IPO Radar - Sportradar
The company no one's heard of with the data that makes sports betting tick
Hey Everyone, it’s been a while since I’ve come online with an IPO Radar article, so apologies for the delay in getting back into the fold of writing for the All Things Venture team. Dez has been putting me to shame these days with all the high-quality content he’s been pumping out, so I figured it was time to step back up to the plate and put pen to paper again.
I don’t know about our readers, but I (embarrassingly) spent a large chunk of my Sunday in front of the TV because NFL football is officially BACK. The time has now come where every Sunday this fall, I’ll consciously choose to avoid natural sunlight to frantically flip between channels checking the status of my fantasy football teams. Football Sundays in my life have historically been filled with friendship, hot wings, and friendly fantasy trash talk, but there’s been one element of my football Sunday routine that’s become much more pervasive over the last few years alone. That element is the absolute emotional roller coaster that is SPORTS BETTING.
In my experience with sports betting, nothing brings you on a euphoric high like hitting a three-bet parlay on a last second field goal, only to swiftly crash you back down to earth when you lose all your winnings on a Sunday night game. The emotional highs and lows of sports betting creates a fanatic following around this weekly ritual, and one company that’s poised to benefit from the rise in sports betting is Sportradar. This goliath sports data company is set to IPO sometime in the next couple days, and for those who enjoy the sweet taste of winning a big sports bet, the time has come to learn more about what makes Sportradar tick. This Ty-PO Radar jumps into the weeds below:
Sports Betting: A Brief History
For the viewers who are probably reading my words above scratching their heads and wondering if I should seek gambler’s counseling (for avoidance of doubt, I only make a couple bets a month and always split bets with friends), I’d like to start with a brief background on sports betting for those who aren’t too familiar with it. The act of sports betting is essentially betting on elements of a sports competition, much like one would bet on the outcome of a traditional casino game (craps, blackjack, roulette). You can bet on the winning team of a game, the final score of a game, or even get as granular as the number of points a player will score in said game. One element of sports betting that makes it particularly captivating is that, unlike traditional casino games that are purely games of chance, sports bettors often believe their personal analytics around betting have a “secret sauce” to winning more often than losing. Because sports betting is more open ended than blackjack, bettors will try to develop proprietary strategies to “beat the Vegas odds”. Likewise, a communal element around sports betting has erupted as well, where bettors will often split bets with friends and share in the outcomes. This allows bettors to fanatically root for sports outcomes with friends, which is much more thrilling (and much less lonely) than playing a hand of blackjack. I speak from experience when I say there’s nothing more exciting than jumping in on big sports bets with two close friends as you quite literally ~ride or die~ with them on your gambles.
Up until about three years ago, sports betting was an illegal practice that could only be circumvented by placing bets through illegal sports books or in Las Vegas. This ban was instituted in 1992 when Congress passed the Professional and Amateur Sports Protection Act (PASPA). That ban on sports betting was thrown on its head when the Supreme Court delivered a 2018 landmark decision in Murphy v. NCAA, declaring PASPA unconstitutional and giving each state the right to legalize sports betting. Since this decision, 26 states PLUS Washington DC have legalized sports betting, liberating the practice once and for all and creating a new state tax income stream for governments.
About Sportradar
So, what is Sportradar and how does it fit into this newly legalized practice of sports betting? Sportradar is one of the largest sports data companies and is the number one provider of B2B solutions to the sports betting industry based on revenue. Sportradar can be thought of as the “plumbing” of sports betting operators such as Draftkings and Fanduel, since it provides them with mission critical datasets and functionality to help them run their everyday sportsbooks. The company was founded in 2001 in Norway by Carsten Koerl, who still retains a 31.8% stake in the business to date and has methodically grown it over the course of a 20-year history. Koerl’s story is one that is quite unique, being born in the mountains of Germany and harboring ambitions to compete as a professional downhill skier or tennis player at a young age. When he realized his athletic ambitions were a bit of a stretch, he decided his intellect could bridge him back into the sports world and went to school to study computer engineering before going on to found Sportradar. Now as his business prepares for the public markets at an approximately $7.4B valuation (the low end of the IPO pricing spectrum, per sources), Koerl stands to make AT LEAST $2.3B upon IPO of his business. Not a bad career transition from shredding the slopes of the German mountains!
Throughout the company’s history, Sportradar has aggregated partnerships with many of the major sports leagues such as the EPL, NBA, and MLB to collect data and aggregate it into flexible products for sports betting operators and media companies. Such core products include:
Pre-Match Odds Services, Live Data, and Live Odds: An extensive list of data to set odds and help sports betting operators keep customers engaged with bet data across the span of a game
Manage Trading Services (MTS): A turnkey solution for trading, risk, and liability management so bookmakers can avoid outsized losses
Managed Platform Services: Through the company’s acquisition of Optima, Sportradar offers a turnkey betting solution. The solution includes player management that has a full 360-degree view of user activity across all channels. The platform will also handle payment processing, accounting, transaction management, and business intelligence
Betting Entertainment Tools: On-screen visualization tools designed to further increase user engagement
Global API (Application Programming Interface): Flexible plug-in tools for customers to access data feeds without any legacy issues. Sportradar has over 50 APIs across 30 sports
Sportradar has a vast suite of capabilities and products to expand horizontally within its customer base and continue to increase wallet spend among users. It’s place as the intermediary between sports leagues and betting books is critical to the burgeoning industry of sports betting.
Sportradar IPO Details and Key Figures
Sportradar filed its F-1 (the S-1 for foreign businesses) on August 17, 2021, with plans to follow a traditional IPO process. This route was taken following a failed attempt at a SPAC merger with Horizon Acquisition Corp II, which was a blank check company led by Todd Boehly, the founder of Eldridge Industries and co-owner of the Los Angeles Dodgers. At the proposed SPAC merger price of $10B there was no appetite to complete the merger, and Sportradar decided to pursue a traditional IPO at a lower valuation of $7-8.5B (as noted in the preceding section).
Sportradar has a fantastic mix of institutional and athlete investors. On the institutional side, the company is backed by TCV, CPPIB (a Canadian Pension), and EQT Ventures. From an athletic perspective, notable figures such as Michael Jordan, Mark Cuban (owner of the Dallas Mavericks), and Ted Leonisis (founder of Revolution Growth and owner of the Washington Wizards) back the business. Through this all-star investor base, the business has continued to grow rapidly. Here’s the business by the numbers:
€405M in total revenue in 2020A, up from €380M in 2019A (7% YoY Growth) - Fairly impressive growth given the COVID effect on business due to cancellation of sporting events
€77M in total Adj. EBITDA in 2020A, up from €63M in 2019A (22% YoY Growth)
Over 8,300 contracted data journalists who use proprietary technology tools to collect live data from over 600,000 events ever year across 37 spots
78% of revenue comes from subscription services
1,612 customers as of 2020A and partners across more than 120 countries
900 sports betting operators as customers and 350 media and digital platforms
Top 200 customers represent 80% of total revenue in 2020A
Net retention of 113% in 2020A and 118% in 2019A
Key Investor Jargon: Net Retention
One metric that’s important to break down when you’re evaluating the performance of a business is called net retention. Net retention, simply put, is the increase in total spend by your prior year’s customer base in the current year. For example, if I have 100 customers in 2019A and they spend $20M in that year, if that same group of customers spend $24M in 2020A, then my net retention is $24M / $20M = 120%. If only 90 of the original customers remain in 2020A, then you factor in only the spend of those 90 customers that were existing customers in the prior year. In your net retention calculation, you never include new customers acquired in the current year, because you’re trying to evaluate how your existing customers are interacting with the business. Net retention is a great tool to see if a company is getting its customers to increase their spend with a business. A usual rule of thumb is that if a business has >100% net retention, then it’s doing a good job managing its customers and increasing their wallet spend. Once you get into the >120% range, you’re looking at an all-star company!
Closing Thoughts
Overall, Sportradar is a business that lies at a critically important juncture of the sports betting value chain and will continue to see success as sports betting proliferates. It’s an intermediary that’s important to both sports leagues (who require their data to be collected and organized) and sports betting operators (who need data to build accurate betting platforms). I see Sportradar as one of the more mission critical companies of the sports betting industry that will continue to grow with time. However, despite the massive tailwinds the business is receiving, there is significant competition risk, primarily from Genius Sports, their primary competitor. Founded in 2016, Genius actually won the exclusive rights to collect NFL data instead of Sportradar in April 2021. Given Sportradar’s edge lies in their superior data, losing out on datasets to Genius could significantly impact their business. That being said, B2B sports betting data services are poised to make a BIG run in a BIG way over the next few years as sports betting continues to gain widespread global acceptance.
Thank you so much for weathering my Ty-PO Radar storm today and looking forward to the next one. Stay tuned for the article I’ll be putting together on Allbirds, which is a sustainable apparel company that’s on the come up and soon to be hitting the public markets with a bang. In that article, you can brace yourself for a lengthy rant from yours truly on the environment and the importance of ESG initiatives 😊.
TL;DR
Sportrader is a sports data company that provides mission critical data to sports betting operators such as Fanduel and Draftkings. As sports betting continues to become more widespread, Sportradar is poised to continue its success as long as it can maintain its competitive position and data advantage.
Helpful Sources
Sportradar Abandoned SPAC Process
Sports Betting Spend on Football Ads
DISCLAIMER. We are not financial advisors. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary.
Great read T, looking forward to your rant on climate change!