Tempo

Gaming's interactive experience company

Analytics

Raised to Date: Raised: $619,291

Aggregate Commitments $
Platform

Republic

Start Date

03/02/2021

Close Date

08/31/2021

Min. Goal

$25,000

Max. Goal

$1,070,000

Min. Investment

$100

Security Type

SAFE

Funding Type

RegCF

Series

Series A

Valuation Cap

$30,000,000

Discount Rate

20%

Rolling Commitments $
Status

Active

Reporting Date

07/31/2021

Days Remaining

31

% of Min. Goal

2,477%

% of Max. Goal

58%

Likelihood of Max
unlikely
Avg. Daily Raise

$4,101

# of Investors

1,854

Momentum
cool
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Location

LONG BEACH, California

Industry

Media, Entertainment & Publishing

Tech Sector

GamingTech

Distribution Model

B2B/B2C

Margin

High

Capital Intensity

Low

Business Type

Growth

Tempo, with a valuation cap of $30 million, is raising crowdfunding on Republic. It is an esports organization which not only participates in esports and gaming experiences but also creates them. The three backbones of Tempo include Tempo Games, Tempo Studios, and Tempo Community. Andrey Yanyuk founded Tempo in May 2014 and has raised over $5.8 million in previous rounds of financing. The proceeds of the current crowdfunding round, with a minimum target of $25,000 and a maximum target of $1,070,000, will be used for growth and expansion. Tempo is launching a premier liners channel for gaming in the second quarter of 2021. The company generated a revenue of $2.4 million in 2020 and expects to generate $4.5 million in 2021.
Summary Profit and Loss Statement
Most Recent Year Prior Year

Revenue

$2,194,514

$1,974,007

COGS

$848,637

$1,782,770

Tax

$0

$0

 

 

Net Income

$-2,316,250

$-2,021,480

Summary Balance Sheet
Most Recent Year Prior Year

Cash

$132,179

$909,509

Accounts Receivable

$0

$0

Total Assets

$1,685,252

$1,517,572

Short-Term Debt

$303,199

$171,324

Long-Term Debt

$2,351,564

$0

Total Liabilities

$2,654,763

$171,324

Financials as of: 03/02/2021
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Ratings

Analyst Report

Synopsis

ESports are a fairly recent addition to competitive sports in which video game players participate in organized competitions. Both the video game and eSports industries are large and growing rapidly, and where there’s growth, there’s opportunity. One company looking to take advantage of this paradigm shift in entertainment is Tempo. Though the firm is still technically a startup, it is already a diversified player in this market. Management envisions turning the company into a vertically-integrated interactive media studio focused on three key categories in the video game and eSports markets: studios, games, and community. 

With its studio endeavors, Tempo has already succeeded in creating some valuable content. For starters, management succeeded in creating and selling a show called Hivemind. Sold to Twitch for an undisclosed sum, Hivemind is an interactive game show that follows a host who asks contestants questions to real-time surveys, and the winner receives some cash compensation. In its debut show, Hivemind generated 1.3 million views. It has continued to generate an average of one million or more views since it began airing. Game Changers has been another successful program the company has embarked on.

In addition to this interactive content, Tempo is working on the release of its first video game. Inspired by the creator‘s experience with Hearthstone and Magic: The Gathering, The Bazaar is an immersive PVP strategy game. The Bazaar will be free to play and will generate revenue through in-game upgrades such as skills, skins, and new playable characters. If all goes according to plan, the game will be launched in the second quarter of this current fiscal year. Tempo is already in talks with potential distributors for the game and has successfully locked down a worldwide distribution arrangement for its mobile release with Samsung. The company is also working on other unique features such as a browser extension that will allow people to gamify their streams and better engage with their fans.

Finally, there is what the company calls its Tempo Community. This is a website that serves as a hub for both pro esports gamers and a general streaming gamer community. It provides educational content to its user base, and members are rewarded for completing challenges. Since launching in June 2020, Tempo Community has grown to more than 1,500 streamers. To generate revenue, Tempo intends to charge other businesses that want their brands promoted on the site. In time, there could be other sources of revenue, such as affiliate fees or content licensing. 

The company boasts that it has 32 brand partnerships and eight world champions across its platform. Tempo teams have won $1.7 million in prize money in the last two years as well as winning the world championship in Magic: The Gathering in 2020. With 1.5 million visits per month, Tempo’s team site is also the most visited eSports team on the market.

Tempo’s current Republic raise has been rated a Deal to Watch by the KingsCrowd investment team.

Price

Tempo’s valuation for this round is $30 million. Participating investors will receive a SAFE that will convert into equity upon the company’s next round, subject to a 20% discount to the future value of the firm. The company’s valuation is very high compared to other startups that are currently using crowdfunding to gain funding. However, Tempo has strong early traction that makes this price more reasonable, and the discount is also a boost. Thus, the price score for Tempo is high.

Market

Tempo dips into multiple markets, the first being eSports.  Admittedly, the industry is growing at a rapid pace, averaging 24.4% per annum through 2027. However, eSports on its own is quite small. In 2020, the market was estimated to be worth $1.48 billion. By 2027, its growth will only take it to $6.82 billion. As a note, it is surprising just how little of its revenue is associated with advertisements. In 2021, about $226 million eSports revenue came from advertisements. This compares to $143 million in 2018. While eSports on its own may be small monetarily, it attracts an incredible amount of people. In 2019, there were 454 million eSports viewers globally. This number is expected to grow to 646 million in 2023.

The big money, meanwhile, lies in the broader video game market. As a whole, the space is worth $151.06 billion in 2019, about $109.66 billion of which came from mobile. Through 2027, this broader industry is expected to grow by 12.9% per annum,taking it to $398.75 billion. A significant portion of this growth will come from mobile games. It is also worth noting that other sources suggest a similar market size today. One, for instance, estimated in 2021 that the industry was worth $154.63 billion. With an annualized growth rate of about 9.3%, it should grow to $220.55 billion by the end of 2025.       

Based on the size and overall growth rate of these markets, Tempo’s market score is strong.

Team

At the top of Tempo is Andrey Yanyuk. He founded Tempo and is presently serving as its CEO. All of his experience that has been made publicly available relates to the video game and eSports markets. At one point in time, he was a professional player in Magic: The Gathering. After a cheating incident, he left and made a name for himself playing Hearthstone. That was what really allowed him to take off and eventually own an eSports team. Yanyuk’s experience in the space is incredibly valuable, but the absence of any prior CEO position and of any real business experience does leave some of his credibility in question.

One person on the team who does have this experience is Noah Kline. Kline serves as Tempo’s chief revenue officer. In the past, he served as the founder and CEO of Kilobyte Labs. That firm focused on things like AI, virtual reality, big data, and more. He was also the founder and CEO of Electric Sloth. Prior to that, he worked in business development at sticky.io, a company focused on subscription e-commerce and campaign management. Kline has also worked as a business development advisor at Civil Maps, where he focused on work related to city-scale HD 3-D mapping and localization. These experiences in tech centered firms certainly have a tie-in with his current work. They also demonstrate some degree of leadership experience in a corporate environment.

While Yanyuk has exceptional knowledge of the eSports space, he does not bring strong leadership skills or past entrepreneurial experience. As a result, the team score for Tempo is its lowest across all five metrics.

Differentiators

Management would probably tell you Tempo is special because it’s a vertically-integrated player in the gaming and eSports market. While this is a fair description of a company, it’s not unique. Competitor 100 Thieves is a gaming organization that participates in competitive gaming, entertainment, and apparel sales. Similarly, VENN is a network for gaming and esports that also creates its own original content. However, there are two main features which Tempo is building that these competitors do not offer — community and in-house game development. Tempo’s community site is a smart addition that lets it tap into the huge eSports audience. By developing its own games, the company also taps into an additional revenue stream. The full suite of features that Tempo is creating also lends itself to multiple synergies across the organization. The community of streamers will likely be able to provide feedback on streaming events and games they want to see or play. Games created by the company could produce new streaming events or competitions. 

Due to the unique set of features that Tempo is combining, the differentiators score for the company is above average.

Performance

In 2019, the company generated revenue of $1.97 million. This amount grew to nearly $2.2 million in 2020. Although this trend could very well continue, the company is still losing a lot of money. In 2019, the firm generated a net loss of $2.02 million which expanded to a loss of $2.32 million in 2020. Likewise, its operating cash flow was negative to the tune of $1.93 million in 2019, and $2.23 million last year. 

On the other hand, there are some other areas in which the company has excelled. The fact that it has already sold some of his content is encouraging. In addition, it clearly has built a name for itself. Across its entire ecosystem, the company has more than 60,000 subscribers. It has 5.8 million Twitch followers, 1.5 million YouTube subscribers, and 1.6 million Twitter followers. The fact that Tempo has succeeded in growing its new community from nothing to 1,500 streamers since June 2020 is also quite encouraging.

With both healthy revenue figures and strong user traction, Tempo scores extremely highly in the performance metric.

Bearish Outlook

One risk to keep in mind with Tempo is that the team could be better, especially as it could use a CTO. While the product is somewhat differentiated from current competitors, it’s not highly defensible. What makes Tempo unique is the combination of services and features it’s bringing together. If a competitor chose to replicate aspects of Tempo that it didn’t currently have, Tempo might struggle to maintain distinction in the market. The firm is also still losing money, and that picture shows no signs of improving. It will likely be some time before Tempo can live up to its slightly lofty valuation.

Bullish Outlook

Tempo’s greatest advantage is the fantastic revenue generation the company has accomplished in recent years, which could help it survive. In addition, the market is large and rapidly growing. That alone could lead to significant upside for shareholders in the long run. The company also appears to have established itself as a creator of quality content that is in high demand. If it continues to create successful content, Tempo could carve out a niche of name brand recognition for itself.

Executive Summary

Putting everything together, management has done well to get Tempo to where it is today. It has a successful eSports team of its own, a significant following across social media, and a significant amount of revenue. The company is combining a smart set of features and services together which distinguish it for the current competition. The video game and eSports markets are growing, providing plenty of market opportunity. If Tempo is able to capitalize on its early content successes and ample amount of followers, it could be well-positioned to become a major name in eSports. Because of these considerations, Tempo is a Deal to Watch at this point in time.         

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Daniel Jones.

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