roger mitchell
19 November 2018

A VC and sporttech goldrush

roger mitchell
19 November 2018

What is early stage investing really all about? Once you strip away the BS.

Are we in a VC and sportstech bubble, where fundamentals are forgotten? If so, what axioms can keep you on solid ground?

Over the last 4 years, especially via our ongoing work with the football sector in Israel, we’ve been exposed to an overdose of ventures from the (sports) startup sector. At the very same time as so many franchises, leagues, clubs are trying to start accelerators/incubators/funds. With new VC funds mushrooming. 

There has never been so much buzz around innovation
in sport media and tech.

And I have to say, I believe we are now seeing a lot of the “take a swing at whatever comes across the plate “ approach. It’s like when “retail” enters the financial markets exactly at the wrong time. People forget the fundamentals and just rush to get on the train.

Why can we talk about startup fundamentals?
Some background first.

I am principally a financial professional by training, and Albachiara has for many years incorporated angel and seed investment into its business model of knowledge transfer. In the very particular niche of the creative industries.

Specifically, if we think we can add value to a young company, with our advice, we tend to back that up also with our own risk capital. Conversely, we seldom invest remotely without the ability to contribute.

Interestingly 2018 has seen a lot of this work come to fruition at the same time for Albachiara. We have seen very positive exits for three of our portfolio companies.

Vipera plc. Mobile middleware company, which evolved into fintech on IPO in 2010, and now sold to a major Italian bank.

GiveMeSport. Sports social media digital publisher now reversed into a betting operation from the deregulating North American market.

Iosport. Quant/algo shop providing risk management and engineering to the sports data industry, sold to a major European bookmaker.

Whilst not in 2018, we also exited very satisfactorily from our seed investment in social video publisher Base79 to Rightster. Now named Brave Bison.

Our other current investments in medicaltech company Goshawk Ventures and music rights company Think Louder, continued to gain real traction. FindaPlayer wins award after award.

What are the fundamentals of analysis and evaluation
we use and teach?


Which then also form the basis for the Elevator Pitch Art of Persuasion courses Albachiara Corporate Learning has offered corporate and academic clients in the last 3 years.

Let’s strip it back before diving in.

What do startups ups really want? I mean really want.

It’s simple:

Bizdev door opening


What do they always undervalue as what they should want?

Gravitas with banks and investors

Advice on managing a sustainable scaleup

An adult in the room

A corporate jester to tell some home truths


What do they usually totally miss as needed?

Keeping the founding team together as they all grow at different speeds

The ability to delegate and drop their micromanagement

People skills to hire motivate and retain

Avoiding the God Complex, the Kool Aid, the testosterone-driven jealousy


– Most startups fail in these last 4 aspects –
the Startup’s Four Horsemen of the Apocalypse:
Disharmony, Micromanagement, HR, and Ego.

Four Horsemen of Apocalypse, by Viktor Vasnetsov. Painted in 1887.

Combatting these is what I like to call the Tom Hagen role: someone smart, who will respect the vision and drive of the founders, but who can whisper softly another perspective at the right moment. To let them reach their full potential.

That’s an added value role.

But let’s go back to brass tacks and not forget the start of our article.

Money! Capital! Cash!

So many founders looking for money. The millennial generation has much closer empathy with the startup culture.

So much capital looking to be deployed. So many now looking to invest funds in early stage sport and media tech for example.

So what stops the natural alignment? And a simple match?

In short a simple truism:

Founders pitch a product/service;
whereas Investors seek a business.


I’d say for 80% of cases this is the blockage, and what specifically we at Albachiara look to resolve.

In the other 20%, it is because founders don’t understand the VC model, and how they are obliged to invest for ARR or ROI. Founders request an investment profile totally incompatible with the parameters within which a VC must operate.  To explain this more clearly, let me quote one of the pioneers of the new sporttech funds. Vasu Kulkarni of Courtside Ventures.

We have a $35M fund. ~2% of that is spent on fund expenses each year, which means that over the course of a 10 year fund (roughly how long you expect it will take to harvest all your deals), $7M is gone in fees. That leaves you with $28M in investable capital. It’s usually good practice to reserve between 40% and 60% for follow on investments in companies that are doing well and continue to raise more rounds of funding, so that you can maintain your ownership percentage and don’t get diluted down to nothing. So let’s go ahead and say $14M of that $28M is now reserved for us to put more money into our top performing companies. That leaves us with $14M to place early bets on companies. At roughly $500K a check, we’re looking at about 28 shots on goal. Of those 28, unless we are the recipients of divine intervention, roughly a third will fail altogether, a third will maybe break even, and the remaining third, if the stars align, will make up for all our losses, and make us some money. So, basically $5M in initial investments (10 companies) are going to need to be responsible for returning $35M to our investors. Just because we think a company can have a great 3x exit someday, that doesn’t mean it’s a bad business, it just means it’s not a good business for a venture fund to be investing in. I say to that type of company: go take $2-3M in angel money, don’t raise more than $5M or $10M, and if you have a $25-30M exit you’re going to do really well – but we as investors just can’t do that deal. I try to explain that as candidly as I can to as many people as possible.

There it is. In summary, if you are not pitching a home run to a VC, don’t be surprised with the “no thanks”. And if you are not asking for the right amount of money  to get you to a home run, same outcome.

Some businesses are more suited to HNWs and angels more than VCs. And need to be told that.

Last point: working out how much money to ask for is a real skill. That’s another article.

P.S. I can’t recommend enough the musings of Vasu and his work at Courtside. So here is what I consider essential reading.

Let’s come back to the 80% of cases. Founders will bore talk to you about their baby product all day long. It is by definition their passion.  But ask them this and they often struggle:

1. What specific problem or pain are you solving/removing?

If you are lucky you’ll maybe get some explanation in the ballpark, but likely out of focus. It’s a 2nd or 3rd derivative of the real source problem.

We have found no better to explain this to our clients and students than Moneyball and Brad Pitt.

The best decks I’ve ever seen have this down pat. The rest of the pitch becomes then so much easier. Once you articulate the problem, people don’t struggle to understand your solution.
The challenge is getting it down pat.

Once over Becher’s Brook, there is still The Chair.

2. How big a market is suffering from this problem?

It is truly astonishing the founders who think a cool product is enough. They often don’t have the market numbers. Even ballpark.

Let’s come back to Vasu on the reality of market size as applied to sports in his case:

Generally speaking, the reason is market size. It’s never about the team, it’s never about “we don’t think you can build a good enough product,” it’s none of that. It’s straight up, very few VCs believe in the market cap of sports-related companies, and they’re not wrong; I won’t say that they’re right, but they’re not wrong.

So, if you are solving a clear problem for a big market you are definitely on the dance floor.

Now you need the personal moves.

The team needs to make sense and inspire confidence. And be well suited in skillset to your operational plans. I personally look for another trait.

3. Ability to adapt, network to pivot, character to bounce back

Because it never goes as you think. At least 2 of our successful exits started out with a different vision. And needed to dramatically evolve. That’s down to people attitude and network.

Around this point you’ll need to throw in the

4. Revenue model and the financials

But don’t make the mistake of producing reams of Income Statements. This isn’t an accountancy exam. It’s instead a test of business planningand how well you know your levers. Have in your pocket the answers to these types of questions:

  • if you don’t capture your 18 month forecast market share, how far out does that push breakeven cash flow?
  • If your margins are less juicy, how many units do you need to cover overheads?
  • If your competitors reacts by x,y,z what does this leave the ROI?

As we can see, sooner rather than later you’ll be asked about

5. The competition

It may come in the first 30 secs. “aren’t you just like him or her?”.

If you can’t show to know a complete competitor scenario you’re dead. Just leave the meeting.

It’s over.

That’s doesn’t mean knowing every last newco from Vietnam, or Vancouver. But the obvious ones yes. And you need to know where you stand in comparison. The easiest and most credible slide is a SWOT.

6. Gotomarket

How you market and get noticed, and scale. The most technical of the slides.

Lastly, don’t be shy with

7. Milestones

Whether they are already achieved and expected. It’s a metric of accountability that always impresses. “We today have this traction, these clients, and with your money we’ll get to here. At which point I’ll ask you to follow on for the Serie B”

This is how we work at Albachiara in assessing where to invest our own capital. It’s the same process of fundamental analysis we advise startup clients to prepare for. And what we teach accountants and consultants and investment bankers.

This is what Aristotle calls the Logos dimension.

Of course, we haven’t mentioned the techniques of persuasion, written communication and effective pitching to deliver all this for impact.

Ethos and Pathos.

We usually keep that back for paying clients 🙂

So next time you see the latest sexy (sportech) startup announcement, mentally go through this process.
And see if you are still impressed at the end.