Big Things

10 big things: A VC-backed bet on teen sports superstars

February 7, 2021
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. 

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. 

Related content