The crazy hype surrounding the football trading card startup

Berlin Everything about the story of the new French super start-up is really crazy – the idea, the fans and the economic success. Investors have valued Sorare at $4.3 billion in a new round of funding. This makes the Parisian fantasy football company France’s most valuable start-up. And this despite the fact that it was only founded in 2018 and to date has only 30 employees.

In principle, this is a virtual football trading card variant based on the Panini model. However, fans can field five of their footballers on matchdays and rack up points when the real pros score goals, save penalties or win duels. The special thing: With the help of blockchain technology, the company of co-founder and CEO Nicolas Julia ensures that digital images are rare and cannot be copied. “Fans want to play a game that really belongs to them,” Julia told Handelsblatt. Additionally, the technology adds value to Sorare Trading Cards from a crypto investing perspective as well.

According to the company, cards worth around 128 million euros have been exchanged since the start of the year. The starting price is usually a few euros and can be bid higher. The previous record sum was paid for a unique digital image of professional footballer Cristiano Ronaldo. His digital image was worth more than 245,000 euros to a fan. But the question is open: is there any real value in the cards? Or is it sheer madness?

Investor Christian Miele, who joined Sorare a year ago with venture capital firm Headline, also asked himself the same question. He observes the development of so-called non-fungible tokens (NFTs) since 2018. At that time, the first hype about non-copyable and digitally encrypted cat images appeared in the United States. Miele saw this with a critical eye: “With the first pictures of NFT cats, owners could do nothing but wait for another idiot to buy them at a higher price.” However, Sorare then managed to create NFTs with a true to bind utility.

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In the words of CEO Nicolas Julia, it goes like this: “Our business model goes beyond betting, selling and collecting – we captivate fans on our platform.”

High customer retention rate

Indicators that Miele and its partners have seen confirmed: a large majority of players are still regularly active on the platform three months after purchasing their first Sorare card. Julia told the Handelsblatt a so-called 70% retention rate – an extremely high customer retention rate compared to other business models.

According to the company, more than 600,000 users are currently registered. Nearly 40 leagues around the world are taking part in the game. Fans can buy match tickets at 180 clubs, including Bayern Munich, Bayer Leverkusen, Liverpool and all clubs in Spain’s top two leagues. In the meantime, there would be Sorare players making a living on the platform by buying, using, and reselling the cards.

But one thing is certain: there is no guarantee that the cards will not lose their value. It is true that Sorare is not considered a game of chance, because pure chance does not decide who wins or who loses. But players have to bet that the excitement of the gaming community will continue. And there are other risks: If a football professional withdraws from the game, the corresponding playing card only has collector’s value – similar to cat pictures. Sorare users can’t do anything with photos of Schalke 04 football professionals as long as they walk around with their club in the second division.

Many venture capitalists and prominent representatives of the football industry are also counting on the fact that all the Sorare hype won’t suddenly vanish into thin air. The current funding round (Series B) of nearly €581m is led by Japanese investment giant Softbank, alongside London-based venture capital Atomico, California-based Bessemer Ventures and American private equity firm IVP, as well as existing investors Benchmark and Accel are following suit. National footballers Gerard Pique (Spain), Antoine Griezmann (France) and 2014 German world champion André Schürrle are invested, as is DFB director Oliver Bierhoff.

Besides the risks, the business model is attractive and already very profitable: according to industry circles, Sorare should make a double-digit profit of one million this year. Decisive for this is an average of 90 percent of the first sale of playing cards, the rest is collected by clubs and leagues. Each season, Sorare publishes a total of 1111 cards per footballer on the platform: a limited edition of 1000 cards each, 100 cards in the Rare category, 10 in the Super Rare category and one NFT card in Unique. Depending on the rarity value, the number of points obtained is multiplied on the day of the game. Sorare does not yet participate in the resale of playing cards to users of the platform – but this is possible in the future, specifies Nicolas Julia.

expansion plans

With the capital raised, Sorare intends, among other things, to enter into new licensing agreements, to expand and to hire 170 additional employees by the end of next year. According to Julia, the company now makes almost 20% of its sales in the UK, with 10% in France, Germany, Spain and Italy. Twenty percent of sales are already generated in the growing US market – he wants to increase that share. It doesn’t see any serious competitors yet, but it’s still about growing fast.

For investor Christian Miele, who is also president of the German Startup Association, Sorare could be the biggest investment success of his career. His venture capital firm, Headline, is one of the main shareholders. And the numbers are already impressive. According to industry sources, since Miele invested in the seed funding round a year ago, the value of the stake has increased nearly 140 times in the other two rounds. It also means: based on Sorare’s current rating alone, Headline could repay nearly three times investors’ investment in its €150 million fund.

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