Mobile esports company Skillz has begun trading on the New York Stock Exchange, becoming the latest company to take advantage a boom in the game industry.

Skillz will have a multibillion-dollar valuation. It went public through a quick initial public offering process known as a special purpose acquisition company (SPAC). This has become a popular way for fast-moving companies to go public without all the hassle of a traditional IPO. SPACs are set up by managers who raise money in a blind shell company, and the investors don’t know what they’re putting their money into.

Skillz is technically merging with Flying Eagle Acquisition, which is led by the same financial team that brought DraftKings public through a SPAC. The company’s market value at the outset of trading was $3.5 billion, and it has risen to close to $7 billion, with shares starting at $10 a share and hitting $19.84 at the moment.

It’s a big day for founder CEO Andrew Paradise. He launched the San Francisco startup launched in 2012 with a simple proposition and stuck to it, Paradise said in an earlier interview with GamesBeat. Skillz provides a platform to turn any mobile game on iOS and Android into one you can play with friends or strangers for cash, prizes, or points. And it enables esports tournaments for games that integrate into its platform.

Financial picture

In its most recent third quarter ended September 30, the company reported revenues of $60 million, and it has reported higher engagement thanks to the pandemic, much like the rest of the game industry.

Above: Andrew Paradise is CEO of Skillz.

Image Credit: Skillz

Skillz has a relatively small base of 2.7 million monthly active users, but the keyword on that is active. Paradise pointed out that this is a tiny fraction of the 2.7 billion gamers in the world, and so there is a lot of time to grow. In 2020, Skillz expects to power more than 2 billion tournaments, including 500 million paid entry tournaments, and facilitate $1.6 billion in paid entry fees generating $225 million in revenue. The average revenue per user is $6.93.

“The incredible reception has been so humbling,” said Paradise. “We’re so excited. And since we announced the merger, we have transitioned more than half of the investor base from hedge funds to fund investors with long-term outlooks” such as Franklin Templeton.

The SPAC called Flying Eagle Acquisition, headed by Bethesda owner ZeniMax and DraftKings SPAC veteran Harry Sloan, raised $690 million as a publicly traded entity. It is acquiring Skillz, at which point the public shell company will essentially become Skillz. On top of that, institutional investors put money into the new company using private investments in a public company (PIPE). In this case, institutions invested more money in PIPEs, giving Skillz access to even more money.

The company raised $848 million through the SPAC, and of that amount about $608 million went to the early-stage investors such as venture investors. Neither Chafkin nor Paradise sold any of their stock. The net proceeds for the company are about $240 million, and it will have no debt. About $690 million came from the SPAC, while follow-investors (via a PIPES transaction) put in another $158 million.

“The SPAC gave us more opportunity and we met with more than 100 investor groups in the process,” Paradise said. “The competition between SPACs was hotly contested and only slightly more expensive than a traditional IPO.”

Early days

Paradise is a serial entrepreneur who began as an inventor. He started web media and advertising company Double Picture in 2008 and later sold it to MPA. In 2010, he founded AisleBuyer, a virtual shopping assistant that created a mobile self-checkout system. He sold that to Intuit in 2012 for an estimated $80 million to $100 million. Then he teamed up with Casey Chafkin to cofound Skillz. They brought in some engineers who took big pay cuts to build the platform.

There were some “near-death experiences” along the way, Paradise acknowledged. Many people were initially skeptical since conventional wisdom was that esports would do best on hardcore platforms such as PCs and consoles. Mobile seemed too casual.

But mobile esports caught on in a huge way. Skillz took a cut of the transactions on its platform and made ad revenue as well. It took more than 36 months for the company to generate its first $50 million annual run rate or the money it generated in the trailing 12 months. But it took just eight more months to hit a $100 million run rate in May 2017.

Above: Skillz players will play 2 billion matches in 2020.

Image Credit: Skillz

By 2018, Skillz had hit a $400 million run rate. Rivals like Sony and Amazon took Skillz on, but they faltered.

Skillz plans to use the proceeds to accelerate growth in domestic and international markets, support marketing efforts, and provide additional working capital.

Paradise said in an interview that the company has forecast 87% growth for 2020, and each quarter so far this year has exceeded expectations, with the most recent September 30 quarter exceeding revenues of $60 million by 35% from the previous quarter.  The company has more than 200 employees, and employees were able to sell 60% of their shares today.

Updated: 11:34 a.m. Pacific on 12/17/20 with interview and other details.

Presented by Beat

In 2019, the ride-hailing market was valued at 73.07 billion, and expected to reach $209.60 billion by 2025. Worldwide, Uber still dominates, but innovative startups are disrupting the industry, as they steadily chip into its market share. In America, ride-hailing companies Waze, Carma, and eRideShare are pushing their local advantage. In Europe, French BlaBlaCar has 40 million members worldwide. More than 500,000 in the U.K. have signed up for Liftshare.

And now Latin America is emerging as a major market, with tech-first ride-hailing companies like Beat taking advantage of a growing demand for affordable, flexible transportation.

The growing LatAm ride-hailing market

Latin America is the second-fastest growing mobile market in the world – 73% of the population has smartphones, and the number is growing rapidly. With expanded access to mobile internet, especially in burgeoning urban areas, the demand for ride-hailing apps is swelling. They’re especially attractive because companies offer safety and transparency with innovative real-time tracking, in-app navigation tools, and price monitoring.

Uber is competing with localized startups across Latin America. The technology and ride-hailing company Beat is growing in five markets across the region, beating out Uber in markets like Peru and Colombia to become the number one ride-hailing app, and has gained a foothold in Mexico.

Adapting to COVID-19

Unsurprisingly, the pandemic hit the ride-hailing market hard across the Latin American market. Rush hour has become a thing of the past, as more of the population shifts to working from home, and after-work ride-hailing has dropped precipitously with the decrease in public social gatherings.

“Every ride-hailing company was impacted similarly across the board,” says Sanja Ilic, COO at Beat. “There was a drop of 60 to 70% after the first wave of recovery.”

And along with the decline in demand has come a decline on the supply side, too. Fewer drivers are available now due to pandemic fears, despite the rigorous safety measures the company employs.

But despite the loss of business across their regular avenues, Beat has been able to pivot in the communities they serve to offer essential services and communication.

“When there is a challenge, there’s always an opportunity,” Ilic says.

When Beat’s regular services had to be temporarily disabled following the State of Emergency, the company launched the reduced-fare Beat Mission service in Peru and Argentina to connect people with essential services and goods, such as pharmacies, hospitals, grocery stores, supermarkets, malls, and banks. They also immediately arranged transportation for essential workers like medical, bank, and supply chain personnel. Within the first 47 days of the emergency service’s operation, Beat offered rides to more than 18,000 people daily, and helped 26,000 drivers earn an income.

The Beat Bus initiative gave free bus service to more than 1,800 frontline medical workers during the lockdown, while the Beat Envío courier service in Peru, Chile, Colombia, Mexico, and Argentina transported goods and supplies such as groceries, medicine, prepared food, clothing, and documents.

Because their customer and driver communication network is extensive and well connected, the company was also critical in supporting cities in the effort to push out safety messages and improve overall awareness, she adds.

“The fact that we have almost 24/7 access to our audience, both drivers and passengers, makes us quite agile in communication,” Ilic explains. “We also stay on top of what’s happening because we get feedback from passengers who rate every ride, and run surveys every couple of weeks to understand the sentiment of the market when it comes to safety and security measures we need to follow.”

Beat Tesla service

A downturn in the market might not seem an advantageous time to expand, but their recent launch of Beat Tesla service “is a no-brainer,” Ilic says, for a number of reasons.

As part of its efforts to reduce its carbon dioxide emissions, Beat recently launched their Beat Tesla service in Mexico City. The launch marks the first all-electric private EV fleet in Latin America, featuring Tesla Model 3 cars. The choice of circumstances for the launch is very deliberate, she says.

“The timing is quite critical for us, to make sure we reach a certain level of operational excellence as the COVID situation is improving,” says Ilic. “It only helps us to be even more ready for when cities return to moving at the same levels as before. We have time now to make sure we can execute on this.”

Although they’re the number one service in Peru and Colombia, in Mexico they’re a young player, and it’s a tough market, she adds.

“It only makes sense to innovate and try to be the first mover in important ways,” she says. “As a company that moves millions of people every day in massive cities, we need to play a bigger part when it comes to pollution and how cities evolve, how much greener cities can become as they grow,” she explains. “Besides us helping people move using cutting-edge technologies, we also wanted to contribute to addressing air quality in our communities.”

The second biggest advantage of the service was made clear by the impact of COVID-19.

“The pandemic made us realize that if we truly want to focus on our customers, the passengers, we need to control a lot more, and as much as we can, the supply side of the business,” she says. “Tesla’s model, where we hire the drivers through a third-party company and lease the cars as well, makes a very big difference.”

The service features Tesla’s high-end electric vehicles with zero carbon emissions rides, best-in-class COVID-19 sanitary measures from the driver screening stage thorough to the disinfection of cars, fully trained drivers, cameras recording and monitoring each journey in real-time, unlimited Wi-Fi connection, maximum legroom, and all-glass roofs.

“We want to be first, and that’s why we’re starting from the top of the pyramid, with the premium Tesla brand,” she says. “As we further see the evolution of EVs, that will help us push the electric model down the pyramid as we adopt different price points.”

The Beat Tesla Mexico launch is now beginning its third month of operation, and Beat intends to continue scaling, with plans to roll out the Tesla business model in Chile, Peru, Columbia, and Argentina. While those markets will include both Tesla and more affordable fares, the plan is for half of rides to be electric within two years – amid their entire fleet in all markets.

“We introduced the first and largest private all-electric car service in Latin America,” Ilic says. “That’s a big statement to make. It’s a great example to follow for different types of companies, not just our competitors. We’re contributing to the way a city moves, reducing CO2 emissions.”

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