SharpSports extends seed round, plans move up-market

SharpSports, which provides developer tools for the sports betting ecosystem, has raised new funding as it prepares for the next stage of growth.

We caught up with Ryan Murphy, co-founder and CEO of SharpSports, to find out how things have been going since he appeared on The Betting Startups Podcast in April 2022.

“I guess a lot has changed since then. I think the biggest story is that we have started to move up market. The average size of our customers has grown as the market sees our offering as a need to have. When I was on the podcast last year, we were mostly serving startups. Now we’re serving more mid-market companies and hoping in the next year to be serving the enterprise.”

Capitalizing for the next stage of growth

As Murphy explains, the company has been growing steadily since its appearance on the pod. It has also been focusing on optimizing its unit economics, which he calls “really strong”.

Now as it readies itself to serve larger customers, SharpSports has raised some seed extension funding, though the amount was undisclosed.

“We have a pretty consistent playbook for acquiring new users and retention is really solid. So, it made sense to invest more in growth. We raised a little bit of additional capital to expand the team and invest more in new products, as well as sales and marketing.”

Joining the SharpSports cap table are Chris Grove, Adam Krejcik, and EKG Ventures. Existing investors also participated in the round.

Murphy notes that his new investors see a lot of additional opportunity for SharpSports given the vast amounts of data the company has access to.

“We're sitting on a lot of really interesting user betting history that could be the basis for generative AI to create personalized content for users, and build really robust personalization journeys for users on the sportsbook side of things.”

Valuations under pressure

When asked about his experience closing the round, Murphy admitted that it required a shift in expectation on valuation since the last time he raised money.

“It’s the same thing that everyone else is saying: there’s more of a focus on monetization. There’s not as much appetite for ‘lets grow and figure out monetization later’. I do think there’s a lot of capital to be deployed, but at less founder-friendly terms”.

This reality factored into Murphy’s decision to structure this new round as a seed extension, rather than a new round at a new price.

“We structured it as a seed extension, because it's at the same valuation that we raised last summer, even though our ARR has grown 400%. We’ve grown into our previous valuation just based on the market.”

Does SharpSports’ shift in focus signal challenges for industry startups?

On the surface, Murphy’s comments about moving up market make perfect sense as it follows the well-trodden growth path of a SaaS business.

But could it also signal some challenges with the startups that it was previously focused on?

With the cost of capital increasing over 500% in the last twelve months, startups have very quickly found themselves in a new economic reality - one that prioritizes revenue over user metrics.

And given that SharpSports powers many of the most popular betting tools and products, it has a unique lens on that landscape.

“There's two different types of companies out there right now, those who have some sort of monetization, and those who don't. And those who don't are rapidly trying to figure that out, but it's a different muscle to flex,” says Murphy.

One of SharpSports’ newest offerings, its Best Price widget, was developed to combat this very challenge.

“We're trying to help a lot of our customers figure that out. That's a big reason why we built the best price product because we can help them directly monetize via affiliate links.”

But even still, Murphy expects to see more turbulence for a lot of betting tools and products.

“We definitely see some of them struggling with that shift to monetization, so I think we’ll see some consolidation, or some pivots. Everyone's got to flip the switch to figuring out profitability and that's a more difficult task for some than others.”

What’s next for SharpSports

With the new football season looming, SharpSports remains focused on increasing the depth of its offering.

“There's a natural uplift in revenue growth during football season. We're working around the clock right now to get new products like the best price widget out, so we can get those monetized for this football season, and help our customers out there.”

And longer term, SharpSports has a clear focus on moving up market - now armed with additional capital to help it get there.

“We're just really excited to be working with larger and larger businesses. We're looking to build some case studies this football season and really show the growth story that they're seeing with us. And then hopefully be able to work with the NBC Sports, the ESPNs, the Yahoo Sports, Bleacher Reports in the coming future.”