Japanese VC Scrum Ventures’ focus on sports tech startups didn’t come out of left field. The firm found it to be a space with lots of promising players in need of an assist. The key was not focusing on bats, balls, pitches and playing fields but instead rethinking what the vertical covers.
“We see that there’s a massive opportunity,” Scrum Ventures Managing Director Michael Proman told Sportico. “Where I get excited is that sports, particularly over the course of the pandemic, had its definition expanded. Before the pandemic would you have called sleep technology, home fitness or mental health a sports tech company? Maybe not.”
The Scrum Sports & Entertainment fund was formed in late 2022 with US$120 million. Now, the VC is trying to understand what sports will even look like moving forward in order to find the best opportunities.
“The category has continued to expand and evolve, is what gives me a lot of confidence that this is a vertical that has those venture-style returns, we just have to find those,” Proman noted. “When I look at sports, it’s less about what has occurred and it’s more about what we’re going to be defining as sports, even five or ten years from now, that might now be on the peripheral.”
Perhaps the most significant challenge is making sure startups have value that appeal to those within the sports realm while still boasting mainstream potential. Being sports only can hinder long-term efforts.
“The pain point is sports is kind of a rounding error, in terms of the total addressable market (TAM), when compared to other high-growth industries. What’s really challenging is that the valuations of some of the earliest stage companies are not reflective of that TAM,” Proman stated. “To counter that, we’ve found we need to home in on technologies and companies that can speak to teams, leagues, properties—your core customer base in sports and entertainment—but at the exact same time have diversity from a customer base and revenue. To put it simply, sports plus something else.”
Having a presence in Japan and being backed by some of the country’s massive conglomerates, such as Mitsubishi UFJ Bank, gives the Japanese VC a unique perspective to identify sports tech startups.
“Japan is the third largest economy in the world. Every startup, even if they don’t have the bandwidth to be there today, is going to want to be there at some point as they mature,” Proman said. “Having that as a core competency and differentiator is what is also helping us establish a deeper presence within the sports and entertainment community.”
Interesting Analysis
Scrum Ventures approach feels misleading. Not in a bad way, though. But sports tech is not the focus here. If anything, the phrase is used more for marketing purposes than anything else. The fact that Proman tries to redefine sports on several occasions in the Sportico piece was certainly interesting. It is also understandable why the Japanese VC doesn’t want to get boxed into being exclusively sports tech-centric. That limits the upside of the startups it funds.
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