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Sapphire looking to uncover tech jewels

Michael Spirito, managing director, Sapphire Ventures at the 2019 Web Summit in Lisbon, Portugal. (Photo By Stephen McCarthy/Sportsfile for Web Summit via Getty Images).

  • Company brings together executives and owners from major sports properties
  • VC firm focused on companies at seed, Series A, and Series B rounds
  • Investments include MyCujoo and Overtime

There are hundreds of venture capital funds looking to capitalise on the fast-growing world of sports technology. But Sapphire Sport, part of the Bay Area firm Sapphire Ventures, believes that materially it has a different approach to the crowded market.

Sapphire Sport, which formally debuted early last year, brings together high-level executive and sports ownership groups from every major North American sport and several major international entities, including the City Football Group, Anschutz entertainment Group, Major League Baseball, Sinclair Broadcast Group, Adidas, and investment funds connected to the National Football League’s Minnesota Vikings and New York Jets, among many others.

The fund, which started at $115m (€98m), has also sought to create its own space in the market by focusing primarily on companies at the seed, Series A, and Series B rounds, as opposed to later stage start-ups.

Initial investments have included digital sports media network Overtime, connected home fitness system Tonal, live soccer streaming provider MyCujoo, audio platform Mixhalo, social commerce solutions platform Fevo, mobile technology platform Buzzer, and a series of gaming and esports entities, including the amateur-focused PlayVS.

Michael Spirito, a former executive with Fox Sports and the YES Network who helps run Sapphire Sport as managing director, discussed the current sports technology landscape with SportBusiness US Editor Eric Fisher.

What do you see as the foremost emerging technologies impacting the sports industry, and why?

Since launching Sapphire Sport nearly two years ago we have been focused on the future of consumption, with sport, media, and entertainment as the backdrop. In short, if technology is affecting how we consume, it is affecting the sports industry. The biggest technology theme that is impacting global sport currently, and which will continue well into the future, is the necessity of data-driven connectivity and business models.

In effect, how will a global sporting brand – be it a team, league, athlete, media rights-holder, merchandiser, sponsor, or venue – connect to its customer and provide a truly engaging digital product that meets the ever-advancing consumer desire?

For example, we see a technology like Fevo, a buy-flow solution which is changing the way e-commerce works by turning every purchase into a social experience for brands, as elemental to the way consumption will occur in the future, and better help sporting brands engage with and learn more about their customers.

Do you expect a greater rate of advancement in the next several years with regards to technology impacting fan experience, or with athlete performance, and why?

The consumer trends we are witnessing now, whether it is personalisation, connectivity, or enhanced digital commerce, certainly existed before Covid-19. But the past six-month period has drastically accelerated them. I don’t see that changing in the coming years. The products harnessed (or created) during this time by stakeholders in global sport, and the end-consumer habits they enable, will build long-term brand value.

Take fan experience. Clearly the experience in-venue will be different and it will be technology that enables that, a company like Mixhalo which offers a latency-free networking approach to on-site audio, video, or wagering being one example. But critically for brands in sport, how do you invigorate fandom when the game or match isn’t happening, or for the multiples of fans who aren’t experiencing it live?

This is where the virtualisation and gamification of fandom enters the picture. A company like GreenPark, which has built a completely virtualised fan experience so one can be a fan any hour of the day, and in conjunction with any subset of the total fan universe, is bringing this to life. We see founders like Chad Hurley, Nick Swinmurn and Ken Martin, who could have created products in any industry given their past successes and are elated that they chose sport. As investors we love that the calibre of entrepreneur who is creating products around things like fan engagement is so high.

How do you see the emerging realm of legalised American sports betting benefiting from technology, and why?

The legalised American betting industry has certainly benefited from the much longer product and behavioural history of betting in Europe. As markets have opened state by state, established US players from casino groups to DraftKings have iterated quickly to offer products to meet the nascent legalised US wagerer’s needs. And as we have seen, this industry has massively accelerated over the past two quarters, reflected in the market caps of the public players.

The critical areas where technology can play a meaningful role are where it can allow for the marginal wagerer to be more comfortable coming into the betting ecosystem, as well as where it can allow for an even more gamified, mobile, and – critically – social experience.

There has been an accelerating ramp-up in usage, interest, and funding for all sorts of connected home fitness platforms during the pandemic, and you’re obviously involved with Tonal. What is the next stage for that sector? Will there be consolidation among the key players?

We’ve seen consolidation already with Lululemon’s $500m acquisition of Mirror in June. This transaction could put pressure on other traditional fitness merchandisers and retailers (Adidas, Nike, Puma, etc.) to feature digital health and fitness technology as a core part of their brand offering in this new normal, especially when the future of physical retail is so uncertain. However, when it comes to acquisitions, the degree of difficulty for a traditional athletic brand to successfully integrate a technology company remains high (like Under Armour’s acquisition of MyFitnessPal).

When we look at the connected fitness market, one of the reasons we as so bullish on a company like Tonal is that is has developed an extraordinarily unique product in the digital strength market with relatively few competitors, while the digital cardio market remains crowded with both incumbents and new entrants. We believe that the successful companies in the space need to understand how technology can use data and artificial intelligence to personalise the fitness experience so that consumers embrace their solutions not just during the pandemic but beyond, which is where Tonal excels. And finally, with Peloton approaching a $40bn market capitalisation, the next stage for the sector sure seems limitless.

Sapphire Sport has made a sizeable statement on its belief in esports through its various investments. Does that space need to evolve to include a lean-back experience for some fans, much like what we see in traditional stick-and-ball sports?

Our overarching belief is in the power of gaming as a transformative and engaging consumer experience. Esports, while an intriguing area for us, is not yet a big industry and is arguably more disrupted by the current pandemic situation than traditional sport simply because the media rights are so low, at least currently. Regardless, we seek to invest in the technologies that power it all, and in the realm of gaming and esports we see the opportunity for the most financial upside around gaming IP and the associated platform technologies.

In esports specifically, a company like PlayVS immediately comes to mind, as they are creating platform technology around the amateur ranks of esports, starting with high school, as a way in which value can be created and scaled upwards within the industry.

We see that an incredibly consequential company like Roblox can be built on the basis of bringing users together as creators. Similarly, a company like Manticore Games was founded with the mission to allow for a new wave of creativity in games by lowering the barriers to game making and publishing, and Epic’s recent investment in and public support of the Manticore Core platform further shows how critical these technological building blocks truly are.

The pandemic, not surprisingly, has accelerated numerous trends around cord-cutting and disruption of the traditional media ecosystem. Where do you see that evolving, both during and post-Covid-19?

It’s clear that the way in which people engage with sports media today is much different than it was five years ago, three years ago, even eight months ago. Today’s consumer demands more from media products in terms of ease of use, mobility, engagement and transactional opportunities, and the global sport industry has largely struggled to keep up.

These large shifts in consumption habits, again accelerated by Covid-19, mean that for a sports media rights-holder, it is critical to provide more value than ever before to the increasingly pickier consuming public. And with fewer and fewer people in the traditional pay-TV ecosystem, the value inherent in the media rights (which account for anywhere between 25 per cent and 40 per cent of the economics of most leagues or teams) is more critical than ever.

This trend will continue to accelerate. The brands that iterate quickly through digital products and create that data-driven linkage between them and their customers will be in position to create long-term asset value on that basis. Overtime, which has built a digitally native brand with 40+ million followers, has thrived in this environment by resonating with younger generations through storytelling about athletes and personalities that people want to engage with.

Buzzer, the latest Sapphire Sport investment, brings to life a digital product that helps support media rights-holders by simplifying the discovery of live sport moments and making them seamless to watch, providing for net new media consumption and associated revenue. Simply put, a better consumption experience, which is ultimately the goal of any industry seeking to advance. Sport is no different.

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