| | | Investors across the private markets are showing an insatiable appetite for deals related to pro sports. The same is true for deals that capitalize on the booming influencer economy, home to a new generation of teenage celebrities using the power of the smartphone to amass serious social sway.
What happens when the two trends collide? A startup with backing from the likes of Andreessen Horowitz, Greycroft, Kevin Durant and Carmelo Anthony is about to find out.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. From its offices in Brooklyn, N.Y., sports media startup Overtime is planning an unprecedented push into the professionalization of teen sports superstars. That's one of 10 things you need to know from the past week. | | | | | |  | | Ball is life. (xia yuan/Getty Images) | | | 1. Hoop dreams
The ultimate goal for Overtime, which has raised more than $30 million since its founding in 2016, is to become the ESPN for Gen Z. The company first gained a following with short-form video highlights on social media, deploying an army of videographers to high-school gyms across the US in search of the next big thing. Eventually, it expanded into reality shows and web series built around a roster of budding basketball stars.
For its next act, Overtime plans to launch a semiprofessional basketball league that will pay some of those stars to leave high school and begin their pro careers, according to a report from 247 Sports, in a stark departure from the amateur ethos that has defined the teen circuit for decades. The league plans to launch in September, with payment for players "expected to be well within the six-figure range."
There are a few different points of interest here across the landscape of sports, influencers and investors. Let's take them one at a time.
First, Overtime's new effort continues a trend of elite basketball prospects turning pro earlier and earlier in their careers. Teen pros have long been the norm in Europe, but in the US, nearly every young star would graduate from high school and attend at least one year of college. But that norm is eroding, as names like LaMelo Ball have excelled in recent years by following a different path. The NBA is widely expected to change its rules in the near future to allow players to enter the league directly out of high school. If these sorts of shifts continue, Overtime could be ahead of the curve.
This also marks the latest episode of venture capitalists backing an upstart sports league. The most recent example, the Alliance of American Football, failed to complete one full season before descending into bankruptcy. The obvious problem with the AAF, though, was that it was putting out a second-rate product—the best football players are already in the NFL. Overtime's prospects for success may rest on the types of kids they're able to sign, both in terms of the quality of their play and the size of their followings.
That, to me, is what the league ultimately comes down to: a bet on being able to monetize the huge interest in certain prospects who have turned into social media stars. 247 Sports reported that one of Overtime's top targets will be Mikey Williams, a high school sophomore and slam-dunk savant who's widely ranked as one of the best prospects in his class. He already has his own web series on Overtime, and he claims 2.7 million followers on Instagram. Another top prospect in Williams' class is Bronny James, whom you might better know by his birth name, LeBron James Jr. The 247 Sports report didn't mention the younger James, but he could be another intriguing theoretical target, with 5.8 million Instagram followers of his own.
Instagram followers obviously aren't everything, and who knows what sort of players will ultimately be interested in Overtime's new league. But those huge numbers highlight the potential the company sees for this sort of venture.
"Nobody had built a national brand for reaching these kids," Overtime co-founder Dan Porter told Variety back in 2018. "It’s the same dynamic as YouTube stars with massive followings."
We've seen the impact influencers have had on other startups. TikTok is the obvious example. Snapchat is paying popular creators millions to post content on its app. Rapid adoption by influencers has helped Clubhouse, the audio-only social platform that is also backed by Andreessen, to reportedly increase its valuation tenfold in about eight months.
I'm curious to see the specifics of Overtime's plans. It seems unlikely the company will broadcast its games the same way that, say, ESPN televises a typical NBA game on a Friday night. I would expect the product to cater to the same sorts of younger fans who are already Overtime's audience—the sort who are probably less interested in sitting down to watch two straight hours of basketball and more interested in the highlights, in the characters, in the stories.
Perhaps the main product won't be the games themselves, but rather a web series (or several series) going behind the scenes of what life is like as a 16-year-old pro player. That's pure speculation, but it seems more in line with the ethos of Overtime. The main attraction isn't the sport itself. It's the people who are playing it.
2. Pre-IPO pops
UiPath, a provider of enterprise automation services, raised $750 million this week at a $35 billion valuation. Databricks, which makes data-processing tools, brought in $1 billion and is valued at $28 billion. Both are now among the seven most valuable VC-backed companies in the US, according to PitchBook data. Along with Roblox, which was valued at $29.5 billion earlier this year, that makes three companies in the span of a month opting to raise huge sums at highly elevated valuations ahead of potential public debuts.
3. Game over
Last week, we wondered what was next for GameStop. This week wasn't a pretty one for shareholders determined to hold the line: The price of GameStop stock declined 83% between the start of trading on Monday and Thursday's close, eating away the vast majority of the shocking gains that piled up the week prior. Yet, in a testament to just how high GameStop soared, its shares are still up more than 1,400% since last August.
4. Robinhood's billions
In other fallout from the GameStop extravaganza, Robinhood raised another $2.4 billion this week on top of the $1 billion it collected last week, an effort to amass enough collateral to back the highly risky trades being conducted en masse by its users. My new colleague Marina Temkin took a closer look at Ribbit Capital, an existing Robinhood backer that led the new cash infusion.
5. Diamond deals
We already covered basketball. The week was also full of overlaps between baseball and the financial world. Alex Rodriguez is sponsoring a new SPAC called Slam Corp. that filed this week to raise $500 million. Former Houston Astros general manager Jeff Luhnow, who was fired after the team's cheating scandal surfaced, is among the backers of another new SPAC that will aim to raise $125 million. And former Boston Red Sox and Chicago Cubs executive Theo Epstein is set to become an executive-in-residence at Arctos Sports Partners, a firm focused on buying stakes in pro sports teams. On Friday, Arctos and Epstein launched a new $275 million SPAC. | |  | | Alex Rodriguez is MLB's all-time leader in grand slams. But this could be his most lucrative Slam yet. (Tom Pennington/Getty Images) | | | 6. A TikTok rival
It was a banner week for Chinese social video startup Kuaishou and its cadre of VC backers. The company raised around $5.3 billion in an IPO in Hong Kong, then saw its share price nearly triple during its first day of trading, elevating its market cap to roughly $180 billion. That's the same valuation reportedly attained by TikTok parent ByteDance in its latest funding round. One major VC winner of Kuaishou's debut was DCM, whose 9.2% stake was worth a whopping $13.3 billion once the stock went public.
7. Bye-bye Bezos
Jeff Bezos is stepping down as CEO of Amazon, bringing to an end one of the most lucrative reigns by any executive in American business history. He will be replaced later this year by Andy Jassy, best known as the architect of Amazon Web Services. In other Amazon news, the National Labor Relations Board denied a request by the company to postpone a union vote at an Amazon warehouse in Bessemer, Ala., a case that could be something of a bellwether for future tussles between the company and its workers.
8. Earnings season
Marc Rowan, who will become CEO of Apollo Global Management later this year, used the firm's Q4 earnings call to announce a slate of governance changes. Adam Lewis has more details, including moves to make Apollo's board more independent and to eliminate its existing dual-class share structure. Fellow private equity powerhouse The Carlyle Group also revealed its latest earnings, including a spike in net income that was aided by the firm's recent exit from Supreme.
9. Sky high
Private jet provider Wheels Up made its SPAC merger official this week, agreeing to go public in a $2.1 billion deal. The company had last been valued at around $1.1 billion in 2019. In other aviation news, Advent International portfolio company Cobham agreed to sell its Cobham Mission Systems arm (which includes the company's air-to-air refueling operations) to Eaton for $2.8 billion. And SpaceX is teaming with a fintech founder to raffle off a trip into orbit.
10. Bottoms up
Uber agreed this week to pay $1.1 billion to acquire Drizly, the operator of an alcohol delivery service, in what seems to be the latest sign that Uber is moving away from other moonshots and doubling down on deliveries. Vivino, a startup operating a marketplace and recommendation service for wine, raised $155 million in new funding this week. There was non-alcoholic beverage news, too: Nestlé has reportedly entered exclusive talks with a group led by One Rock Capital over a potential $4 billion deal for its North American water business.
View the full list online | | | | | | | | | | A message from KEY Investment Partners | | | | Breaking down how US election results may hold implications for cannabis investors | | The 2020 US election resulted in a "blue wave," with Democrats taking control of the presidency and both chambers of Congress. That blue wave has accelerated the timeline by which industry experts expect cannabis to be legalized federally. But why was cannabis made illegal in the first place? Where does the legislative framework stand today, and exactly how and when should you expect prohibition to be repealed federally?
In this white paper, KEY discusses the nuanced regulatory framework that developed over the last 25 years as prohibition has unwound. Next, they dive into the implications of the 2020 election and the path to federal legalization. Finally, KEY addresses the election results' implications for investors and why now is the time to deploy capital into cannabis.
Read it now | | | | | | | | |  | | (PM Images/Getty Images) | | | | PitchBook Benchmarks are our quarterly examination of all things fund performance, with data on IRRs, cash multiples and other metrics for a whole host of fund strategies and geographies. And to kick off the new year, they're getting a makeover.
The new-look Benchmarks now include preliminary data from Q3 2020, making them more timely than ever before. And we now have separate editions focused on VC, PE, Europe and North America, making it easier to find all the data you desire.
The timing of a GP's exits can go a long way toward determining fund performance. But what happens when an investor wants to hold onto an asset for longer than it first planned? Andrew Woodman answered that question this week with a look at the ongoing emergence of continuation funds. | | | | | | Pandemics & prescriptions |  | | (Fiordaliso/Getty Images) | | | | As in so many other markets, M&A activity cratered in Europe during the early days of the pandemic. And as in so many other markets, dealmakers spent the second half of the year making up for lost time.
Our 2020 Annual European M&A Report takes a close look at the industry's second-half recovery, a cascade of acquisitions that took overall deal value in the space past €1 trillion for the fifth straight year.
Online pharmacies were already growing in popularity before COVID-19 entered the global lexicon. And now, the presence of the pandemic has hastened the industry's shift away from brick-and-mortar. In a new analyst note, Kaia Colban examines how these digital alternatives are disrupting the pharmacy supply chain. | | | | | |  | | A pair of emperor tamarin monkeys on the prowl for a better receivables marketplace. (Oli Scarff/Getty Images) | | | | The Amazon rainforest is home to somewhere around 10% of all known species on Earth, a testament to the stunning biological diversity found in Brazil. That includes dozens of different primates, ranging from the very vocal howler monkey to the mustachioed tamarin.
A different kind of primate can be found in the Brazilian city of Sao Paulo: Monkey, a fintech startup that raised $6 million in Series A funding this week, according to a TechCrunch report. The company operates a marketplace for receivables, with the aim of making it easier for smaller businesses to gain access to Brazil's high-end financial institutions.
There are a lot of fintech startups out there these days. And as always, naming yours after a furry critter is one way to stand out. | | | | | | Recommended reads For several decades now, the rich have kept getting richer on Wall Street. Was the tale of GameStop something different, or more of the same? [n+1]
432 Park is one of the biggest and swankiest high-rises in New York City. But residents have found that not even Billionaire's Row is immune to plumbing issues. [The New York Times]
When the deal of a lifetime surfaced, two gold dealers named Sam Barrage and Renato Rodriguez thought what they didn't know couldn't hurt them. How wrong they were. [The Atavist Magazine]
The Catholic Church is one of the largest landowners in the world. A devout 26-year-old from Connecticut is combining software and cartography in a push to put all that real estate to better use. [The New Yorker]
A recent $430 million purchase by Sony Music appears to be a bet on the future of DIY singers and songwriters. [Rolling Stone]
The future of fighting climate change is … spinach sending emails? [Euronews]
After closing its $15 billion acquisition of Refinitiv, the London Stock Exchange's battle with Bloomberg for the future of financial data is set to begin. [The Wall Street Journal]
Some of the world's biggest oil companies have begun to make headlines for new environmental initiatives. Do industry insiders see it as a real chance, or mere corporate greenwashing? [Vanity Fair] | | | | | | Quote of the week "When I was a younger man, I was more tolerant; I always thought I could coach people to a place where they would be great. And 99 times out of 100, you're wrong on that, which is the reason I [now] pull triggers much faster. I still don't think I've ever taken anybody out of a job too soon. It's [always] been too late.
"I exercise executive prerogative. I don't have to justify it, I don't have to convince you. I just have to know that this is what I want to do. And the reason is, CEOs are only there for one reason, and that is they need to win. When you win, nobody can hurt you. And when you lose, nobody can help you."
—Snowflake CEO and Blackstone senior adviser Frank Slootman, speaking to Forbes about the evolution of his management philosophy | | | | | | The Weekend Pitch is produced by editor Kevin Dowd.
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