With a sports tech industry valued at $11B, there has been an increasing focus from pro teams and leagues on sports tech startups over the year. But like most industries, sports teams and leagues are being approached by a myriad of sports tech startups. Unfortunately, most of those sports organizations do not have an effective way to truly vet those startups. Many of those sports tech startups, on the other end, often times do not have a solid business model as well as the ability or desire to go beyond the sports sector in order to scale their business. In this analysis we will analyze the state of the sports tech industry, and what needs to happen for sports tech startups to build a scalable business beyond sports.

Picture: Upside Global, 2021

Sports tech sector: A $11B industry

Over the year the global sports technology market has gained good momentum. Currently estimated at $11.7B, this market is expected to reach $12.19B in 2021, according to Grand View Research. This is why sports organizations (pro teams, leagues…) are increasingly focused on adopting sports technologies (AR/VR, GPS, sleep tech, AI, esports..) in order to help them improve the fans experience, grow their top line and reduce injuries. This translates into sports organizations launching sports accelerators, or VC funds.

4000-5000 sports tech startups, but how many of those have a solid business model?

We are estimating that there are about 4000-5000 sports tech startups today. Now the question is: Of those 4000-5000 startups, how many of those startups have a truly innovative technology, a solid business model and the ability to scale their business? The answer is: Not many. Often times we are seeing small startups at a very early stage who cannot scale. Btw this is not a problem specific to the sports tech industry but a recurring issue for startups in general. This is why seeing some industry organizations claiming that they have a network of 4000-5000 sports tech startups is irrelevant in our opinion. The focus needs to be on high quality sports startups and finding the startups that have a truly unique and scalable technology and business model, not on startups that are too small (2-3 employees) and too early.

NFT Sports startups, the perfect example of an overhyped sports tech sector

Take the NFT sports startup sector. Over the months there has been a tremendous amount of hype around the NFT Sports sector. Many sports leagues (NBA, NFL, etc..), athletes (Tom Brady..) are now jumping on the bandwagon in order to take advantage of the anticipated growth. Of note, the NFT market for non-fungible token art grew more than 800% in the first 4 months of 2021. It is now worth around $490M, but is only a sliver of the total NFT market, according to some reports.

But in our opinion, how many of the NFT sports startups have a solid business model or even have a business model at all? Not many. This is the perfect example of a sports tech industry that is overhyped. And in our opinion that needs to change in order for the NFT Sports market to reach its full potential.

Decision makers (Head athletic trainers, CTOs, Director of digital experiences…) are looking for high quality startups

We have been working with athletic trainers, CTOs of sports teams and leagues for many years. These individuals are key decision makers in their organizations when it comes to buying emerging sports technologies. However the reality today is that they have very little time to look at thousands of startups. Often time they rely on their network of peers to assess sports tech startups. But this is a very manual and time consuming process. Those individuals are also often reluctant to try unproven technologies at very early stages. This is why there has to be a better way. This is why at Upside Global we have created a platform to enable them to quickly get access to vetted sports tech startups.

The emergence of sports tech unicorns: Peloton, Fitbit…Fanatics.

However on the bright side over the past few years we have seen the emergence of sports tech unicorns and exits. Notable exits include Fitbit (acquired by Google for $2B), Misfit (acquired by Fossil for $260M), Recon Instruments (acquired by Intel for $150M), just to name a few. Notable sports tech unicorns include Fanatics ($12.8B valuation), Discord ($2B valuation, funding approx. $270M, est. $5M in revenue), Calm ($1B valuation, funding approx. $115M, est. $40M in revenue), Hudl ($460M valuation, funding approx. $110 Million, est. $15M in revenue), and TeamSnap (funding approx. $45 Million, est. $12M in revenue). More recently, startup unicorn Peloton became a public company and is now worth $36B in market cap. So what does that mean for the sports tech industry as a whole? It simply means that these sports tech unicorns have the ability to acquire small sports tech startups in order to enhance their product offering, and acquire engineering resources. The latest example being Peloton’s acquisition of Atlas Wearable. Peloton is now rumored to be working on a HR wearable device based on Atlas Wearables technology which is expected to be introduced next year. We expect more sports tech unicorns to go on a M&A spree which will help consolidate the sports tech industry. As a result of those sports tech unicorn startups going public we also expect executives from those unicorn startups to launch their own sports tech startups. The hope there is that these executives will have a solid knowledge of what it takes to build a sports tech startup at scale and some new sports tech startup unicorns.

Teams’ 2020 Sports tech plan to invest in new technologies in 2021, specially in sleep tech, GPS, neurotech and mental health technologies.

Last year we ran a survey with 30+ pro teams (NBA, NFL, MLB, MLS, European soccer..) which clearly demonstrates that sports organizations’ continued appetite for sports technologies as they are looking to invest in emerging technologies like sleep tech, GPS, neurotech and mental health technologies in 2021. As shown in the graph below, 48% of the athletic trainers we surveyed indicated that they plan to invest in sleep trackers in 2021. GPS systems remained a top priority moving forward with 44% of the athletic trainers planning to invest in GPS systems while 44% of them planned to invest in neurotech & mental health devices. This does not come as a surprise as being on quarantine likely affected some players mentally and trainers want to make sure that they can address any mental issues moving forward. 32% of them also planned to invest in HR monitors and video analysis systems. 32% of the athletic trainers also planned to invest in temperature sensing & screening solutions. This makes sense as many sports leagues plan to do temperature screening of players before each games when the competition resumes.

Hydration/electrolyte monitoring solutions also gathered a lot of interest with 24% of the respondents indicating their plan to buy hydration/electrolyte monitoring solutions. Lastly, 16% of athletic trainers also indicated their plan to invest in connected fitness (Peloton, Tonal..) in the future.

Source: Upside 2020 Top Coaches Sports Tech Budget Survey Results, April 2020.

If you want to learn more about this Upside 2020 Sports tech budget survey click here.

Only high quality sports tech startups are set to survive the COVID-19 crisis

As Vasu Kulkarni recently pointed out to us, “Sports is back with a vengeance. We think there is a ton of pent up demand for people to be outdoors and active, and sports will be the beneficiary of this. Certainly a number of companies had a rough year, but if they managed to survive, we think they will be stronger on the other side”. With that in mind we believe that the COVID-19 pandemic has forced many sports tech startups to either pivot, build a more solid business model or simply shut down. We see this as a good thing. For example, we have seen many wearable sports startups pivoting and focusing on the healthcare industry in order to take advantage of the growing demand for wearables capable of monitoring patients’ health without contacts. For example, Kinexon ended up offering a contact tracing solution in order to enable organizations to better trace COVID-19 cases. This is just one of the many examples of sports tech startups pivoting but there are many other like this one.At the end of the day, we expect to see a growing number of sports tech startups shutting down due to the lack of funding, solid business model, or inability to pivot or adapt quickly…We think this is a good thing as it will help elevate the quality of sports tech startups in the long run.

Sports tech startups need to go beyond sports to survive and scale

We are dealing with lots of sports tech startups on a weekly basis and we always tell entrepreneurs “focusing on the sports sector initially makes sense as it helps them create awareness about their product and startup, and refine their product, but it is critical for those startups to go beyond the sports sector in order to truly scale their business.

Put another way, in sports a wearable startup could end up equipping an NFL roster of 90 players with their wearable device, but they could also equip thousands of field workers of a large oil & gas or construction companies as well. The choice is clear on which strategy makes the most sense over time to enable them to scale faster, generate more revenue, help them increase their valuation and bring a solid ROI to investors in the long run.

We are already seeing startups adopt such strategy. One of them is Kenzen a wearable tech startup that initially focused on the sports industry but then pivoted to focus on the industrial (oil & gas, construction..) market today. Of note, we helped Kenzen transition from the sports industry to the industrial space, and land pilots with top industrial customers in the oil & gas, construction and energy sector. Kenzen is now working with some of the largest oil & gas, construction and energy companies in the world today. In the end it was the right strategy for this startup. It helped them raise more money, increase their valuation, and scale their business faster. We expect many other sports tech startups to follow suit and enter new verticals like healthcare, government in order to truly scale their business in the coming years. This is why we at Upside Global are also focusing on the healthcare and government sectors to help those sports startups make inroads into those other verticals to better scale their business over time.

Bottom line: The sports tech industry is more exciting than ever. However in our view there has to be a better focus on high quality startups. At the end of the day, pro teams and leagues care about using truly scalable and vetted technologies. The last thing they want is to work with a sports tech startup that might shut down in 12 months due to the lack of funding. Investors and VCs on the other end, want to invest in sports tech startups that have the ability to scale beyond sports in order to get the best ROI. In the end, if sports tech startups take the proper steps to be focused, and go beyond sports, it will be a win-win for everyone.

To learn more about Upside Global, and help you find truly vetted sports tech startups, find investors or new customers, please contact at us at julien@sportscouncilsv.com or simply visit our website at Upsideglobal.