Monday, November 08, 2010

Be Like Khosla: SBNation's New Funding

Regular readers know that I am a fan of sports-media start-up SBNation, featuring 200+ high-quality team blogs, regional hubs and a national portal, and led by Jim Bankoff and featuring some absolutely terrific talent in every department.

I'm not sure if "start-up" is the right word -- although I appreciate that the company still acts like one (in all the right ways). Financially, they are well beyond that: From the early days of Daily Kos' Markos Moulitsas and Ted Leonsis' seed investment to Accel Partners (which backed Facebook) to Bankoff's investment fund to Allen & Co (which has investments in a lot of top-tier media start-ups -- and often brokers their M&A) to Comcast (which has a vested interest in local sports media).

Yesterday, the company got another funding boost: $10.5 million, led by Silicon Valley A-list VC Khosla Partners (whose website's lead page features a quote from Michael Jordan) but also showcasing a positive signal from re-investment by Comcast and Accel.

This is a big deal, on a couple of levels:

*Resources: That is a large stake to push the pedal down in a couple areas SBN had already started accelerating: Ad sales (see the recent Samsung takeover on the site), distribution partnerships (Yahoo was a big one in the past year), technology (which is a widely underestimated core asset), editorial talent (like the regional editors), acquisition (like Spencer Hall's EDSBS). And ad sales. And, um, more ad sales.

The fact is: You have to spend to make. The company has had to (and still has to) spend on technology and distribution and talent to increase traffic, but also spend on more sales talent to tell the company's story to marketers -- both nationally and regionally.

*Valuation: Between the incumbent sports-media companies backed by massive corporations (ESPN,,, Fanhouse, Yahoo! Sports, Comcast regional online sports sites -- even Deadspin) and early-stage start-ups (present!), name a current independently owned sports-media company valued between, say, $5 million and $100 million.

Waiting... waiting...

That's right: SB Nation. And that's about the extent of the list. (Citizen Sports was acquired earlier this year by Yahoo for $50 million. Yardbarker was acquired a few weeks ago by Fox Sports for an undisclosed amount. Unsure about Big Lead Sports' valuation.)

With its new investment round, SBN is valued somewhere between $60M and $90M. That is a lot -- certainly a lot more than their valuation a week ago. But it remains an entirely reasonable size for a potential acquirer like Yahoo or AOL or Comcast, a current investor.

More important, SBN has staked out a position that is complementary to most of the rest of the sports-media ecosystem, big or small. Particularly clever is the way SBN has built up their back-end tech platform to keep pace with social media -- and the way they have combined existing editorial content into hubs that have the potential for more distribution and more revenue.

(To the point about acquisition, I think that it's fun for the rest of us to say "Well OBVIOUSLY this fits!", but ultimately a distraction. Whether Comcast buys SBN outright or merely remains an investor and distribution partner, I cannot imagine that Comcast doesn't want SBN to play a role -- perhaps a large one -- in their pending sports-media uber-strategy when Comcast eventually acquires NBC-Universal, a slightly bigger acquisition priority right now.)

The latest funding round is an affirmation of the company's strategy -- forget the valuation; it is particularly eye-opening that someone like celebrated VC Vinod Khosla wanted in. Look at his firm's portfolio -- nothing close to a media company (or certainly a sports-media company) in view. That says something about SBN's position in the market, its tech platform, its growth rate (and future plans) and -- frankly (and self-servingly!) -- the larger opportunities in online sports media. (Happy to push the meme: "Be Like Vinod.")

SBN has cultivated and relished its position outside the sports-media "mainstream," even as it has created the traction with fans and with marketers to accelerate closer to it.

Now it has a boost of resources to keep growing in its own unique way.

-- D.S.

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