Financing Considerations in Esports — Part 2: Sponsorship (AKA Advertising for Others)
Sponsorship. For many esports entrepreneurs, it is the first answer that comes to mind when questions are asked regarding how to raise capital. Any new organization that needs to pay players, develop infrastructure, and market to fans will need an influx of cash. Many young esports companies ask themselves how this can possibly happen? The young company has a great idea, but no financing or investors. Unless the owners have deep pockets, how will the team stay afloat? Sponsorship of course! It seems to always be the answer! Businesses will be eager to pay for the ability to connect their brand with budding esports organizations that are setting up within the scene.
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Except, unfortunately they won’t actually be that eager. In many cases, organizations jump the gun and assume that sponsors will line up to give them money to build an idea. In my humble opinion, if an organization is approaching companies for sponsorship before they have something concrete to sponsor, then the inevitable denial of funding will probably be the sort of wakeup call that the organization needs. If a team has an unproven management team or group of players, then approaching sponsors too early paints a negative picture about the judgement and business sense of the collective leadership within the organization.
In Part 1 of this series, I talked at a high level about how to determine if you are ready to pursue financing. Certainly, the initial review of yourself as an entrepreneur can help answer many questions specific to your unique business situation. Once this review is complete, and you as a business owner are confident that financing will allow you to take your business to the next level, you must determine what financing is most attractive for your business. Traditional financing through investors or bank loans is a common option for businesses looking to begin immediately selling a product or service , whereas sponsorship is generally the financing method of choice for teams or events. Today we are going to review the latter, and tackle traditional financing in a later article.
Understanding Why Sponsors Sponsor
In order to successfully pursue financing and attract sponsors, it is important for any entrepreneur to step outside the bubble that they operate in, and truly grasp who their sponsors are and what they want. I believe this is the first analysis that should be conducted before sponsors are ever approached. Know a lot about who you are asking for money, and understand why sponsors choose to sponsor things.
The simple reason that a sponsor chooses to partner with an organization is that they see an opportunity to advance their own business. Too many event hosts or team managers approach sponsors as if the sponsors are charities looking to donate to the growth of esports. While a sponsorship may very well lead to a partnership that helps grow a team or community, sponsors will initially engage with teams because they can get something in return. The primary driver for sponsors to invest money into the esports ecosystem is not because they want to contribute to the growth of the industry, nor because they particularly covet a relationship with one organization over another. Sponsors are not partnering with events and organizations because they want to be friends.
This might sound negative to some, but it really is not a bad thing. There is absolutely nothing wrong with larger companies looking to take advantage of the market that esports has created. Sponsors want something from you in the same way that you want something from them. A talented businessperson will recognize the potential of a mutually beneficial relationship, and not gasp at the idea that sponsors are not inherently interested in helping you. That said, sponsors will be thrilled if their sponsorship can be attributed to helping a business flourish. In that regard, sponsors do want to see your business succeed. Just recognize that their interest will always be primarily self-serving.
Generally, the benefit that a sponsor is pulling from a sponsorship with a team or event is the exact same benefit that they get when buying traditional advertising (television, radio, newspaper, etc.). In television, when cutting to commercials, it is common (or used to be!) to hear the phrase “and now a word from our sponsors”. Indeed, advertising in television emerged from the concept of sponsoring a particular bit of programming. By doing so, they are building goodwill with the audience that are watching the program. The same sort of track record applies to esports teams and organizations. Sponsors want access to the audience that follows organizations and attends events. This is largely males of the millennial generation, but it is worth noting that the demographics of esports are expanding. Still, sponsors who choose to sponsor esports are doing so first and foremost because they recognize the potential cultivate goodwill within the scene. If you understand this need, then an organization can properly refine their strategy for approaching sponsors and win their respect (and hopefully their dollars!).
Eyes Are on You — Now Prove It
For sponsors to want to sponsor, they need hard evidence that the organization approaching them can help them spread brand awareness. To be comfortable that this can happen, they first must know that there are individuals who are interested in the team or event in the first place. This is the first major aspect of any serious pitch to a sponsor.
Metrics can paint an elaborate picture. More information about a following is better when attempting to generate interest from a sponsor. Obvious metrics like Twitch stream viewers, Twitter followers and Facebook fans are all worthy. If you’re looking for an event sponsor, be prepared to provide attendance figures from previous events. Additional demographic information can be useful as well. It is great to be able to state that you have 1000 Twitter followers and that that number is growing at 23% monthly, but it is something else entirely to be able to break down the demographics of those numbers so that sponsors can determine if your following matches their target market. If those 1000 Twitter followers are 20 year old males, and the sponsor is looking to sell business-to-business software, it’s unlikely that they will see value in your audience for their purposes. Think about what the target market of the sponsors you are approaching might look like, and focus on that if you can.
If you are early in your development and some of these metrics are not particularly impressive, look to find metrics that can paint an attractive picture about the direction your organization is growing. Perhaps you don’t have a past event to draw information from, but there have been other local events that you can use to demonstrate the existing local interest. Or maybe your team is only just getting started and you’re not be able to provide impressive data about Twitter followers. Tell the truth, but also demonstrate what your followers will look like in 6 month time if current growth continues. Next talk a bit about your strategy to increase those followers, and show how your followers will grow if your strategy works. All of a sudden you have demonstrated knowledge, and also replaced an unimpressive metric with something a little sexier. Don’t get me wrong, the sponsors are not going to forget about your current following. What they might do though is begin imagining what you CAN become, which is also worth a lot when sponsors are making their decisions.
Ask Not What Your Sponsor Can Do for You
Something else that sponsors want to know is that your business will be a strong ambassador for their brand. Remember; sponsorship is a partnership. When you enter into a sponsorship agreement with a business, you become their partner and you take advantage of their success and growth. As their partner, it is in your business’ best interest if they grow. Even more so, it is in your business’ best interest for you to positively contribute to that growth.
With that in mind, you want to do more for your sponsors than toss their logo on your website and call it a day. Your job is to utilize YOUR market presence to help your sponsors grow theirs. You want to ensure that you and every single person within your organization pumps your sponsors brand. If you aren’t already, you want to become users of their product or service! One secret is that sponsors want to know that not only do you genuinely want to partner with them, but that regardless of whether or not they decide to partner, you still love their shit! Tell them about your history with their brand, and make it clear that you have been a diligent customer long before you became a potential partner. Sponsors feel comfortable partnering with organizations that genuinely like what they do. It also will ensure a strong relationship going forward.
Wrap It Up and Close It
If you can successfully demonstrate an interest in a brand, as well as display honest data that proves how successful a sponsorship with your organization could be, then the last requirement is to compile the information and determine exactly what your “ask” is going to be.
You generally hear teams talk about “sponsorship decks”. For those that don’t know, these decks are essentially power point presentations which can be pitched at a live meeting, or sent as a PDF. Decks will generally explain what is being sponsored, who are the key people involved, and what the future of the partnership will hold. Decks will also outline key metrics, as mentioned previously. Lastly, decks will end with some for of an “ask”.
So what should an ask look like? In its most basic form, an ask is simply a request for sponsorship. However, successful organizations will have an ask that is structured and clear. Many sponsors want to know what you need, and nothing can throw off an otherwise good-looking organization than an ask that essentially says “we will take whatever we can get”. Not only does that look desperate, but it suggests that the organization has not thought about what they truly need, nor have they thought about how sponsorship works.
Your ask should be specific, and in some instances, one clear sponsorship option is all that is needed. For many organizations and events though, I would recommend a tiered sponsorship system. A tiered system may look something like this:
A tiered system allows a company to weigh their options and evaluate what sort of coverage they need, and what sort of funding they can provide. It also demonstrates that the person requesting the sponsorship has thought about financing. Obviously someone requesting this amount of money is only in need of about $6,500 worth of sponsorship. Likely this would be for a small local event, based on what is being offered, so a company can determine if the amounts and the coverage line up with what they may have allocated in their local outreach budget.
Ultimately, by presenting your information intelligently and pitching your ask clearly, a sponsor knows that not only do you know what you’re talking about, but you are a serious contender within the space looking for some help. This instantly makes you more attractive, regardless of what event or team you’re selling.
One final note on closing sponsors — keep in touch with them and provide them with information that they can use to evaluate the partnership after they give you money. Once they become a sponsor, do not forget about them. Keep them posted about your success. Send them pictures from your events to use in their own material. Update them as your social media following grows. Ask them if there are any changes they would like to see. If you continue to foster a relationship with your sponsors, then you increase your presence in their mind. When the time comes to determine if they will sponsor you again, you want to make sure that they don’t have any questions about your value to them.
Don’t Get Discouraged
I will close with one final thought. Esports entrepreneurs who are looking for sponsorship cannot get discouraged by rejections. Companies have sponsorship budgets, and their decision is not necessarily based on the quality of your pitch or the success of your organization. Their decision is going to have as much to do with their own company’s current state as it is with yours. If you are rejected, receive it respectfully. Ask for feedback as to why a sponsorship was not provided, and also ask to remain in touch. Someone who does not want to sponsor you today may become a partner in the future. At that point, hopefully your organization will have blossomed, and nothing will feel better than charging them more for the same coverage!
Sponsorship is a great way to provide quality funding for an organization that needs it, but it is also a great networking tool. Don’t forget that sponsors are your partners, and that their success is your success. Do what you can to build them up. If they can link their own growth back to you in some capacity, they will continue to see you as a viable partner that brings their company value. No one can argue with proven results.
In Part 3, we will talk a bit more about traditional funding and what entrepreneurs could consider when thinking about financing or accepting investment. For now though, think about what your organization can provide to a sponsor. If you know that answer, then the pitch should be easy!
About the Author
Brandon Copeland founded and operates No Jokes Partnerships, an esports focused professional services firm aimed at helping esports organizations and players professionalize their operations and improve their business practices. If you would like additional assistance preparing to approach sponsors, do not hesitate to reach out to info@nojokespartnerships.com.
