The $4.3 Billion Company That Combines Fantasy Sports & NFTs

The newsletter is presented by…

My friends at Underdog Fantasy have a contest on their app RIGHT NOW that NO ONE else is doing. It's called The Dance, and it's open from now until April 16th, right before the NBA Playoffs start.

With $200,000 in total prizes and $30,000 awarded to first place, now is the time to draft your perfect team for the NBA Playoffs. Pick players from teams YOU think will make the Conference Finals and NBA Finals, and you'll have a shot at winning big money by the time the playoffs wrap up.

Just go to underdogfantasy.com or download their app in the App Store, sign up with the promo code HUDDLEUP, and Underdog will DOUBLE your first deposit up to $100. The Dance is only $10 to enter, so download the app, try it out, and take your shot at $30K in THE DANCE on Underdog Fantasy today.

Hey Friends,

Sorare is one of the most fascinating companies in sports today.

The blockchain-based startup was founded in 2018 by Nicolas Julia (CEO) and Adrien Montfort (CTO). The game’s concept can be confusing at first, but the TLDR version is that the platform enables users to buy, sell, trade, and manage a virtual soccer team using digital player cards — it combines NFTs with fantasy sports.

Users are given a set of digital trading cards when they sign up (representing players & teams that they have IP deals with), and then the user enters those cards into a fantasy-style competition. The winners of each competition (best managers) receive Ethereum and/or more trading cards.

It’s very similar to fantasy football here in the United States. There is a skill required to set the right lineup and maximize points, but rather than just picking from all available players, there is an underlying economy where you own the actual cards and can earn money by trading them on the secondary market.

Sorare has found product-market fit throughout Europe, and the business has exploded in popularity and value. The France-based company has over 1.5 million registered users today. They did more than $300 million in GMV last year with just 20 employees and expect to cross $1 billion in GMV this year.

And, of course, that success attracted the world’s best investors.

Sorare has raised over $700 million across four venture capital financing rounds (Pre-seed, Seed, Series A, and Series B) and was valued at $4.3 billion in September 2021.

SoftBank led the $680 million Series B last year, and Sorare’s cap table includes investment giants like Accel, Benchmark, Headline, IVP, Atomico, Bessemer, Eurazeo, Liontree, D1 Capital partners, and an impressive list of angel investors like Gary Vaynerchuk and Alexis Ohanian.

Even French President Emmanuel Macron congratulated Sorare on LinkedIn for becoming one of the fastest-growing startups in European history.

Now I don’t think it’s genuine to act like everything has been perfect.

The company has grown tremendously over the last several years, and that has brought along criticism. Many people complain that big accounts pool their resources together to increase their chances of winning, while others will say this is an investment product and should be regulated appropriately.

Still, it’s important to remember that this is an entirely new concept. I’ve used the product, and I genuinely believe the Sorare team is trying its best to build the next great global sports entertainment offering. And since I’m an optimist by nature, I’d rather focus on why it’s gained traction instead of what could go wrong.

Here are a few reasons I think Sorare has been successful:

1. They figured out a way to combine digital collectibles with traditional fantasy sports. These categories are multi-billion-dollar industries in their own right, but no one has figured out an attractive way to combine them.

2. Each component is strong on its own. The digital collectibles are unique and have a robust primary & secondary market — several cards have sold for hundreds of thousands of dollars. But the fantasy play is also an innovative product with a good design that would probably succeed on its own.

3. You don’t have to be crypto-native to play. I think this is a huge component. Many people are super confused by crypto onboarding (deposits, wallets, etc.), and that’s been a significant issue for scaling NFTs. But Sorare has partnered with a company that allows you to use your credit card for payment, and most users probably don’t even know they are using crypto.

4. They purchased premium IP. Sorare could have made players up and created their own game, but instead, they went out and signed ~250 of the world’s best players & clubs to digital IP deals. These cost a lot of money (they’ve raised over $700M!), but it’s a critical element of the vision. Not to mention the contracts include clauses that require the clubs/players to help promote the platform.

5. The unit economics scale. Most platforms that attempt to create an underlying economy with play-to-earn tokenomics fail once the user base starts to grow meaningfully — the incentives fall out of whack, and things falter. But Sorare continues to do an excellent job of iterating on its original design and implementing unique rewards that incentive all players (big & small) to continue investing in the product.

Ultimately, the “play-to-earn” or “play & earn” space is still in its infancy.

Most people first heard about it when Axie Infinity popped up on the scene last year. But the overwhelming majority of gamers are still in “play-for-entertainment” mode, and it will probably take a few years for that to change — the games have to be better, and people need to get educated on the differences.

Still, I think Sorare is just getting started. They have retention metrics that are just as good as Netflix, and with NFTs and sports gambling growing at a rapid pace here in the United States, my guess is that more Americans will know about them shortly.

They just announced an official partnership with Major League Soccer yesterday, opened a New York headquarters late last year, and now have hundreds of millions of dollars on their balance sheet to really go for it.

I was fortunate to have Sorare co-founder & CEO Nicolas Julia on the podcast this week, and it was a fantastic conversation. He walked me through exactly how the company got to a $4.3 billion valuation in just three years, the future of blockchain gaming, the next steps in building a global sports entertainment company, and some excellent advice that he wished he had known when he first founded the company in 2018.

I’m obviously biased, but I think it’s a worthwhile listen whether or not you have any interest in joining the platform. Nicolas spotted a trend before everyone else, took a risk, and turned an asymmetric, concentrated bet into one of the world’s fastest-growing companies. I think there is a lot to learn from his story.

I hope everyone has a great day. I’ll talk to you tomorrow.

Your feedback helps me improve Huddle Up. How did you like today’s post?

Loved | Great | Good | Meh | Bad

Huddle Up is a daily letter that breaks down the business and money behind sports.

Join more than 55,000 professional athletes, business executives, and casual sports fans that receive it directly in their inbox each morning — it’s free.

YouTube: I have also released two mini-clips from the podcast episode on YouTube.