Techcrunch recently posted an article by Christine Magee, editor for CrunchBase, about the recent surge in investing activities in the sports tech scene. The funding rounds for sports tech companies reached its peak at $927 million in 2014. In comparison to other industries such as e-commerce and SasS, perhaps sports tech does not attract as many investments. However, data shows that it has been increasing in the past couple of years with 30% YOY, mimicking the overall trend in venture funding.
Recent trends has been evolving lately. Giant sports brands are taking advantage of sports tech startups with acquisitions and investing. For example, the LA Dodgers, the baseball team, has created the Dodgers accelerator program which is a 12-week program.
Under Armour (UA), most notably, has been more aggressive. The American sports clothing and accessories company had made two acquisitions in the technology sector in 2014, Edomondo and MyFitnessPal. On the other hand, Nike had made investments in two companies and one seed fund.
UA recent actions caught our attention and we found them quite interesting. Remember, UA came into market to cover a specific niche and that is to manufacture t-shirts using moisture-wicking synthetic fabric. And since then it expanded to cover shoes and accessories.
With that in mind, we decided to look further to identify the reasons behind its recent acquisitions.
Endomondo ($85 MM)
Endomondo is a social fitness network and mobile app allowing users to track their workouts, challenge friends, and analyse their training.
200 million users
MyFitnessPal ($475 MM)
MyFitnessPal tracks food habits and calorie intake.
80 million users
MapMyFitness ($150 MM)
MapMyFitness uses built-in GPS technology to provide users worldwide with the ability to map, record and share their exercise routes and workouts in an online database.
30 million users
According to Kevin Plank, CEO of UA, the apps now have 130 million unique users combined, more than 60% of whom are women.
As UA recently claimed it is the largest digital health & fitness community. It is apparent that UA is trying to establish their brand name through social media. If successful, perhaps it already has, UA could reach a status of brand name that is synonymous with health and fitness- quite a powerful asset. Think of Kleenex, Q-tips or Google (for searching). Also, these acquisitions enables UA to target their customers directly.
These are hidden assets that can create a powerful defence against new entrants and that can protect future revenues.
This approach not only can create brand defence mechanisms but can also give invaluable data regarding consumer behaviour. The data can give insights on users’ interactions, consumption, and lifestyles.
Price Tag = Priceless
For the numbers, since the acquisitions, cash and cash equivalents increased 71% to $593 million at December 31, 2014 compared with $347 million at December 31, 2013. Total debt increased to $284 million at December 31, 2014 compared with $153 million at December 31, 2013.
Fourth Quarter Net Revenues Increased 31% to $895 Million; Full Year Net Revenues Increased 32% to $3.08 Billion.
Apparel sales rose 30 percent in the fourth quarter.
Footwear sales surged 55 percent in the three months ended Dec. 31.
Sports tech is opening the door for major companies to capitalise on traffic and create new doors for innovation and brand awareness.