SeatGeek Bucks Late-Stage Funding Trend, Raises $238M at $1B Valuation
SeatGeek recently raised $238 million in Series E financing at a $1 billion pre-money valuation. Accel led the round with a $100 million investment. Wellington Management, Arctos Sports Partners and Utah Jazz founder Ryan Smith also participated.
Large, late-stage funding rounds have been muted and down in 2022, in part because companies want to avoid raising capital at depressed valuations because public market comps are down 70% or more in some cases. But Chad Hutchinson (partner, Arctos Sports Partners) said that good companies can still get funding.
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“[SeatGeek resides in] rare air, growing well over 100% [YoY] at real scale with a team that’s terrific and all locked in on a big mission,” Accel partner John Locke said.
Accel believes the company is also well positioned to take market share in an evolving ticketing landscape. “The world’s moving towards an integrated experience where the lines between primary and secondary markets are blurry. We all want to be able to share or sell our tickets as needed and don’t want to work with two different companies to do that. To win in ticketing, you need to have both,” Locke said. SeatGeek does. Ticketmaster, is the only other ticketing company at scale in the U.S. that can make that claim.
JWS’ Take: SeatGeek wasn’t supposed to be privately held at this point. The company’s plans to go public were halted by COVID-19, and the subsequent sports hiatus forced those conversations to the back burner.
SeatGeek resumed the discussion last October, entering into a definitive agreement to merge with publicly traded RedBall Acquisition Corp. at a $1.35 billion pre-money valuation. But in the ensuing months, SPACs rapidly fell out of favor with investors, and regulatory scrutiny on blank check companies ramped up, making it difficult to close the deal. By Q2 2022, SeatGeek was left with two options: Renegotiate with RedBall and go public via the SPAC at a different level or remain privately held, raise a bunch of capital and file alone at a later date.
It ultimately chose the latter, and SeatGeek is on pace to post more than $400 million in net revenue this year-up from roughly $200 million pre-pandemic.
“We’re more excited than ever about the future of SeatGeek. The business is well ahead of our SPAC plans and the momentum across all aspects of our business is strong. We want to continue to be aggressive and right now, that is easier as a private company,” Locke said.
Accel was so encouraged by the growth spawned by SeatGeek’s integrated primary and secondary market solution that it ended up investing twice as much as it previously committed to the PIPE associated with the proposed RedBall SPAC merger.
Accel is a long-time SeatGeek backer. The venture capital firm led the company’s $35 million Series B in 2014 with a $30 million investment and put an additional $20 million in over the last eight years.
Initially, SeatGeek’s tech-focused team captured Accel’s attention. “SeatGeek is the only tech company in the ticketing market. Most of the team is in product and engineering, and I would put the team up against the best companies we’ve worked with at Accel,” Locke said. That group includes Spotify, Slack and Meta.
Accel’s investment thesis on the company remains, as does its belief the experiential economy will continue to thrive. What has changed is SeatGeek’s vision. “These guys came to the conclusion that to build a really big, important company, they would have to build a primary ticketing stack,” Locke said. SeatGeek bought Israeli start-up TopTix to serve as the foundation of its primary platform in April 2017.
The decision to expand into primary was a big move for the company, according to Locke. The costs to enter the market are prohibitive, and the tech stack needed to service it is a challenge to build. But if you can successfully integrate the two markets, and land primary market clients, the primary market can drive secondary market sales and both markets will benefit from the combined scale.
“There really hasn’t been [another market participant] that has gone toe-to-toe with Ticketmaster on primary in a long time, if ever,” Locke said. “Getting the local primary team has been a real boon for getting more consumers to use SeatGeek for all kinds of local events.”
It took SeatGeek time to get its primary business off the ground. But it now appears to be gaining momentum. The company has signed several pro sports organizations, including the Cowboys, Nets, Cavs and Smith’s Jazz, as clients.
Arctos’ client portfolio convinced it that SeatGeek was different. The fact that the platform can be useful to the broader portfolio further made the investment opportunity a no-brainer. “There was this constant churn in the background of who is disrupting ticketing in a way that’s coming into the primary market, which is flowing through to the secondary market, and it was SeatGeek,” Hutchinson said.
Ticketmaster remains the 500-pound gorilla in the industry, but SeatGeek intends to make a play for the top spot in the years ahead. “Our clients radically prefer [the platform] from the perspective of making fans happy and making more money. The market share gains that we’ve had [since launching in 2017] bear that. If we keep doing our job, we’ll keep taking market share,” Jack Groetzinger (CEO, SeatGeek) said.
The company plans to use the newly raised capital to “double down on the product itself and the fan experience; all of the things that have been leading the market share capture,” Groetzinger said. Ultimately, that means investing in and growing the development team.
Locke envisions SeatGeek’s open API architecture eventually tilting the balance in its favor. In contrast, Ticketmaster has historically taken a more walled-off approach. “In a world where some of the tech giants are getting more into streaming and rights, and it is a different set of players participating in some way in these live events, more and more teams are going to embrace an open approach with their primary ticketing stack,” he said.
Accel believes SeatGeek has the chance to build a “Live Nation-size” company. In addition to the confidence it has in the team and its market position, there is an international expansion opportunity worth pursuing.
The data SeatGeek captures on buyers can help to open up new revenue streams too. “Fanatics crushed it with their analytics and capturing the fan. The ticketing side of the equation is another way to do that. There’s a number of products that can be pushed through the ticket,” Hutchinson said. FWIW, Live Nation has a ~$22 billion market cap. This latest round should be SeatGeek’s last before an IPO, and the VC noted the company has more than enough capital to get to that point. “We were on the doorstep, so the company is ready,” Locke said. “When the market comes back around, and the time is right, we’ll be ready to go.”
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