owner Stephen Kaplan. Sapphire did not disclose investment terms.

Over the next few years, investors expect significant advances in augmented reality, virtual reality, blockchain and Web3. This digital innovation could help team owners unlock a wave of new media rights. The NBA is definitely at the forefront of technology consolidation. On Monday, the league renewed his contract with Meta, streaming 52 of his games from courtside angles on the company’s Oculus Quest VR device. Part of the deal includes five of his immersive games exclusively produced by Meta. Sapphire Sports is looking for startups to power this kind of futuristic experience.

“I think AR/VR is just getting started,” says Higgins. “If you think about Apple,AAPL
What Meta is doing — We’re looking for killer apps that make AR/VR feel ‘kinda funny’ and ‘can’t live without it’. ”

“The genie is out of the bottle,” said Spirito. “Young people are doing things differently, right? So the only way forward is to invest in the front.”

S.research from Research firm Morning Consult shows that Gen Z is watching less live sports than previous generations. This could threaten the future of the global sports rights ecosystem, which is projected to exceed $60 billion annually by 2024. Sapphire Sports suggests that this problem can be resolved and companies like Buzzer can be used to raise the rights fee.

Higgins, 50, co-founder of Sapphire Ventures, says the company will use Spirito’s media knowledge, which he developed during his stint at the New York Yankees’ YES Network, to find the next gem in sports tech. said there is. Spirito, 46, said the challenge now is to preserve and extend the value of media rights in an unfriendly environment.

“In an era where young people spend their time differently, how can we increase their value?” Spirito said. Gen Z: “Attention is at an all-time low. And is media and content value at an all-time high?

Sapphire Sports invests in startups for up to 10 years. For the second fund, Spirito said he plans to invest about $5 million in 20 companies. Sapphire Sports has already invested once in his lottery platform Jackpot.com. The company wants to digitize state lotteries across the United States, and Jackpot.com went live in its first market, Texas, this month.

Buzzer founder Bo Han said he signed with Sapphire Sports after learning Spirito didn’t have a Twitter account. “I thought it was very real,” Han said.

So far, only two Sapphire Sports have come out. In 2020, the company sold its stake in game studio Phoenix Labs to Singapore-based internet company Sea Limited for $150 million, according to PitchBook. Sapphire has also sold his position on streaming his platform MyCujoo for an undisclosed amount.

Aside from these deals, Spirito and Higgins warn limited partners to take a long-term view.

“You’ll probably be locked up for 10 years, locked up in illiquid assets,” Spirito said. “I think what the athlete and team owner has learned is that when he meets new entrepreneurs with ideas, his venture capital can be very attractive and exciting. It’s also a long-term commitment.”