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

tHere is the extra work, which pays promising high school athletes six-figure deals to broadcast their games. There’s Buzzer, which aims to be the mobile version of the RedZone NFL for all sports. And there’s Tonal, which makes smart home gyms.

Sapphire Sports — whose parent company, Sapphire Ventures, has more than $10 billion in assets under management — has committed $300 million to drive the innovation revolution to disrupt fitness, entertainment, and sports culture through startups like that. The funding includes a new $181 million, announced Wednesday, provided by a member of the sports investment community.

It’s a strange time for start-ups, with rising interest rates and inflation causing many of them to drop in value, 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 valuation expectations at every stage,” Higgins said. Forbes. “If companies still think they are worth the prices they were two or three years ago, we can be patient.”

Sapphire Sports is among a handful of companies that have raised money from limited partners to buy shares in startups. Courtside Ventures said it has raised $100 million for a third sports fund and has attracted investors such as Basketball Hall of Famer Shaquille O’Neal. Chicago-based KB Partners said it closed a $127 million raise at the end of 2022.

Sapphire brought back a number of investors who participated in its first sports mutual fund in 2018. Among them are names familiar to people who follow the business, including Stephen Pagliuca, co-chairman of Bain Capital and co-owner of the NBA’s Boston Celtics. Blackstone Group
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Philadelphia 76ers CEO and co-owner David Blitzer; Intersect Ventures, which owns the Indiana Pacers; Tampa Bay Lightning owner Jeff Finick in the NHL; Adidas; Sinclair Broadcast Group
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; and Anschutz Entertainment Group. Among the new investors is Madison Square Garden
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Stephen Kaplan Sports and Major League Soccer franchise. Sapphire did not disclose the terms of the investments.

In the coming years, investors expect major developments in augmented reality, virtual reality, blockchain, and Web3. This digital innovation could help the team owners launch a wave of new media rights. It can be said that the NBA is at the forefront of integrating technology. On Monday, the league renewed its agreement with Meta to stream 52 games on the company’s Oculus Quest VR device from the corner of the court. Part of the deal includes five immersive games produced exclusively by Meta. Sapphire Sports is looking for startups that will power these kinds of future experiences.

“We think AR/VR is just getting started,” Higgins said. “If you think about what Apple
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What you do, what Meta does — we’re looking for those killer apps that take AR/VR to kind of go from, “Hey, this is kind of interesting,” to “I can’t live without this.”

“The genie is out of the bottle,” said Spirito. “Young people do things differently, right? So, the only way forward is to invest before that.”

studies from Research firm Morning Consult shows that Gen-Z watches less live sports than previous generations. This could threaten the future of the global sports rights ecosystem that is expected to exceed $60 billion annually by 2024. Sapphire Sport suggests that it could help solve this problem and use companies like Buzzer to increase rights fees.

Higgins, 50, co-founder of Sapphire Ventures, said the company uses Spirito’s media savvy, which he cultivated during a stint at YES Network in New York, to find the next tech sports gems. The current challenge, said Spirito, 46, is to preserve and expand the value of media rights in an unfriendly landscape.

“How can you make it more valuable in an era when young people spend time differently?” Spirito said. Gen-Z’s attention span is at an all-time low. Has the value of media and content reached an all-time high? How do you make it higher? That’s what we’re trying to solve.”

Sapphire Sports invests in startups for up to ten years. Spirito said the company will look to invest about $5 million in 20 companies for the second fund. Sapphire Sports has already made one investment in a lottery platform called Jackpot.com. The company wants to digitize state lotteries across the United States. Jackpot.com began operating in its first market, Texas, this month.

Bo Han, founder of Buzzer, said he signed with Sapphire Sports after learning Spirito did not have a Twitter account. “I found this very real,” Han said.

To date, Sapphire Sports has only exited two companies. In 2020, it sold a stake in game studio Phoenix Labs to a Singapore-based internet company, Sea Limited, for $150 million, according to PitchBook. Sapphire also sold her position on streaming platform MyCujoo for an undisclosed amount.

Regardless of these deals, Spirito and Higgins cautioned the limited partners to take a long-term view.

“You’ll be in custody and in illiquid assets for maybe 10 years,” Spirito said. “I think what athletes and team owners learn is that venture capital can be very exciting and exciting when you meet new entrepreneurs with ideas. But at the same time, it’s a long-term commitment.”