e’ve been saying this for a while at SportsTechX: 2021 was a mega year with over US$12 billion invested in sports tech startups globally，sports fitness .
For context, that figure was more than the previous three years combined. That strong momentum has carried into 2022; up until May, we’ve seen investments cross US$4.9 billion, which is already greater than any year since 2016 – apart from 2021, of course.
So what is driving all this growth? Here’s a closer look at the top three investment trends in sports tech.
NFTs and Web 3.0 in sports More than US$2.3 billion was invested globally in NFT and digital collectibles-related startups in 2021, with a further US$940 million invested up until May 2022. This compares to less than US$30m in 2020.
It really seems like a multi-billion dollar industry appeared almost overnight when NBA Top Shot burst onto the scene in January 2021. Since then, we have seen a flurry of activity of various types. An especially significant one was the Premier League’s recent announcement of Consensys as their official NFT partner in a whopping US$589 million deal over four years, which equates to around US$147 million annually. For context, Dapper Labs pays the National Basketball Association (NBA) and the National Football League (NFL) roughly US$20 million per year each.
In June 2022, the sentiment certainly isn’t as bullish. Outside of the sports world, A-list NFT collections of Apes and Punks have dropped in value significantly in the face of a bear market. Incoherent goblins are now taking centre stage, making it even harder to make sense of it all. Nihilistic projects like these seem to scoff at the ‘utility, utility, utility’ mantra that was the oft-repeated key to success. But those with a more long-term view, one that is not driven by the speculative nature of the market, will know that there is potential yet to be unlocked.
NFTs may well have been the first use case in understanding the possibilities of what Web 3.0 technology creates in sports. Smart contracts, decentralised applications (dApps) and oft-touted virtual worlds and metaverses create a world of opportunities, literally and figuratively. We’ve seen some successful use cases already. The Australian Open found a unique way to have fans own a part of the court. You can already buy land in a sports metaverse. And make money while you get steps.
So plenty of applications are already visible and there are more: fantasy sports, move-to-earn, play-to-earn, creating tiered membership groups amongst fans to unlock rewards and so on. Only time will tell which attempts will lead to the best results but for now, there is certainly plenty of room to play. In the meantime, Nifty Sports is a good place to filter through all the noise.
Connected fitness In December 2020 Peloton stock peaked at US$171 per share and market cap at US$50 billion. In June 2022, at the time of writing, it had dipped below US$10 per share with a market cap of US$3.3 billion. Ouch.
Arguably, that’s not the company’s biggest problem. Major staff layoffs, changes in top management, lawsuits, production issues and slowing demand have culminated in talks of a cut-price sale to the likes of Amazon, Apple or some other deep-pocketed giant lower in the alphabet.
So why are they interested in Peloton? Apart from the draw of a cut-price acquisition, there are still positives in the company. A solid core product, strong NPS scores, and healthy, even if declining, demand. But most importantly, the overall sentiment for the connected fitness market is extremely healthy.
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Tech Investment Week The virtual fitness market has been estimated as rising to US$79 billion by 2026, up from US$11.4 billion in 2021. Investment in fitness tech startups – covering both hardware and software – crossed US$2.6 billion in 2021 and is at US$740 million in 2022. As consumer driven markets like China and India take the topic of fitness increasingly seriously, this rapid growth is unlikely to slow down anytime soon.
The ‘Peloton for X’ sub-industry still seems to be strong as investors back similar models in other areas, from rowing to boxing to stair climbers. And the models continue to evolve. Artificial intelligence-based (AI) training combined with nutritional planning, all personalised to the user, have become the norm. It has also become clear that people don’t want to work out exclusively at home; the social layer of fitness cannot be purely digital.
As gyms reopen doors to eager fitness enthusiasts, the future is likely some sort of hybrid. It will be up to these new solution providers to learn from Peloton’s mistakes and not break too much of a sweat.
