In recent weeks, the current global pandemic (COVID-19) has dominated esports business news as tournaments and leagues have been canceled, postponed, or transitioned into an online format; esports organizations had to cut costs to counteract the loss of revenue streams, sports and entertainment personalities turned to competitive gaming to engage their communities to name a few examples.
For one of the most prominent U.S. esports organizations, FaZe Clan, the combination of COVID-19 and a couple of lawsuits, such as Turner “Tfue” Tenney suing the team in August 2019, created a unique situation as they announced a $40M USD Series A investment last week, which was initiated in late 2018 and closed in December 2019. The financing round was led by entrepreneur and record executive Jimmy Iovine and the team at NTWRK, an e-commerce and culture platform.
Following the announcement of its $40M Series A investment, which will support expansion, player acquisitions, and operations, the organization’s CEO Lee Trink talked to The Esports Observer about the details of the investment yesterday.
Trink, who has his roots in music including a stint as the former president of EMI’s Capitol Music Group, explained that the investment “was raised sorts of friends and family-style.”
Further investors, which participated in FaZe Clan’s Series A financing round, included NBA players Meyers Leonard (Miami Heat), Josh Hart (New Orleans Pelicans), and Jamal Murray (Denver Nuggets); musicians Kiari “Offset” Cephus (who was previously announced as an investor), Armando “Pitbull” Pérez, Khalif ”Swae Lee” Brown, Mario “Yo Gotti” Mims, Paul “DJ Paul” Beauregard, and William Ray “Ray J” Norwood Jr.; actor Chris O’Donnell; Chair and CEO of Epic Records Sylvia Rhone; entrepreneur and music industry veteran Troy Carter; radio host Kurt “Big Boy” Alexander; talent manager and Maverick founder Guy Oseary; the American production duo Disco Fries (Nick Ditri and Danny Boselovic); as well as former Dutch soccer player Gregory van der Wiel.
While the FaZe Clan brand has been around for 10 years, the esports ecosystem and the business models sprouting within it, are still nascent. Trink said that in this ecosystem, “it’s much harder to have the vision to see what the business will become. People of cultural relevance, who really understand how culture moves (culture moves first and the business fills in behind it) are the people that FaZe Clan resonated with, people that live in that space, that can translate what a cultural wave really means. That is why you have those people as our investors.”
One of the investors, former Dutch professional soccer player Gregory van der Wiel, told The Esports Observer that “FaZe is in hyper-growth mode and that will definitely result in financial returns. But besides that, we closed a partnership that goes beyond just the financial investment. We are already talking about collaborating on future projects.”
Moreover, van der Wiel provided an insight into the involvement of the investor group in FaZe’s content strategy by his example. “FaZe is getting more and more involved in soccer culture. They had a great start with their Manchester City partnership. We are now looking at ways to expand that success and bring FaZe to even more people in Europe and worldwide.“
Furthermore, Trink mentioned that “we launched a team with a PUBG MOBILE organization in Thailand and created some infrastructure in Thailand with the idea of further expansion in SEA. China is a big priority for us, as well.”
In our conversation, Trink shed some light on the timeline of FaZe Clan’s Series A investment. “We started raising in late 2018 and we actually closed this round in December 2019. We were planning on announcing in January and when COVID-19 happened that got delayed.” Additionally, “we had some lawsuits, which was a difficult situation to raise money under as potential traditional investors will use that to push down your valuation and talk about risk. While that wouldn’t be unreasonable, it isn’t really looking at the full picture of FaZe.”
Following the Series A investment, FaZe Clan obtained a $22.7M convertible loan earlier this year, which “was done by a company called Bridging Finance and by David Sharpe, who is granted a board seat as a part of that transaction,” Trink added before revealing that FaZe Clan is already working on the next financing round. “We’re in the middle of a very small Series B. We didn’t go out in the marketplace with it. It’s an aggressively priced round to get a little more working capital from targeted strategic partners in our sphere.”
As part of the financing round, lead investor NTWRK entered into an exclusive creative partnership for apparel distribution rights and production. Trink said that the two companies had been working together previously, which “was not a long-term relationship, but we turned it into long-term licensing in conjunction with them.”
In response to the current global pandemic, FaZe Clan initiated its Fight2Fund initiative, a weekly online pro-am tournament that raised roughly $125K in four weeks for those affected by COVID-19, as “we tried to increase our output during this time because our fans are stuck at home and we want to entertain them,” said Trink. “Fight2Fund demonstrated how lightning quick FaZe Clan can maneuver.”
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