Chad Stender: Private Equity Financing in Sports Tech, Esports, and Sports Betting Startups (Full Transcript)
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Ronen Ainbinder 0:31
Today's guest of the Halftime Snacks features yet another absolute legend from the sports industry. Our guest's background is packed with awesome experiences in diverse companies such as Walt Disney, the Philadelphia 76ers, and the Philadelphia Flyers.
Today, he's a partner at SeventySix Capital – a venture capital and private equity firm that invests in seed and early-stage companies in diverse industries, including sports and technology.
This man is an expert in investor relations, fundraising, and company investments. I can guarantee this episode will be a massive one.
Ladies and gents, Chad Stender!
Chad Stender 1:12
Ronen! Thank you so much. Great to see you, my friend.
Looking forward to having some fun today. Let's get it going.
Ronen Ainbinder 1:17
Good to see you, Chad. How's it going? How are you doing? Man? How are you today?
Chad Stender 1:22
Things are good, enjoying the summer up here in the northeast. We're based right outside Philadelphia, having a lot of fun with the kids. And there are so many exciting and amazing things going on in the sports world. And I can't wait to share everything with you. So again, thank you for having me on the show.
Ronen Ainbinder 1:38
That's super exciting to hear, man. Welcome to the Halftime Snacks. It's a super pleasure to have you here. And I want to kick off our conversation with an icebreaker, and I want to know what's your favorite sports memory. I'm going to share mine while you think about yours. Mine is the goal of Didier Drogba at the UEFA Champions League final against Bayern Munich. I think it was minute 87 or something. The game was already gone. And he scored with his head. And man, I cannot stop remembering this memory– my favorite one. What about yours?
Chad Stender 2:10
Sure. I was super blessed. I came home from school and third or fourth grade. And my dad said, change your clothes. We're going to Philadelphia; I grew up in Central Pennsylvania, so about an hour from Philadelphia. And I said, where are we going? He said. Unfortunately, my friend cannot use this ticket tonight. We're going back then to the spectrum, which no longer exists for all of our Philadelphia fans. Everyone knows the spectrum well. But it was the main place in Philadelphia, and we ended up going to the Duke versus Kentucky NCAA basketball game that night. And had it not been for my dad's friend, unfortunately, not being able to take the ticket. So not only was it an amazing moment experience for me and my dad and bonding and getting to go when I was about 10 years old. But we saw arguably one of the greatest moments in NCAA basketball history with Christian Laettner making the shot. Everyone knows the shot. I was there, you're hugging my dad, I'm hugging strangers, and it was something that will forever be in my memory. I didn't sleep the rest of that night. I'm at school, I think it was. I think that was a Thursday and then Friday or Friday and Saturday. But you're sharing all the memories with your friends. And it was just the coolest thing ever. And the fact that I got to deal with my dad made it all that more special. So that was by far one of the coolest sports events I've ever been to and sporting event moments. And that's the power of sport. That's the power that this industry brings to people and can affect people's lives for the better. So it's so cool.
Ronen Ainbinder 3:48
100% Chad, I feel like you remember the ones that cost you the biggest emotion. So I guess that for you, that means a lot between you and bonding with your dad. So I guess that's awesome. And thanks so much for sharing. Let's kick off our conversation with some of the stories, some of the things that you've been involved in that you've been in private equity VC funding for? A little bit over a decade. So, man, you're one of the experienced ones. So let's talk about how the industry of private equity VC has evolved over time since you first joined. So how about you just share with us a couple of stories that depict the real change of how it was how it is now? What has changed? What do you like better now that wasn't as good as before? So share with us a couple of stories.
Chad Stender 4:44
Sure. So I started in venture capital in 2012. So almost a decade now. And while I have some amazing experience, our founder, Wayne Kimmel, started 76 capital in 1999. So it was almost two years ago, and getting to understand his experiences and what he's seen through. Back when he started, early-stage investing wasn't involved. There were a lot fewer early-stage investors. And then, as I came in, in 2012, by that point, it had gotten saturated. And you look at certain instances, so Y Combinator started in 2005, you had an Angel list, and 500 startups, both starting in 2010. And kind of by 2012 1314, it felt like everyone out there was an early-stage investor, you had angel investors, you had individuals, it was crazy when you started looking at cap tables and what they look like. And I think it was very healthy for the ecosystem. From a venture capital standpoint, I think what I felt and what I learned very quickly was that you needed to have an incredibly strong brand to get the deals. So you had to be known for what you're investing in; you had to be a leader in the industry. And obviously, you had to be able to identify and have relationships with the entrepreneurs because, at that point, you weren't competing. You were fighting for deals, the deals were getting praise to love, everyone talking about seed became so on so forth, a became B, right, these rounds got more expensive. And so, for that same check size, you were getting less ownership. And well, we were fortunate to do it because I was able to work with Wayne. And then, we brought in our third partner, john pal 2014 1516. And we identified our strengths, relationships, and networks, and I think we identified one of the largest macro trends in investing. And we were one of the first to do so on the early-stage side. And that was the overall sports industry. And I will say definitively today, sports is going to be the largest investable category. Over the next 10 years, it is truly ripe for disruption. I think we were early in the game. We followed some of the macro trends with sports betting in Europe, gaming in Asia, the value of the sports franchises in America, the power of the athlete. And so what we did is we launched our fun, we also became partners in a sports marketing agency, we started working with athletes, and we don't do anything, where 1000 miles an hour, we go all in, and we knew we had it right. And we were proving it out. And we were able to do so.
We launched our first sports-focused only fund in 2017. And again, it's being known for what you're investing in being able to access the deals. And to us. Most importantly, I think we're a bunch of entrepreneurs; we happen to have our ambassador caps on most of the time. But we're a bunch of innovators, disruptors, entrepreneurs, ourselves. And we saw an opportunity to go with the sports industry. And so, for us, the best part about getting to invest in getting to build together and work with our entrepreneurs. And to me, that is the most rewarding and best part of the job. And it's been amazing, the last four or five years, and we feel like we're just getting going here on.
Ronen Ainbinder 7:58
So 10 years ago, there were no sports types like companies that were coming for you. You guys were like, Oh, yeah, so we're innovating in the sports space. Was that so like at all or not?
Chad Stender 8:13
Not at all. There's always been innovation and disruption around the sport. I just think from the investor side, there hasn't been a targeted and focused venture and private equity the way you're starting to see it now. And I think in the later stages, you're seeing much more of it. But on the early side, there are a few of us, and everyone's asked us what's your competition, like who else is doing it? Right now? It's very collaborative. You just had your past guest, Keith Bank, someone was close with. KB is one of the few outfits in America that's kind of in a similar space. I literally just emailed Keith last night at about 11pm sharing an opportunity. So to me, it's very collaborative. There are many opportunities, but we invested in a company we invested in whistle sports in 2000.
I think 12 or 13, kind of right when I got going with 76 capital. At the time, there were six employees in the Meatpacking District in New York. The other investors were Mia Hamm, Derek Jeter, and Peyton Manning, right? The Gator, a big three, one of the founders, came from Gatorade and us. And it was pre-market, pre-revenue, pre-product, but they were going to disrupt the kids and the youth generation of sports content. And so that company made a sports investment, I would say back in 2012 2013. And, that company just expanded this past year to 11 sports. And so a couple of things, this takes time when you get in early, but I think people have been investing in sports. I think the idea of what I said about branding and being known for is becoming more Vogue around what we're doing on the venture and private equity side. But again, this is early. I think we're just getting going. We want to be more involved because this is a large ecosystem, and there are many opportunities.
Ronen Ainbinder 9:59
What's the best investment that you've made? You've been an investor in VC for almost 10 years but probably also a private investor for the rest of your lifetime. So what's the best investment you ever made? What was something that you took a bet on and were successful?
Chad Stender 10:19
So I'll give you, I'll give you two. And the first one was an investment I made 12 or 13 years ago. And the answer is going to sound cheesy, but I truly mean, it was getting to me, my wife, whom I met through sport, we interned together at the Wells Fargo Center. So again, it's all about sports for me. But getting to build our family together, having two kids today, and building your own team was by far the best investment. I always say like, You're stupid for going with me. But I think my star sport, so I know that's a little bit of a cheesy answer. But I made it; it's valuable to have a strong base on the home front, which kind of allows me to go out and do this job to my fullest. And it's kind of a 24, seven, you're always on, you're running hard constantly. And it's what I love, I'm passionate about what I do, I don't ever feel like oh, I've got to go to the office today, or I got to do this. It's, of course, challenging at times and stressful. But I can say I absolutely love what I do. From the investment front, the investment that I'm kind of most passionate about occurred. It started in the spring of 2019. And we invested right at the end of Of The Year of 2019 we invested in a company called vine library. But at the end of the day, what we did is we backed the entrepreneur, we identified Sam Ratner as someone that truly understood the sports betting space, truly understood gaming, and thought in a way we kind of dig on the Mark Zuckerberg of sports betting. And we've been going to all these conferences and all these events and seeing startups after startups pitch after pitch. And it was one of those things. We sat down with Sam for an hour. And we got up from the table. And I looked at my business partner Wayne, and I said that's our guy. I don't know exactly. If he knows what he's gonna do. I don't know. There's a lot of TBD here. But that is our guy. And that's what we do. We identify big opportunities, we back the entrepreneurs. And we figure out how we can add value. And so, we invested in 2019. I'll move the story along. Our first board meeting, we were at NBA All-Star weekend in Chicago, where they're based, we sat down for the board meeting, and Sam looked me in the eye and said, we need to pivot here. I said, Oh, okay, what does that mean? We're going to become a sportsbook. And I said You know what, let's go. He explained why we were given the opportunities, and we became victorious. And we launched, and we went, and we were fortunate. We got to bring in Scott star, who made the introduction. Ultimately, they became business partners that later that summer 2020, we introduced them to their acquisition. Right, so we made the connection to Fubo and Fubo Tv. It was an insane fall.
I always try to stay even keel like people always ask the best advice as a venture capitalist, you have to try to maintain you can't get too high or too low. And no matter how much I tell myself to maintain, it was a roller coaster ride so many times we thought we were about to get acquired. Last fall, it didn't happen. We thought we might be going public vs. back didn't happen. And then David Gambler, the CEO of Fubo. Basically, they went public in October 2020 told the street that they were going to get into gaming, and they were either going to innovate themselves, or they were going to acquire. They went out and found a banker, and Viguerie was one of the targets, obviously incredibly biased. But I think it was the best choice. They found two of the most talented entrepreneurs in the space. And they're building together. They're going to be launching this fall first in Iowa. They just announced Pennsylvania will be their fourth state they're going to have access to, and it was amazing. It did happen quickly. It was about 13 months from investment to exit, and that's not typical in our industry. But I not only got the ups and downs, but I can honestly say I became deeply good friends with Sam Ratner. I consider him a business partner and someone that I'm a good friend with and lucky to have that success. And it's been amazing for our investors in our venture fund. And it was a pretty incredible deal.
Ronen Ainbinder 14:37
Man. We're lucky to be able to hear the story firsthand from you, Chad. Thank you also for sharing that. I feel like we're getting the blueprint of the way you think, the way you've been strategizing investments and your whole career in finance and now, of course, sports. So I want to ask you if there's any specific thing that You think you think about any thought that you have that is not widely shared with people you work with? Or people in the sports industry? Or, maybe also people in finance, something contrary and something that you think this is maybe the way and not everybody. Everyone believes it's the way of doing things, but you surely believe in it. And why do you think it's contrarian? Why do you believe in it? And where do you think it is? Taking that thing that you're thinking about? Maybe I'm getting too abstract here. But let's just kick off with that thought that you have. And maybe we'll move along, as you tell us.
Chad Stender 15:41
I think I know what you're going for here. And from my seat, I'm at an interesting age, right? I just turned 40 last year. And so I'm commonly speaking with people that are kind of the generation above me, maybe in their 50s, 60s, 70s. But at the same time, our employees and I still have many conversations. It is unfortunate to mentor and works with what I consider the youth today, late teens, early 20s, going to college, coming out of college, starting your careers. And it's an interesting spot where I'm too old to be hip and cool with the young ones. But at the same time, I feel like I'm finally at the place where I can sit to stand toe to toe and have that conversation with anyone. And it's interesting. And what I get to see from my seat is this amazing blend and convergence of sport, music, gaming. And what I think is already happening, but again, when I said and spoke with anyone kind of the generation above me saying that gamers today will be the most popular athletes moving forward. And I think anyone under 30 is already kind of seeing this and experiencing this. And I don't know how contrarian that is. But when I make that comment, and they look at me as anyone older, and they'll say Wait, you mean like video game players? And I'm like, Yes, professional video game players or streamers. They don't have to be playing competitively. But they're entertainers. They're influencers. They have social capital. I mean, the power of social media is incredible. I think LeBron is the most powerful person in the NBA today. I think what he did in free agency was incredible. I think he was more powerful than his team. And so what I think you're seeing today is kind of the equivalent of gamers, musicians, artists, and athletes, and there's this amazing blend that's happening. And so I think moving forward when you say, your top 10 athletes, I think kind of this youth generation is just going to name gamers, artists. In their minds, the word athlete is going to mean something very different. And so again, I'm already seeing this today. But I think this is happening very quickly. I think it's incredibly exciting. I'm looking forward to the day when people talk about eSports. And they're not calling it the other sport, right? There are traditional sports and eSports. Like, I think it's just going to become a sport. And the word is changing in the definition of an athlete. And thankfully, and I L is finally here, the NCAA is gonna figure it out, they'll never gonna figure it out. But finally, these athletes have an opportunity to monetize and to get paid what they should have been doing 20-30-40 years ago. I wrote a paper in college. And that is 20 plus years ago about how athletes should be getting paid for their name, image, and likeness. And so I think it's an amazing time. And I'm so excited to get to invest and disrupt today via 76 Capital on our investment thesis.
Ronen Ainbinder 18:51
Would you say that eSports got more popular because of COVID? Or it wasn't a catalyst that made it more present in people's lives. What do you think about that?
Chad Stender 19:04
I think eSports going into the pandemic was amazingly popular. Almost a third of the world were gamers identified as gamers, over 200 colleges in the United States today. Before the pandemic, we're offering scholarships to be an esports athletes. They put the pandemic that is it accelerated the industry. Unfortunately, we were stuck at home. And everyone was bingeing TV, but they were also gaming, so no doubt that it accelerated the industry. But I think before the pandemic, specifically in the United States in North America, gaming had already taken off where there was almost a serious organic attempt 10 years ago. And I think in the last 234 years, there's been no turning back. And again, I can't wait for the day where we just talk about sports and gaming as part of the conversation. It's not a separate kind of traditional versus gaming. Again, it's so freeing; it's so much opportunity out there.
Ronen Ainbinder 20:04
I think it's super interesting. Because if, as you mentioned, athletes, well, musicians, entertainers, they're also athletes in their own sports. But this blends with eSports professional players joining live streams with DJs or musicians and playing fortnight or League of Legends and just being there as athletes. Still, in eSports entertaining, this new blend of entertainment games and streaming is just this. I think it's super fascinating to see it happening how new athletes are just getting more and more into gaming. And of course, they're not maybe as good as, let's say, Ninja, or it's a kid that's very professional about it. Still, it's just very, very fun to see how it blends, it's like, how in the NBA all stuff we can you had the stars playing so you had musicians, and you had famous people. So I think that, like eSports, is also opening doors for mixing, mixing, and matching between people from different industries, making up for great entertainment. So I'd say that I'm looking forward to what's going to happen in E eSports. Chad, You've been fundraising for a couple of years. You know how it happens, how it works, what do you think are the key ingredients for successful fundraising? Three or four that you can share with us here openly. Of course, this is not investment advice. But if you can keep it as unbiased as possible, we'll appreciate it.
Chad Stender 21:54
When it comes to fundraising, we're constantly dealing with it, whether it's our portfolio companies. Still, the other side of the coin, it's 76 capitals of venture funds; we fundraise as well. And I think people in the industry and not just an industry just in general, lose sight of that at times that you're not going, you're not shaking the tree, you're not going to a pot of money that sits on the sidelines, you're fundraising as venture capitalists. And to me, fundraising, whether you're a company, venture capitalist, outside of venture and private equity, it's a sales process. And what drives success to me is creating interest, urgency, and being persistent. And getting to a yes, but also being able to get to a note. And I think; unfortunately, we all live in a world where we'd rather be comfortable in the land of maybe, but it's the worst space to be in. And one of the things I love to say is you have to get comfortable with being uncomfortable. Unfortunately, you have to sometimes drive to those noes to get to the yeses. You've got to be persistent, and you've got to push, but you've got to create momentum. And that's in any fundraiser. And obviously, the more success you've had, the more prepared you are, the more you can anticipate, the more proactive there is a lot of things that you can do to make it a successful fundraiser, but creating the urgency and having a thick skin and being willing to push to get to hopefully the Yes, but don't sit in the world of maybe. And I tell this to all of our entrepreneurs, do not sit there and just hope that one of these maybes will come to fruition. You've got to push to get to an answer. Because time is our most valuable commodity, right? The importance of fundraisers to get the capital. But it's our use of time. We only have so many minutes in the day. And if you spend all your energy and kind of this 80% of the land, maybe you're wasting a lot of time and energy, and you gotta get that may be down to maybe from 80% to 50%. So then you can focus on driving to the yeses. And that to me is what we try to practice and preach and work with our companies and work with ourselves because, again, we're fundraising ourselves.
Ronen Ainbinder 24:22
Time is the most valuable commodity man. I love that this time having this conversation with you has been the most valuable commodity you have known for a long time, Chad. I've been enjoying this Halftime Snack so much that it has gone so fast. And man, we've been learning so many things about your story, VC, private equity investments, the sports industry, there's any sport that you're a big fan of if you'd get a proposal for a new startup or new technology in that sport. We would probably push you a little bit more to invest or to look at it, or do you have no preferences when it comes to sport? Like what is it that you think about when it comes to liking this specific sport?
Chad Stender 25:14
I think it's a great question. I think that's a big mistake. I think letting your bias and your passion for what you enjoy push towards an investment. So it's a little bit of a caveat here, right? If you can be incredibly valuable, add value to that investment and accelerate that company because of your background in the sport. That might make sense. But if you come out of the football world, and all you're doing is focused on finding a deal pushing to get to a deal, it might not always be the best strategy than underwriting. We underwrite all of our companies on at least a 10 times return our investment criteria, and you have to stick to what and what you do best. And so you can't force deals. Again, now if it's kind of even, to and if we have the experience in a certain sports category more so that that will lead to a better investment. I'd say on the passionate side, I'm a soccer guy, I'm an American football guy, or a football guy, excuse me out. But at the end of the day, I'm most passionate about soccer. It's what I grew up playing, and it's what I enjoy the most. But from investment criteria, I don't care if it's cricket, darts, gaming, soccer. We're gonna make the best investment possible based on our thesis and criteria.
Ronen Ainbinder 26:33
Yeah, I guess it's a real challenge, to keep your emotions, your preferences aside, when you're, being presented new and different types of technologies for different sports, try not to judge them by what you prefer what you like most, but mostly by what do you think can disrupt the industry? Right, I guess I mean, I'm not, I'm not an investor, but I guess, I guess that's, that's part of it. Would you say that there's any other challenge that you can share with us when it comes to investing in sports, that you kind of like have to be aware or have to be careful when you do investor when you don't or when you before you decide is there any other thing that you would suggest the new and up and coming talent in the industry to pay attention to
Chad Stender 27:25
I think it's like all investment categories. There's a lot of moving pieces. As an investor, you have to understand what your criteria are and what you're looking for. And because we get an early will to invest, precede will invest almost with the founding team to the kind of series A we love to build. And for that, we take big chances for the big upside. And again, we underwrite everything for at least a 10 times return. And so, you have to know what your thesis is and what you're focused on. And there's a lot of amazing entrepreneurs. There's a lot of focus startups. But in the sports space, there are also many startups that, in our opinion, do not have the big opportunity for what we're looking for. Now that doesn't mean they're not going to be successful. It just means that that is not necessarily the right fit for us. And so you've got to be careful of if you cannot properly underwrite it for what you need that you politely pass. The beauty is because we get an early we follow these entrepreneurs. We follow these companies, and a no today doesn't mean it's a no tomorrow. I can give you plenty of examples of an investment we've made that we said no initially. We've been able to follow their growth. We still get them maybe at the seed round or maybe around when we passed on kind of that initial capital raise around friends and family. So again, it's knowing who you are and knowing what you do best.
Ronen Ainbinder 28:48
I love it, man. I love it teaches us a lot about a lot of life, not only about investment. Know yourself, know what fits where you want to invest your time and money, and go for it. Man, if you like it, go for it. Why not? ? And as you said, No. and No, now it's not a no forever. So also think about things that have rejected you in the past and think that maybe in the future, you'll eventually get there. Chad, man, it has been such a fun, fun conversation. I can't leave without asking you a more personal question, man. I want to ask you, who's one person you admire? And why?
Chad Stender 29:25
However, I think the one person that I would love to sit down with is President Barack Obama. And I think historically, when we'll look back, and I'm not talking about five years from now, I'm talking about 50-100 years from now. The economic downturn that he was handed we were recession into a potential depression and just being the first African American president, right. There was so much that he had to endure that. It's going to be pretty wild. What will the history books tell? But by far, I think Barack Obama would be the person I would enjoy spending any time with.
Ronen Ainbinder 30:09
That's amazing. So Barack, if you're listening to this man, you get to sit down with Chad for dinner or in another Halftime Snack, maybe. But Chad, man, I want to thank you so much for coming to the show. It was an absolute pleasure to host you. Such an inspiring and thoughtful lesson that you've given to all of us today. I appreciate it, man. I can't wait to see what's gonna happen with you and 76 capital in the future. Sure it's going to be a pure success, man. So I'm looking forward to it. And yeah, man, thank you so much for coming to the Halftime Snack.