Duncan Davidson (Bullpen Capital): In Silicon Valley failure is a feature, not a bug.
04 Feb, 2022
Chad Stender is the Managing Director at SeventySix Capital. He is known as an entrepreneur, venture capitalist and connector. He oversees business operations, investments, finance and administration at SeventySix Capital. Chad also runs their internship program, which has over 100 alumni to-date. As a Partner, he handles investor relations, fundraising and company investments.
I’m the Managing Director at SeventySix Capital. We are Venture Capital Fund focused on sports and based in Philadelphia. As for me, I’ve always been a big sports fan. I excel at soccer but played every sport growing up and have always been a fan of all sports. After the college I was seeking a career in sports and entertainment. After graduation I went down to Orlando and got an internship with The Walt Disney Corporation. Following that I went back to grad school in Pennsylvania. Following grad school, I landed an internship with the Philadelphia 76ers, and then was hired by the Philadelphia Flyers, and that was my first real opportunity in the sports space and it was an amazing opportunity for me. I met incredible people who helped propel my career and start my journey. After working in professional sports, I wanted to explore the entrepreneurship and innovation space. Ironically it brought me back to the sports world when I became second in command in a startup, focused on sports. Throughout that time I used my network, my relationships, my contacts, and ultimately it brought me to SeventySix Capital, it was in August 2012. I met my business partner and the founder of SeventySix Capital years prior via the Flyers and Sixers and have been working together for the past 7.5 years.
As I said, we invest only in the Sports Technology space, with a focus on esports, Sports Betting and the Digitalization of the Sports- how tech is disrupting traditional sports. In the craziness of the world in this exact moment, obviously Healthcare and personal health are the most important things. This time also shows how powerful sports are. Everybody is missing the involvement, the community, the viewing and all of the engagement that sports provide – this is what SeventySix Capital is focused on.
We are focused on the early stage and like to be the first institutional money in the companies we invest. We write checks between $250k and 2m and try to take 5% to 20% of the company.
For us it is really about our involvement and how much value we can add to a company. We are looking for a big enough idea that is able to disrupt an industry, will it be a game-changer, pun intended, this is our first criteria. Also, we try to find how much value we will add at SeventySix Capital. We are not check-writers, we are value-add investors. And, as always in startups, you’re betting on a team, you’re betting on the founders to execute.
Where do we get our deals from? We call it “bottom up and top down.” We’re looking everywhere and to everyone, we’re really using our network, we are big believers in branding, marketing and telling our message. Our founder started this business 21 years ago, so we have a vast network, and a great track record for investing. There are not many investors focused on the Sports space today, so we are at the very edge.
We are seeing 100-150 deals a month.It is a great time to be in this space. Honestly, there are too many opportunities and not enough investors at the moment.
I think, it is a misconception. We invest in cutting edge technology: machine learning, AR, VR, AI – the technology is simply focused on sports. For us, a company needs to be focused on sports as a predominant way of monetization. I think other investors haven’t looked at Sports as an actual investment category yet. What others aren’t thinking about at the moment is that Sports is a forever vertical. Healthcare is obviously critical right now and is a forever vertical. Similar to Finance, Tech and Software, we see Sports at SeventySix Capital as one of these forever verticals for investing. People have always competed and been entertained by it – back to the Colosseum days. But we don’t see many other professional investors focused on sports at the moment. We see Sports as a trillion dollar opportunity and a wide-open space, that is why we have been solely focused on it since 2016. As any other fund being around for 21 years, we invested wherever we saw an opportunity. Our first two funds, were early-stage – consumer facing – technology enabled companies like: Seamless (Web), Indiegogo, Dwolla, Whistle Sports, StartUp Health and ReverbNation. We were the only institutional investors in Seamless, which merged with Grubhub and is now public. In 2016, before we started raising our next fund, we made a decision to focus only on sports because we saw the opportunities and value we would be getting in all those companies. You can get a better value than in traditional early stage technology startups- we get warrants and board seats and are heavily involved due to our networkand connections in the industry. There is too much opportunity and not enough capital right now in Sports
Almost all our deal flow is from warm referrals and our network is predominantly in the US, so 98% of our investments have been in the US. We have made investments in Israel, because it is a strong part of our network. Our investments are relationship driven, because you need to be comfortable with the people and how we can add value. We don’t want just to write a check.
We are investing in people and we get excited about teams and have to figure out quickly will they be able to be winners in their space. Also, we underwrite every opportunity for at least a 10x return. If we don’t see a path to a 10x return, it is not the right opportunity for us. We are high risk high return investors, like all early stage investors. We want to make sure we will add value to the investment from our side and that is critical for us.
We have invested in teams anywhere from 1 to 3 people. We are the first professional money in, so if a founder put their own money in or attracted family and friends’ money and we see an opportunity for us, we are game!
It’s a good question, but I don’t think they would have succeeded without each other, they were a team. So, my answer is you need to invest in people who are able to operate and execute. I don’t believe in the power of one. We celebrate leaders of the great companies, but those companies grew fast and quickly became companies of hundreds and thousands people. And while founders get a lot of the credit, we believe teams and leaders are able to bring the right people around them.
Fortunately for us there are not a lot of other investors in the Sports space, so we are among the leaders. We are inundated with calls, emails and warm referrals. Also, we do a good job in being active- judging pitch competitions and speaking at industry focused events. We also host our own conferences and events. We had one just before the Corona outbreak in the US, in Atlantic City. We hosted two of the biggest Sports conferences the past few years –in June and one in November last year. We have a strong team that have been in the space for a long time.
We can move quickly, within 4 to 6 weeks. Usually it takes 2 to 3 months. We have a process and use technology to help us move to the final decision, and have dedicated people on our team. We have been doing this for 21 years, so we are very effective at it.
At our initial investment we take 5% to 20% of the company. We want to be the first institutional money and need to see the opportunity to get at least 10x on our investment. At the same time we need to be sure that the founders still have most of the stake and are able to move along and build a very big company. That is why at the moment we invest, we jump to their side of the table, we open our Rolodex for them, we do whatever possible to help them grow. It is not Us vs. Them, we’re doing it together.
There is a lot of them. If we don’t see a path to10x, we don’t invest. If we don’t like the people and are not comfortable with them, we don’t invest. If we see any type of poor communication, dishonesty… We call references, we check backgrounds, and if anything doesn’t smell right for us, we don’t invest. At the early stage, we’ll pass on about 98% of the deals.
Yes, of course. At the early stage it happens quite often, because companies may figure out what they need on the tech side or what improvements they can make in the business model. So, you will be wrong, you just need to be right at least ⅓ of the time. If everybody was always right about the investments, it would be a very easy space to be in. But early stage VC is a very hard space to be in.
Everything we are doing now in sports betting, which has been legal in the US for just 21 months outside of Nevada. If you walk around the US asking people about Sports Betting, you will get a lot of wrong or confusing answers. People don’t know that in the US you can get a scholarship in college for esports. People have no clue that there are professional gamers, and people make good money, that you can enter a team with a legal contract and be a professional gamer. I’ve been in the space for years, still I’ve never seen anything like this before, and we think this is the great awakening around Sports.
It has been proven that Bio/Pharma is a huge industry, but we have absolutely no expertise there, and will always be a pass for us. There is nothing more important in our world right now as Pharma and finding a cure for Corona. This space has always been incredibly valuable, but you need an expertise and we don’t have it. You have to know what you’re good at and what you have absolutely no clue about.
There is an opportunity in everything, however I’d be lying to say it is not a global threat. It will affect more people negatively than positively, but there are always ways to profit. And not negatively: there is a shortage of ventilators, of masks, the global stock market sunk but it will be back. Still it is a pandemic, it will be devastating, but I’ve seen and heard some amazing humanitarian stories and think there will be a lot of good in these really hard times.
We do a great job on our site in our Resource section, we write about everything we read, watch and listen to. We list opportunities to get a job with us and internships. We list opportunities with our portfolio companies. I personally like reading biographies, human interest stories, stories of how people became successful and about innovators. But the most important thing you can do is to continue educate yourself, learn and be curious. With technology it is very easy to get answers, but the people who ask questions and are forever curious are the ones who are succeeding and getting ahead.
The Internet, without a doubt, has to be #1. Not the basic cellphone, but it is a fact that everyone is now walking around with a computer in their hand, has had an incredible impact. I think the next wave will be around with machine learning and AI. And I’m biased here, still I think that Sports Betting will be a massive in the US in the next 10 years, because everything is tied to it.
I was always passionate about sports and entrepreneurship, and I am really lucky to be able to do what I do. I work with incredible companies and with incredible people, and for me it is all about this. Obviously, you are interested in the VC business because of financial returns, but it is a human side of working with amazing founders that inspires me. The difference of having a startup is that it is everything you do and have, but we are lucky to work across many startups, many teams, many founders, many complexities. Everyday for us is a rollercoaster. So my favorite startups are teams I’ve worked with, those amazing people I met – all of them!
I’m very blessed with the opportunity to do what I do every day. When I talk with young people about their career and finding jobs, I say that most of the people have a job, they work to get a paycheck, to provide for a family. Most of them are not really happy about what they do, but they still need to do it. When you find something that you’re passionate about, that makes you happy, you don’t work just for money anymore. I’m very happy in my career and don’t see myself doing anything else.
To all of them. Athletes are leaders, that is why they feel so easy talking with entrepreneurs. VC is a full-contact sport. It brings the competition of sports into the real world.
That is going to be a real problem. There are jobs robots can do better, and we still need to figure out what to do about it. There will be a generation heavily affected by robotics and AI, and nobody has come even close to the solution yet. Now is time to figure it out and get ahead, for now a human is predominately behind a machine, behind a technology. We need to move humans in front of it.
I’m not a better, not a sports better for the most part. I have the apps and know what’s going on but I don’t think I would be considered a bettor. It was not legal in the U.S. 2 years ago, and I didn’t want to deal with offshores, so I’ve never bet anything more than my lunch money.