What is it all about?
Both as a lawyer and as a management consultant, I have coached some esports teams and helped start-ups to take the first steps. The potential is huge at the moment, but there are of course enough risks. Just because I think it’s more and more true that professional esport teams don’t let themselves be bootstrapped anymore, I want to reveal a few hints that are disregarded again and again.
But beware. My comments relate to professional teams with which the founders explicitly want to make money and with which full-time jobs are available in the long term. If you build a team as a hobby, my remarks are hardly to be applied. However, the explanations in this article should be observed. My remarks also do not concern traditional associations (e.V.), whether non-profit or not.
Capital is important
First of all, it should be noted that nowadays a company in esport can only be built up with sufficient capital. This can, of course, be our own money, and we are not just talking about a few thousand euros. However, you should actually look for a regular investor (a few tips about this in this article). It is important to note that a sponsor is usually not an investor (as also mentioned in this article ). An investor secures the financial basis for the establishment of a company, salaries, player compensation, enables the creation of ordinary contracts and much more. Only with an investor will you be able to bring continuity to an esports company. Something that most teams lack.
The strategic planning
If you have acquired or convinced an investor, you have to work out a strategy for how to make money with this at the latest now. Even if it seems uncool, 100 percent of investors want to have a multiple of the money invested back for the foreseeable future; either by repayment of a loan, by selling shares or by combining these two points. It is clear to the founders at least that most investors expect 10 times the investment amount or more, so that a company as an investment object is interesting at all. The main source of income is the sale of advertising and the focus on this aspect must be correspondingly large. The main sources of income are currently revenue from streaming activities of players and the organization, revenue from brand marketing at events, in streams and on the homepage or in social media channels and to smaller proportions regular banner advertising. From a certain size, very relevant revenue can also be generated from sales activities. Irrelevant, since completely unpredictable, are revenue from tournament wins. These revenues have nothing to look for in a serious and balanced business plan.
Social media reach is the most important currency
Due to the sources of income mentioned under the 2nd point, there is only one important currency for team success in esport: social media reach. Although most organizations don’t want to hear this, a well-functioning esport team is basically comparable to a marketing agency. Things like tournament successes can usually only be means to an end to achieve the desired reach on social media. This is a circumstance that is very difficult for many founders in esport to understand. Especially people for which esport is a certain passion. Founders and leaders of successful esports organizations should be the first to learn that a professional organization can only be successful if management understands that the organization is a job or a business. This does not mean that there must be no people with a passion for esport in a professional esports organisation. Especially the managers of individual teams or esport titles need to know the scene very well. As a rule, however, these have only very limited work to do with the operational and financial management of the organisation.
How important is “sporting” success?
At the beginning of the establishment of a professional esports organization, far too much focus is usually placed on the “sporting” success. However, this is only necessary to a very limited extent, because financial advantages from “sporting” success are very difficult to calculate, if at all. Much more relevant is the above-mentioned social media reach, which results from a combination of “sporty” success, cooperation with successful streamers, good community work and clever social media marketing for successful teams. If you use the experience of professionals and numerous tricks, you can only be successful in a limited way as an organization in the first time, but in the end you earn more money than those who win a tournament, but things like participation in the tournament, Social media or sponsors do not manage to monetize. There are plenty of examples of this, both in esports and, above all, in traditional sports.
Professional contracts are important
Of course, as a lawyer, execution is also logical, belong to a professional appearance, also professional contracts and legal structures, such as corporations. Cleverly designed, good contracts are not only an annoying necessity for a variety of reasons, but also the foundation for their own entrepreneurial success.
Would you like to ask any further questions directly to me
Of course, my remarks are very brief. At the end of the day, I want to make money from my experience as an entrepreneur and by mentoring teams myself. However, numerous discussions during the course of this year have shown that the information presented above is, in principle, a formula for success for esports organisations and is the basis for the fact that only a few years old start-ups in esport are financially and are now – also playful, much more successful than teams/organizations that already exist for 10 or more years. Germany in particular, however, still has a lot of catching up to do, especially in the awareness of being an entrepreneur. However, those who manage to apply established concepts and ways of thinking from other business sectors to esports can currently exploit huge growth potentials. This applies to classic investors who have understood that esport is more than just a youth movement and founders who really want to be successful as entrepreneurs in esport.
I will be happy to answer any further questions.
