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FanBeat

Live-action mobile sports games

23%

Investors

30

Time to Invest

Security Offered

Convertible Note

Minimum Investment: $100

  • FanBeat is currently partnering with the Chicago Bulls and the Golf Channel, and also partnered with the Atlanta Braves from 2016-2018

  • Total unique players grew to 130,239 in 2018, a 1993% increase from 6,222 unique players in 2017

  • FanBeat has generated $250,000 in revenue, a 929% increase from revenue in 2017

  • In 2018, FanBeat had 295,496 total games played, which was a 1396% increase from 19,756 total games played in 2017

Terms

Investment Terms

Security Type: Crowd Note

Round Size: Min: $25,000 Max: $107,000

Valuation Cap: $14,000,000 

Discount Rate: 20%

Interest Rate: 6%

Conversion Provisions: In connection with equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into shares of non-voting preferred stock (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price paid per share for Preferred Stock by investors in the Qualified Equity Financing or (B) the price paid per share paid on a $14,000,000 valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions

Perks

$500: Invitation to an investor-only trivia challenge on the FanBeat platform. Prizes for top players will include an iPad Pro, gift cards, and limited-edition company merchandise.


*You are investing in Crowd Notes in this offering. Perks are meant to be a thank you from the company for investing.

Overview

Opportunity

The overwhelming majority (80%) of sports viewers say they use a smartphone or computer while watching live sports to message other fans, watch related videos, or search for player stats.i Furthermore, over 88% of U.S. adults claim to use a mobile device while watching TV at least once a month. Rather than acting as a distraction, academic research from the University of Texas has shown that second screen usage enhances engagement for sports programming due to the two mediums’ complementary nature. Advertisers and media companies have increasingly looked at different ways to synchronize mobile content with live events to help grow their audience engagement.ii  

FanBeat partners with teams, leagues, and media companies to offer a live-action gaming platform where sports fans answer predictive-play and trivia questions during breaks in the action for a chance to win prizes. The company has partnered with the Chicago Bulls, Atlanta Braves, and the Golf Channel to help them increase their fan engagement through an active viewing experience and competition. Due to increased viewer engagement, FanBeat provides its partners with a mobile asset they can use for additional sponsor opportunities and for actionable data on their fans.  


Press

Product

FanBeat is a live-action gaming platform that can be played via desktop or mobile app (iOS). Users sign up for a specific game or event (i.e. the Chicago Bulls vs. the Los Angeles Lakers game or Round 1 of the Arnold Palmer Invitational) and answer various predictive play and trivia questions regarding the sporting event they are watching. Typically, a contest poses about one to two questions per break in the live sporting action. FanBeat has a game research and production team that creates the questions in conjunction with their business partners. The app is free to download for users. 

FanBeat began its partnership with the Chicago Bulls in the 2017-18 season and is currently running a live game with the Chicago Bulls that is accessible via the Bulls team app, FanBeat’s website and FanBeat’s iOS mobile application. The game with the Bulls will run throughout the remainder of the Bulls’ season, and prizes include tickets, team gear, signed memorabilia, and suite access.  

FanBeat began its partnership with the Golf Channel with four events in the 2018 season. The company is currently running a live game in conjunction with Callaway Golf and the Golf Channel that incorporates pre-recorded video questions, in addition to the standard text-based trivia questions. This contest can be accessed through FanBeat’s website and will run for the Waste Management Phoenix Open, WGC-Mexico Championships, Arnold Palmer Invitational, and the WGC Dell Technologies Match Play events.

Users gain points for correct answers, which they can track on FanBeat’s prize leaderboard that is updated throughout the game. Users can gain additional points based on how quickly they answer a question or if they elect to use one of a limited number of available “double-downs”. Prizes are distributed to users based on the amount of points they accumulate either throughout the specific contest or during the entire season. Prizes are sourced from FanBeat’s business partners and vary for each contest. Examples of prizes include signed memorabilia, event tickets, sports equipment, and cash. Fanbeat is currently running a $1 million perfect game challenge, where if a user is able to answer all 20+ questions in a specific contest correctly, then they would win $1 million. If there are multiple winners, the grand prize will be distributed evenly among qualifying winners. The insurance and surety bonds costs for the perfect game contest are passed onto FanBeat’s partners through its activation pricing.

Use of Proceeds

FanBeat intends to use the proceeds from this raise for sales and marketing, future wages, as well as product enhancements. The company plans to use about 24% of this raise to ramp up sales and marketing to continue to close key pipeline deals and increase their user base. The company intends to use about 8% of the raise to go towards product enhancements like the development of video questions and live-action wagering contests. Finally, FanBeat intends to use approximately 68% of this raise to go towards future wages to help build out the company’s team. The company has the ability to alter the use of proceeds at its discretion.

Video Questions

In 2019, FanBeat plans to launch a new feature where questions are pre-filmed by an athlete or personality and then asked to contestants via video. Up until this point, all questions posed to FanBeat users were in a text-only format, complemented with imagery. FanBeat and Callaway Golf have partnered to develop a mix of trivia and predictive-play questions for designated events in 2019. Callaway Golf sponsored pros and brand ambassadors were recorded on camera during the Callaway-sponsored media days before the tournament starts. Users will be prompted to answer these pre-recorded questions throughout the round.

Live Action Wagering

In 2019, FanBeat plans to make available a live-action wagering version of its predictive play and trivia-based game in partnership with licensed gaming operators. Following the U.S. Supreme Court’s ruling in May of 2018 that overturned the Professional and Amateur Sports Protection Act, states are now able to license legal sportsbooks.  Instead of just competing for prizes, FanBeat users located in states that have legalized online sports betting will have the ability to join “pay-to-play” games by electing an entry fee ($10 game, $20 game, etc.) and then competing against all other players in that game pool. Game play will be very similar to recent FanBeat games with users answering a mix of predictive-play and trivia questions to earn points and move up the leaderboard. At the end of the game, cash winnings will be distributed based upon an explicit pay table which allocates specific percentages of the overall pool value to game winners.

Business Model

FanBeat currently generates revenue from its partners who sponsor the games. These customers are teams and media companies that are looking for a digital asset that increases fan engagement and that they can monetize with their sponsor community. FanBeat charges its partners a fee based on the scope of the events to be run. The fee for a season typically ranges from $50,000 to over $100,000. The company offers fixed-fee pricing on these initial customer deals based on estimated player volumes during the duration of the contract. In addition to increased fan engagement and a digital asset to monetize with sponsors, FanBeat also provides actionable and unique data to its partners. FanBeat’s current partners include teams and media companies and the company continues to target partnerships with additional teams and media companies, in addition to sports leagues and blue-chip brands.

The app is free to download for users.

User Traction

Games Played

In 2018, there were 262,097 total games played through FanBeat, a 984% increase from the 24,184 games played in 2017. This growth was driven by an increase of games played from previous partners like the Chicago Bulls and the Atlanta Braves and from a new partnership with the Golf Channel. In 2016, the company had 6,882 games played by users. In total, FanBeat has had over 295,000 games played and run over 340 live events.

Unique Players

In 2018, FanBeat had 117,438 unique players on its live-action games. This represented 1,107% growth from 2017, when the company had 9,727 unique players. In 2016, the number of unique players totaled 3,074. In total, FanBeat has had over 130,000 unique players.

Partnerships

FanBeat partners with sports teams, media companies, and leagues. In 2018, FanBeat had partnerships and created live-action games for the following entities:

Atlanta Braves

FanBeat created contests for home games for the Major League Baseball team the Atlanta Braves in 2016-2018. Georgia Lottery was the sponsor for this program.

Chicago Bulls

FanBeat developed games for all home and away games in the 2017-18 season for the Chicago Bulls, a franchise in the National Basketball Association. AT&T was the sponsor for this program. FanBeat is currently running an active game for the Chicago Bulls.

The Golf Channel

FanBeat partnered with The Golf Channel and NBC Universal to develop games for four PGA Tour Events in 2018 (World Golf Championships – Mexico, The Valspar Championship, The Arnold Palmer Invitational, World Golf Championships – Match Play). Callaway Golf was the sponsor for this program. FanBeat is currently running an active game for the Golf Channel.

Historical Financials

FanBeat began developing its live-action gaming platform in the fall of 2014. In 2015, the company ran pilot events at a variety of sporting events and in 2016 began generating revenue through its business partnerships.

In 2018, FanBeat generated $250,000 in revenue, a 929% increase from total revenue in 2017. In 2017, the company generated $24,300 in revenue compared to $106,000 in 2016. In 2015 and 2014, FanBeat generated virtually no revenue as the company was building the product and focusing on market fit through a series of pilot events.

In 2018, FanBeat incurred $708,615 in total expenses. Sales and marketing expenses were the largest expense in 2018, accounting for about 35% of total expenses. In 2017, the company incurred $765,904 in total expenses for the year, a slight decrease from the expense total of $784,256 in 2016. In 2015, FanBeat had $497,476 in total expenses compared to $75,622 in 2014.

In 2018, FanBeat generated a net loss of $495,865, and in 2017, FanBeat generated a net loss of $743,891. In 2016, the company generated a net loss of $678,867 compared to a net loss of $501,679 in 2015. FanBeat had a net loss of $72,622 in 2014.

Industry

Industry and Market Analysis

In 2018, Newzoo projected that approximately 2.3 billion gamers across the world will spend $137.9 billion on games during the year, a 13.3% increase from 2017. Digital game revenues represent about 91% of the global market. Mobile gaming is the largest gaming segment, with sales forecasted to reach $70.3 billion in 2018, up 25.5% year-over-year. 2018 was the first year that the mobile segment accounted for more than half of all game sales. Smartphones were projected to account for about 80% of mobile gaming revenues in 2018, with the remaining 20% coming from tablets. Mobile games are forecast to grow to a $106.4 billion industry in 2021, accounting for 59% of sales of the entire gaming market.iv

About 185.8 million adults in the U.S. are estimated to regularly use the internet on a second screen device while watching TV this year, an 4.5% increase from 2017. eMarketer forecasts 193.5 adults will be second screening (using a desktop/laptop or mobile device to go online while watching digital video or traditional TV content) in 2019, a 4.1% increase from 2018. Millennials (~68%) were the most likely to be using a smartphone as a second screen, followed by Generation Xers (~52%).v

In May 2018, the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act that prevented states from drafting their own regulations for sports betting. This ruling allowed legal sportsbooks to begin operating throughout the U.S. Previously, it had only been allowed in grandfathered-in states like Nevada, Oregon, Delaware, and Montana.vi  As of November 2018, New Jersey, Mississippi, West Virginia, New Mexico, Pennsylvania, and Rhode Island joined the aforementioned grandfathered states and passed regulation that legalized some form of sports betting.vii The global sports betting market was valued at approximately $104 billion in 2017 and is forecasted to grow at a compound annual growth rate (CAGR) of 8.83% from 2018 to 2024 to reach approximately $155 billion in 2024.viii

Competitors

DraftKings

DraftKings is a Boston-based online fantasy sports contest app where users can win cash prizes. DraftKings users are able to compete in daily or weekly online sports contests across ten professional sports in the U.S., Canada, the U.K., Malta, Germany, Ireland, and Austria. Customers assemble a team after drafting athletes based on athletes’ salary valuations and historical performance data. Users then submit their team before the games begin and the athletes earn points based on their in-game performance.ix DraftKings earns revenue by charging users an entry fee to participate in its cash-prize contests.x  For New Jersey residents, DraftKings runs a legal sportsbook for customers to place bets on the outcome of games. The company is currently working with other states that have authorized sports betting to obtain operating licenses.xi The company has over 20,000 public contests per day and has paid out $6.2 billion across all sports.xii As of September 2018, DraftKings, had raised about $900 million and was seeking an additional $200 million in funding.xiii

FanDuel

Founded in 2009, FanDuel offers online fantasy sports contests. Users create an account and can compete in tournaments, head-to-head contests, and skill-based challenges, among other types of games for a chance to win a cash prize. FanDuel charges users an entry fee to participate in its cash-prize contests and takes a cut (usually around 10%) of the entry fees.xiv  FanDuel also offers legal online wagering for New Jersey residents.xv  In May 2018, FanDuel and Paddy Power Betfair, a London-based sports betting and gaming group, announced that they were merging their U.S. businesses.xvi

WinView Games

Founded in 2008, WinView Games is a live sports prediction app, where users can predict the next plays in a game. Users can enter cash contests or play free games for fun. When entered in a contest, a user will be prompted to answer prop bet question before and during each live game. WinView offers contests in NBA, MLB, NHL, or NFL games.xvii The company’s paid contests have entry fees ranging from $2 to $100 and are legal to play in 36 U.S. states. The free-entry contests are legal to play in all 50 states and offer smaller prize pools.xviii WinView Games raised a $12 million Series B round in May 2017, bringing its total funding to about $20 million.xix

Boom Fantasy

Boom Fantasy, a New York-based company, is an online simplified daily fantasy sport company. Users can enter cash prize contests in major sports like the NFL and NBA and also in sports like sumo wrestling.xx A player pays cash to enter contests and then answers a series of predictive sports questions, with each answer assigned a point value.xxi In June 2018, Boom Fantasy raised $4.5 million in funding, bringing its total funding to about $8 million. At that time, Boom Fantasy was live in 35 U.S. states.xxii

Team

Brandon Farley

Chief Revenue Officer

Brandon joined FanBeat in 2015 after previously serving as the managing director for sales and marketing at Apparity, an enterprise software company. He has over 10 years of director-level experience in sales and marketing for various companies. Brandon graduated from Stanford University in 1994 with degrees in English and Communications, where he was also a member of the Varsity soccer and golf teams.

Ed Trimble

Chief Executive Officer

Ed founded FanBeat in 2014 after serving as the president of a business-to-business cloud app integration company. Prior to that, Ed was the senior vice president of Global Marketing and Ecommerce at PGI, a publicly traded virtual communication company. He was also the co-founder and CEO of EzGov, a software and services company for federal, state, local, and foreign governments. He has also been recognized as an Ernst and Young Southeast Entrepreneur of the Year.xxiii  Ed began his career at Accenture after graduating from Duke University in 1990 with a BSE in Mechanical Engineering and has received Duke’s Distinguished Young Alumnus award.xxiv

Mike Richards

Chief Technology Officer

Mike joined FanBeat in 2014 as the Chief Technology Officer and technical co-founder. Previously, he worked at AT&T Digital Life where he was a senior developer. He also has experience as a software developer for Macy’s, Engauge Digital, Collinson Media and Events, and Enterprise Rent-A-Car. Mike began his career developing technology solutions for small businesses after graduating from Elon University in 2005 with a BS in Computer Science and Computer Information Systems.

Discussion

Endnotes

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