Sapphire Sports said it attracted a new $181 million in funding from a celebrity investor — a total of $300 million — to fund startups disrupting sports entertainment and culture.
Tonhere is overtime, which pays up-and-coming high school athletes six-figure fees to broadcast their games live. Buzzer aims to be the mobile version of NFL RedZone for all sports. And Tonal, which makes smart home gyms.
Sapphire Sports — whose parent company, Sapphire Ventures, manages more than $10 billion in assets — has committed $300 million to an innovation revolution that disrupts fitness, sports entertainment and culture through such startups. The funding includes a new $181 million announced Wednesday, courtesy of Who’s Who in the sports investing world.
These are strange times for startups, with higher interest rates and inflation causing the value of many of them to plummet, Sapphire Sports managing partners Doug Higgins and Michael Spirito told Forbes They want to take advantage of the current climate.
“Entrepreneurs have become more rational in their valuation expectations at each stage,” Higgins told forbes. “If companies still think they’re getting their money’s worth like they did two or three years ago, then we can be patient.”
Sapphire Sports is one of the few companies that has raised capital from limited partners to buy equity in startups. Courtside Ventures said it raised $100 million for a third sports fund and attracted investors including basketball Hall of Famer Shaquille O’Neal. Chicago-based KB Partners said it closed $127 million in funding by the end of 2022.
Sapphire called back some investors for its first sports investment fund in 2018.That includes names familiar to those who follow the business, including Bain Capital co-chairman Stephen Pagliuca of the NBA’s Boston Celtics; Blackstone Group Inc.
Over the next few years, investors expect major advances in augmented reality, virtual reality, blockchain, and Web3. This digital innovation could help team owners unlock a new wave of media rights. The NBA is arguably at the forefront of integrating technology. On Monday, the league renewed its deal with Meta to stream 52 games from the sidelines on the company’s Oculus Quest VR headset. Part of the deal includes five immersive games exclusively produced by Meta. Sapphire Sports is looking for startups that can enhance these types of future experiences.
“We think AR/VR is just getting started,” Higgins said. “If you think of apples
“The genie came out of the bottle,” Spirito said. “Young people do things differently, right? So the only way to be successful is to invest upfront.”
smallresearch from According to research firm Morning Consult, Gen Z watch less live sports than previous generations. This could threaten the future of the global sports rights ecosystem, which is expected to exceed $60 billion per year by 2024. Sapphire Sport says it can help with that, and leverage companies like Buzzer to boost royalties.
Higgins, 50, co-founder of Sapphire Ventures, said the company tapped the media savviness Spirito developed during his stint with the New York Yankees’ YES Network to find the next sports tech gem. Spirito, 46, said the challenge now is to preserve and expand the value of media rights in an unfriendly environment.
“In an age where young people spend their time differently, how do you make them more valuable?” Genie said. Gen Z’s “attention span is at an all-time low. The value of media and content is at an all-time high? How do you make it even higher? That’s what we’re trying to figure out.”
Sapphire Sports has invested in start-ups for a decade. Spirito said it will seek to invest about $5 million in 20 companies for the second fund. Sapphire Sports has made an investment in a lottery platform called Jackpot.com. The company hopes to digitize state lotteries throughout the U.S. Jackpot.com began operations in Texas, its first market, this month.
Buzzer founder Bo Han said he signed with Sapphire Sports after learning Spirito didn’t have a Twitter account. “I found that very real,” Han said.
So far, Sapphire Sports has only withdrawn from two companies. In 2020, it sold a stake in game studio Phoenix Labs to Singaporean internet company Sea Limited for $150 million, according to PitchBook. Sapphire also sold its position in streaming platform MyCujoo for an undisclosed amount.
Beyond the deals, Spirito and Higgins also cautioned limited partners to take a long view.
“You’re going to be locked up and holding illiquid assets for maybe ten years,” Spirito said. “I think what athletes and team owners have learned is that venture capital can be very sexy and exciting when you meet new entrepreneurs with ideas. But at the same time, it’s a long-term commitment.”