After selling his last startup and leaving about a year later, Marco Mereu started to do some due diligence for his next potential move: investing in an esports team, or even buying one.
The world of competitive video gaming has become a very big business. The prize pool for The International's 2017 tournament topped $20 million, and the overall esports market is projected to grow to $1.1 billion in 2018 from $892 million in 2016.
But after looking into it more with one of his previous investors, Mereu decided he couldn't be like New England Patriots owner Robert Kraft, who bought an esports team over the summer for a reported $20 million. The problem?
"What we found out was that most teams right now were either treading water or losing money, and that the only people who could afford to buy an esports team right now are people like a Bob Kraft who can afford to burn money in the short term in order to have a long-term play," Mereu told BostInno. That point was driven home last week when H2K, one of the leading teams for the game League of Legends, said it would leave the game's European League Championship Series because it was losing too much money.
So instead of buying or investing in a team, Mereu had another idea: create a startup that would help esports teams and professionals make more money. The way he's doing it is Estarz, an esports coaching platform that aims to become the "MasterClass of gaming," with paid video courses created by pros serving as its foundation.
"The way we really envisioned it and pitched it to them is [it would be] very similar to a 'MasterClass for gaming."
Estarz officially launched on Thursday with advanced tutorial videos from leading teams and players, including NRG Esports, which counts Sacramento Kings co-owners Andy Miller and Mark Mastrov as co-founders and Shaquille O'Neal as an investor. Access to the videos, which offer deep dives into advanced gaming techniques, cost $9.99 a month for each series, with the teams and players taking a 70 percent cut of each subscription.
"The way we really envisioned it and pitched it to them is [it would be] very similar to a 'MasterClass for gaming,'" Mereu said.
In addition to the videos, each team and player on Estarz will offer question-and-answer sessions and a digital lesson plan to further help users.
Mereu said his goal is to start placing Estarz users onto pro teams in the next six to eight months. The way Mereu and his co-founder Milenko Beslic plan to do this is by running regular esports tournaments where users have a chance to show off their skills in a live broadcast on Twitch. Mereu said Estarz is partnering with esports tournament organizer Battlefly for the events, which will also give partnering teams access to the stats of tournament participants.
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For Mereu, this is his third time starting and running a business in the video game industry. His first company, Gameblyr, was a mobile game publisher, and his second, Roostr, provided for mobile game publishers and developers to drive installs through content creators on Twitch and YouTube. Mereu sold Roostr to San Francisco-based Chartboost last year.
Estarz differs from another Boston-based esports coaching platform called Gamer Sensei, which recently raised $4 million from investors and lets players pay coaches hourly for one-on-one coaching sessions. It's that one-on-one coaching approach that separates Gamer Sensei from Estarz, which acts as a video network that serves exclusive content.
"We think the most scalable way to teach players and work with pros is to make high-quality content," Mereu said.
"We think the most scalable way to teach players and work with pros is to make high-quality content."
The challenge Estarz faces in creating a sustainable business is to create enough compelling content that users are willing to pay for over an extended period. It will also have to find a way to stand out from YouTube, the mothership of video game content, even if Estarz can provide a greater return on investment for the videos esports pros make. But what would ultimately make Estarz an important player in the esports ecosystem is if it can really provide a way for players to advance in skill and ultimately join professional teams.
Mereu said he thinks it can work because there is currently a lack of structure for how esports teams recruit new talent, and Estarz can help provide that.
"We think that teams very much are looking for ways to find new players," he said.
Estarz is currently a three-person operation between Mereu; Beslic, who previously co-founded Pingup; and Alberto Rengifo, the company's director of coaching who was previously a top professional League of Legends player. The company is expected to announce its first funding round soon, which includes SevOne founder Vess Bakalov, Mereu said, and it's also in talks for sponsorships with a number of Fortune 500 companies.
