Nerd Street Gamers, a fast-growing national network of esports facilities and events, has raised a $12 million Series A led by an unlikely investor, retailer Five Below. For those who aren’t familiar with it, Five Below is a fairly ubiquitous retailer that sells items for $5 or less (hence its name).
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Existing investors Comcast, SeventySix Capital, Elevate Capital, and angel investor George Miller also participated in the round.
Philadelphia-based Nerd Street Gamers builds facilities (dubbed “Localhost”) that house esports leagues, training camps, tournaments, and showcases on professional-grade equipment. It saw 277 percent year-over-year revenue growth in 2018, according to founder and CEO John Fazio.
As part of its deal with Five Below (also Philly-based), the two entities will build 3,000-square foot Localhost spaces connected to select Five Below stores beginning with a multi-store pilot in 2020.
Depending on what they can glean from the pilot, Five Below and NSG will plan a future rollout that could include more than 70 locations over the next several years, they said.
I was curious as to how the deal came about.
Fazio told me that Five Below had approached his company through a mutual connection about a year ago for its advice on creating “authentic gaming experiences” in their stores to promote their new gaming products.
“As we began working together, we realized how closely our missions are aligned,” Fazio said.
He said the deal with Five Below will help his company realize its vision of “ a world where esports is accessible and inclusive for everyone.”
“Too few have access to the type of equipment and internet connections required to compete at the top levels, and by addressing that at a national scale we can increase real-life opportunities for millions of people,” Fazio added. “By working with Five Below, we will be in a position to open venues in every major city in the country, bringing esports to a whole new segment of gamers.”
In a statement, Five Below CEO Joel Anderson described the partnership with Nerd Street Gamers as a “unique opportunity.”
“Gaming is a trend our younger customers are actively enjoying, and working with Nerd Street Gamers will help us to provide an exciting gaming experience that appeals to our core customers and beyond,” he said, while at the same time showcasing the retailer’s technology-related products and accessories. Five Below has over 850 stores in 36 states.
In addition to the Localhosts connected to Five Below stores, NSG plans to build 50 larger regional and university-based facilities. It currently has facilities in Philadelphia, Denver, and Huntington Beach. These include the first public gaming facility in a pro sports arena, and Localhost Rowan University, which was built as part of its effort to bring professional-grade esports training facilities to universities across the country. (Note that as of September 2018, the National Association of College eSports had more than 80 member colleges and universities, with 79 of them providing partial or full athletic scholarships to student gamers.)
Nerd Street Gamers was developed inside the Jarvus Innovations offices in 2014 before being spun out into its own business in 2016 by Fazio. What initially started as an employee LAN party (computers connected by a local area network) quickly grew into some of the largest competitive gaming tournaments in the country, he said.
To date, the company says it has raised $13.9 million. It has 37 employees, up from 13 a year ago, according to Fazio.
Esports is a growing industry, despite monetization challenges. Last month, we reported on PlayVS, a startup building the infrastructure and an official platform for high school esports, raising a $50 million Series C in its third funding round over a 13-month period.
Blog Roll Illustration: Li-Anne Dias
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