Tempo’s valuation for this round is $30 million. Participating investors will receive a SAFE that will convert into equity upon the company’s next round, subject to a 20% discount to the future value of the firm. The company’s valuation is very high compared to other startups that are currently using crowdfunding to gain funding. However, Tempo has strong early traction that makes this price more reasonable, and the discount is also a boost. Thus, the price score for Tempo is high.

Tempo dips into multiple markets, the first being eSports.  Admittedly, the industry is growing at a rapid pace, averaging 24.4% per annum through 2027. However, eSports on its own is quite small. In 2020, the market was estimated to be worth $1.48 billion. By 2027, its growth will only take it to $6.82 billion. As a note, it is surprising just how little of its revenue is associated with advertisements. In 2021, about $226 million eSports revenue came from advertisements. This compares to $143 million in 2018. While eSports on its own may be small monetarily, it attracts an incredible amount of people. In 2019, there were 454 million eSports viewers globally. This number is expected to grow to 646 million in 2023.

The big money, meanwhile, lies in the broader video game market. As a whole, the space is worth $151.06 billion in 2019, about $109.66 billion of which came from mobile. Through 2027, this broader industry is expected to grow by 12.9% per annum,taking it to $398.75 billion. A significant portion of this growth will come from mobile games. It is also worth noting that other sources suggest a similar market size today. One, for instance, estimated in 2021 that the industry was worth $154.63 billion. With an annualized growth rate of about 9.3%, it should grow to $220.55 billion by the end of 2025.       

Based on the size and overall growth rate of these markets, Tempo’s market score is strong.

At the top of Tempo is Andrey Yanyuk. He founded Tempo and is presently serving as its CEO. All of his experience that has been made publicly available relates to the video game and eSports markets. At one point in time, he was a professional player in Magic: The Gathering. After a cheating incident, he left and made a name for himself playing Hearthstone. That was what really allowed him to take off and eventually own an eSports team. Yanyuk’s experience in the space is incredibly valuable, but the absence of any prior CEO position and of any real business experience does leave some of his credibility in question.

One person on the team who does have this experience is Noah Kline. Kline serves as Tempo’s chief revenue officer. In the past, he served as the founder and CEO of Kilobyte Labs. That firm focused on things like AI, virtual reality, big data, and more. He was also the founder and CEO of Electric Sloth. Prior to that, he worked in business development at sticky.io, a company focused on subscription e-commerce and campaign management. Kline has also worked as a business development advisor at Civil Maps, where he focused on work related to city-scale HD 3-D mapping and localization. These experiences in tech centered firms certainly have a tie-in with his current work. They also demonstrate some degree of leadership experience in a corporate environment.

While Yanyuk has exceptional knowledge of the eSports space, he does not bring strong leadership skills or past entrepreneurial experience. As a result, the team score for Tempo is its lowest across all five metrics.

Management would probably tell you Tempo is special because it’s a vertically-integrated player in the gaming and eSports market. While this is a fair description of a company, it’s not unique. Competitor 100 Thieves is a gaming organization that participates in competitive gaming, entertainment, and apparel sales. Similarly, VENN is a network for gaming and esports that also creates its own original content. However, there are two main features which Tempo is building that these competitors do not offer — community and in-house game development. Tempo’s community site is a smart addition that lets it tap into the huge eSports audience. By developing its own games, the company also taps into an additional revenue stream. The full suite of features that Tempo is creating also lends itself to multiple synergies across the organization. The community of streamers will likely be able to provide feedback on streaming events and games they want to see or play. Games created by the company could produce new streaming events or competitions. 

Due to the unique set of features that Tempo is combining, the differentiators score for the company is above average.

In 2019, the company generated revenue of $1.97 million. This amount grew to nearly $2.2 million in 2020. Although this trend could very well continue, the company is still losing a lot of money. In 2019, the firm generated a net loss of $2.02 million which expanded to a loss of $2.32 million in 2020. Likewise, its operating cash flow was negative to the tune of $1.93 million in 2019, and $2.23 million last year. 

On the other hand, there are some other areas in which the company has excelled. The fact that it has already sold some of his content is encouraging. In addition, it clearly has built a name for itself. Across its entire ecosystem, the company has more than 60,000 subscribers. It has 5.8 million Twitch followers, 1.5 million YouTube subscribers, and 1.6 million Twitter followers. The fact that Tempo has succeeded in growing its new community from nothing to 1,500 streamers since June 2020 is also quite encouraging.

With both healthy revenue figures and strong user traction, Tempo scores extremely highly in the performance metric.

One risk to keep in mind with Tempo is that the team could be better, especially as it could use a CTO. While the product is somewhat differentiated from current competitors, it’s not highly defensible. What makes Tempo unique is the combination of services and features it’s bringing together. If a competitor chose to replicate aspects of Tempo that it didn’t currently have, Tempo might struggle to maintain distinction in the market. The firm is also still losing money, and that picture shows no signs of improving. It will likely be some time before Tempo can live up to its slightly lofty valuation.

Tempo’s greatest advantage is the fantastic revenue generation the company has accomplished in recent years, which could help it survive. In addition, the market is large and rapidly growing. That alone could lead to significant upside for shareholders in the long run. The company also appears to have established itself as a creator of quality content that is in high demand. If it continues to create successful content, Tempo could carve out a niche of name brand recognition for itself.

Putting everything together, management has done well to get Tempo to where it is today. It has a successful eSports team of its own, a significant following across social media, and a significant amount of revenue. The company is combining a smart set of features and services together which distinguish it for the current competition. The video game and eSports markets are growing, providing plenty of market opportunity. If Tempo is able to capitalize on its early content successes and ample amount of followers, it could be well-positioned to become a major name in eSports. Because of these considerations, Tempo is a Deal to Watch at this point in time.         

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Daniel Jones.