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E-sports: a market worth billions and hardly any large start-ups

The e-sports scene is growing and growing. This also calls founders onto the scene. They have an advantage over large companies: they are more likely to understand what is important in the young market.

Luca Jebautzke preferred to think bigger. When he went to the Hochschule der Medien (HDM) in Stuttgart in 2017, he met a small e-sports initiative at his university of applied sciences. Jebautzke himself would like to set up a team to play the computer game Overwatch, a science-fiction-style first-person shooter known primarily for its speed. With difficulty, he gets nine players together.

Just two semesters later, the initiative has 140 takers. He leaves the HDM and founds an independent association with Engines Stuttgart. It now has over 250 members. Jebautzke's next big goal: to raise money for his own clubhouse and to make e-sports better known in the region.

Luca Jebautzke, Engines Stuttgart

We still have to fight for recognition, especially in Baden-Württemberg. And without recognition, for example as a real sport, it is also more difficult to get money. Without sponsors, nothing works in e-sports at the moment, this is true for the really big events and clubs, but also for us.

The rapid rise of Engines Stuttgart shows: E-Sports is booming. More and more clubs are being founded, many at universities, but also professionally run ones. And some traditional sports clubs are also getting involved in the business: Schalke 04, for example, has e-sports players under contract, while Alemannia Aachen and Eintracht Frankfurt are also involved.

Time and again it is said that e-sports has the potential to become a billion-dollar market. Prize money and the number of spectators are increasing year by year - also in Germany. The auditing and consulting firm PricewaterhouseCoopers (PwC) even sees e-sports as the key to Generation Z and thus the young people who are already customers and will soon become employees of large companies. According to the PwC study "Digital Trend Outlook 2020: Esports", the industry's revenue growth is consistently high. "Whether it's live streams or sold-out live events in post-Covid 19 stadiums, advertisers are reaching a growing audience with esports. The prospects for the industry, and for games companies in particular, are therefore extremely promising," Werner Ballhaus, global head of entertainment & media at PwC, opined this summer.

This all sounds like a good market for start-ups. A market that is thirsty for technical innovations and in which there are hardly any players worth mentioning apart from the big game developers and publishers - and in which other big companies are having trouble catching on. Sportradar, for example, is one of them. The company has a global presence and offers data from the world of sports as a service provider for the media and betting companies. For a while, the company also tried its hand at e-sports. Because that didn't work out, it formed a joint venture with Berlin-based startup Dojo Madness. The resulting startup, Bayes Esports, led by CEO Martin Dachselt, is now looking to fix things.

"E-sports is changing much faster than other sports, so an established service provider can hardly keep up," says Dachselt. For him and his team, it is therefore also important to find out which of the games could be interesting for betting providers at all - and which ones are not worth the effort. "There are also games that are very popular but simply not suitable for e-sports," says Dachselt.

2018 World Championship, Leauge of Legends, final at Incheon Munhak Stadium in Incheon, South Korea. Photo by Bayes Esports
Data analysis by Bayes Esports: photo by Bayes Esports.

Bayes Esports is one of the startups that has already managed to establish itself to some extent. The company is projecting revenues of €10 million this year, according to CEO Dachselt. Compared to 2019, this would mean it would have grown by almost 300 percent. They also expect high growth in 2021. "I moved here from Delivery Hero and was surprised myself at how big the market already is," Dachselt says. Big investors have also already brought them on board, with Sony Investment Funds joining in, for example. "Actually, I have inquiries from investors on the table every week," says Dachselt. At the moment, he says, the market is in a phase where more and more money is flowing in. "However, I think we're going to see some initial consolidation soon."

Many other start-ups are still in the middle of the experimental phase. Shikenso in Frankfurt, for example, is one of them. The founders Tarik Amhamdi, Arwin Fallah, Armin Herrenschneider, Wahed Hemati and Tolga Uslu had developed a tool in 2017 that allows users to filter streams on the platform Twitch. "However, we have since completely moved away from this B2C business," says Product Marketing Manager Karsten Schonauer.

Shikenso is now targeting sponsors of e-sports events, teams, and marketing agencies, which brings in significantly more money. With the help of an AI, the start-up analyses how successful certain advertising measures are on streams, for example. Companies thus get a better sense of what their marketing actually brings. "We want to do our part to professionalize e-sports," is how Schonauer puts it.

At the beginning of the year, Shikenso's team consisted of the five founders and a few part-timers. Since December they have their first real office. In January, Shikenso will expand to ten employees including partners, says Schonauer. Shikenso has so far been able to do without outside funding. "We are very proud of the fact that we have been able to finance everything completely from our own resources," says Schonauer.


Alemannia Aachen Bayes Esports E-Sport Eintracht Frankfurt PwC Schalke 04 Shikenso
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