Nerd Street Gamers is eyeing a Series B round topping $35 million to grow its esports venue footprint and continue hiring as it rapidly grows.
The startup will begin raising the round in the second quarter, and it is seeking between $35 million and $50 million, said Nerd Street CEO John Fazio.
“We're taking our time there,” Fazio said. “We've been having our conversations with different growth partners. It's really essential that the partner we pick in this next phase is the partner who's here for the long haul.”
Nerd Street has already secured $10 million of a $15 million convertible note that will become part of the Series B, Fazio said. Investors include Zeke Capital, Riverside Ventures, Gaingels and Acies, the firm that helped bring game developer Playstudios public through a SPAC.
The Series B will give Nerd Street “rapid expansion capability” to build Localhosts — Nerd Street’s esports venues — in more states, Fazio said. The startup will also hire several more employees, with most of those roles at the company’s Philadelphia headquarters.
Nerd Street has nine Localhosts open now and plans to open locations at Albright University and Rowan University. The startup opened its 35,000-square-foot headquarters, The Block, in November. A Los Angeles outpost is scheduled to open this year after being delayed due to the Covid-19 pandemic and natural disasters, Fazio said.
In 2021, the startup hosted more than 500 tournaments and saw revenue at its Localhosts climb 950% year over year. Nerd Street more than doubled revenue last year and has already reached 50% of its 2021 revenue in February, Fazio said. Fazio declined to share revenue figures.
“We now have established ecosystems of amateur competitions that are the biggest in the world, and they really started to appreciate and pay dividends,” Fazio said.
Nerd Street is also diving into blockchain technology as companies increasingly add cryptocurrency and NFT, or non-fungible tokens, features to their product offerings. The startup on Thursday announced a partnership with FTX US, the cryptocurrency exchange that made waves for its Super Bowl commercial starring comedian and actor Larry David, to let Nerd Street’s customers enter esports tournaments using cryptocurrency and receive crypto payouts.
FTX will also sponsor Nerd Street tournaments, which are set to award more than $600,000 worth of cash and prizes this year. Nerd Street is planning to include NFTs of its trophies, T-shirts, medals and other awards as part of its prize packs, Fazio said.
The partnership gives Nerd Street’s users the ability to use cryptocurrency to play while exposing FTX to Nerd Street’s growing audience, Fazio said.
Fazio has been a longtime blockchain evangelist, having had cryptocurrency for at least a decade, he said. He even lost money after Mt. Gox — a Japanese bitcoin exchange that at one point handled 70% of all bitcoin transactions — filed for bankruptcy in 2014 and reported that about 850,000 bitcoins were lost or stolen.
The CEO said the growth of cryptocurrency and blockchain technology reminds him of the advent of online multiplayer video games and smartphones, technologies that had many naysayers before becoming ubiquitous.
“I think it's the nature of any new technology that you're going to get a lot of nonsense. But at the underlying root, there's something here that provides a level of freedom for gamers and technology users that we really, really desire,” Fazio said.
