MAY 26, 2017 @ 10:25 AM 4,421
Sports Tech Company Acquired After Raising $24 Million
Darren Heitner , CONTRIBUTOR
I cover the intersection of sports and money.
Opinions expressed by Forbes Contributors are their own.
Krossover founder Vasu Kulkarni says his company's exit is a pretty good sign for the sports tech world. (Photo by Grant Lamos IV/Getty Images for AWXII)
Sports video analysis and statistics company Krossover has been acquired by Dallas-based Blue Star Sports, a company linked to Dallas Cowboys owner Jerry Jones and focused on building sports management software. The acquisition comes after Krossover, an eight year old company, has raised over $24 million through a variety of rounds of funding.
Krossover founder Vasu Kulkarni thinks that the deal is especially notable because there are very few true sports technology exits.
"It's one of the reasons why, in general, venture capitalists are a little worried about investing in the space," explains Kulkarni. "Not that this is an Instagram exit, but it is special for a company in New York that raised decent money to have a decent exit and be one of the true sports tech companies to exit outside of a media entity like Bleacher Report. It's a pretty good sign for the sports tech world and generally a good sign considering how much money has been spent in this space in the past few years."
Kulkarni remembers that when he first went out to raise money he could not get a dime, especially from U.S.-based investors. Now, he laughs about the fact that he could not get anyone in America to take sports analytics seriously. That was 2009.
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"There were never institutional guys willing to get behind us," recalls Kulkarni. "It was always team owners or people related to game of basketball or football who understood it."
But those individuals who understood Kulkarni's concept to provide a web-based video indexing platform are pretty prominent in the world of sports. They include Cleveland Cavaliers owner Dan Gilbert, former NBA player David Robinson and Miami Dolphins owner Stephen Ross, all of whom in Krossover's Series B round of funding.
And then came Blue Star Sports at a very important time.
"If Blue Star hadn't come around eighteen months ago, with Rob [Wechsler] who is a rock star and has sold multiple companies in the past, I don't think a big private equity group would back someone with $100 million from day one to go on an acquisition spree," says Kulkarni. "Who else has enough capital to make this type of purchase in this space?"
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Blue Star Sports was a fit for Krossover when Kulkarni did not see many others around.
"I think that people don't think you can get a return here," says Kulkarni about the sports tech space. "They're not entirely wrong. It is certainly a difficult space to make money."
Fortunately for Kulkarni and his team, who will be sticking around at Krossover, they never had to worry about replacing Blue Star Sports, which reached out to Kulkarni roughly eighteen months ago, right when Blue Star Sports was getting started.
"They're a private equity group and we were kind of like, 'we're not a private equity back-able company at this point, or one that people will buy . . . we are still in startup mode and still not profitable,'" explains Kulkarni. "But they came back to us earlier this year after they raised more money from Genstar [Capital] and said they think we would really be able to help drive revenue for all these other businesses, because video is driving so much revenue in sports."
In exchange for the sale, Kulkarni and his team will receive a mix of cash and stock. He says that the amount of overlap between Krossover and Blue Star Sports' companies is "crazy" and if everything goes according to plan, then it will be a very good exit for investors and founders, but that there exist a lot of variable components.
"If things don't go as well, then it will be an okay exit and we will all make out alright," adds Kulkarni.
Darren Heitner the Founder of South Florida-based HEITNER LEGAL, P.L.L.C. and Sports Agent Blog. He authored the book, How to Play the Game: What Every Sports Attorney Needs to Know.
