Last October, 40,000 screaming fans thronged the World Cup stadium in Seoul to watch two teams battle for the title of world champion and $1 million in prize money.
E-sports have arrived as a money maker for players — whose earnings can top $1 million — and brands — that are tapping into an audience of over 134 million viewers that could generate $612 million in revenue.
Now these teams are getting fantasy leagues of their own, with companies like Vulcun and the newly financed AlphaDraft, competing for a piece of this growing gaming market.
AlphaDraft’s $5 million financing is a fraction of the $12 million that competitor Vulcun raised a little over one month ago, but Los Angeles-based AlphaDraft’s chief executive, Todd Peterson, sees a market where the pie is big enough for several potential winners to share.
Certainly big players in the Los Angeles talent scene are lining up behind the two entrants. In addition to the slew of venture capitalists led by Metamorphic Ventures, AlphaDraft also took in cash from William Morris Endeavor Entertainment, while Vulcun raised from Creative Artists Agency.
AlphaDraft also brought on board strategic backers in Melo7 Tech Partners (the investment shop founded by Knicks superstar Carmelo Anthony) and former NBA Commissioner David Stern.
Peterson began his career selling enterprise software, before working for a San Diego, software as a service logistics company called FleetLogic. He came to the fantasy e-sports business through an interest in more traditional fantasy leagues, but saw the market was too crowded with large entrants like DraftKings and FanDuel.
Online fantasy sports have actually been a growth business for investors with investments in all fantasy league sponsors topping $263 million so far this year, according to data from CrunchBase. That figure is well up from the $121 million fantasy sports companies raised throughout 2014.
Indeed, AlphaDraft was able to attract some fairly big names in the venture business. Investors backing the company alongside Metamorphic included Upfront Ventures, IDG Ventures, Amplify.LA, KEC Ventures, Freestyle Capital, SK Ventures, Basset Investment Group,and Gokul Rajaram.
AlphaDraft says it will pay out at least $5 million in cash and prizes this year, and is targeting 1 million active users by the end of the year. Part of the financing will go toward boosting its prizes, as well as advertising and marketing. The company is hoping to reach out to game publishers to help sponsor its leagues, and is looking to grow beyond League of Legends to include fantasy draft competitions around Counter-Strike: Global Offensive, Dota 1, SMITE, and another undisclosed game.
According to data provided by AlphaDraft e-sports will generate over $500 million in revenue by 2017, while the overall fantasy sports market is worth some $3.6 billion annually. No wonder so many investors have poured so much cash into the market.