Scrum Ventures has closed its debut sports and entertainment fund at “just shy of $70 million,” firm managing director and partner Michael Proman tells Venture Capital Journal exclusively.
“Our fund thesis is really around finding technologies that transcend the vertical that are not just secular in the sports and entertainment space, but have that scale potential,” Proman says. “We really didn’t have a precise number in mind [for the fund]. We were shooting for between $50 million and $100 million, but it was really more about bringing the right partners on.”
Scrum Sports and Entertainment Fund I is Scrum’s largest vehicle to date and its first vertically focused fund. The firm, which is co-located in San Francisco and Tokyo, was founded in 2013 by Tak Miyata and previously raised roughly $80 million across four sector-agnostic funds that have invested in over 130 companies.
The sports and entertainment fund is led by Proman, a former Coca-Cola and NBA executive, and general partner Kazuhiro Kiyoshige, former president and CEO of sports marketing agency Dentsu Sports America.
Scrum began fundraising for the sports and entertainment fund at the beginning of 2022 and held a first close at just under $5 million the following December, including a “large” commitment from Japanese bank and financial services conglomerate MUFG, Proman says.
The firm declined to share the terms of the fund, but did say that it is structured as a 10-year vehicle. Besides MUFG, limited partners include Japanet, which committed roughly $4 million, SBI Group, Sumitomo Corporation of Americas, Sumitomo Mitsui Trust Bank, Sega Sammy Holdings and Wowow, according to fundraising data from affiliate title Private Equity International (registration required).
“In Japan a lot of these corporations are also team owners, so they have a vested interest in the space,” Proman explains. “We’ve got multiple media conglomerates, Nippon Television, TV Asahi and of course having people like Sumitomo and MUFG, about as blue-chip as they come within the Japanese market.”
The fund has completed 20 investments in 16 companies across stages, with its first checks going into seven companies at the seed stage, five at Series A, three at Series B and one at late stage. Representative investments include participating in the $12 million early-stage round of Ozlo, which produces sound-blocking earbuds designed to improve sleep quality, and participating in the $14.25 million round of retail apparel company Bandit Running, which designs and manufactures running-related sports and athleisure apparel.
Scrum’s sports and entertainment vehicle is primarily focused on North America-based companies because “people look at North America as a leader in the sports and entertainment space,” Proman says, but the fund is also interested in leveraging its presence and networks in Japan to work the opposite direction in specific cases.
“There are a few particular spaces that I think lend themselves to that,” Proman tells VCJ. “One would be Anime or Manga, some more traditionally Asia-based genres that have been unable to really break through and find that level of democratization within the space. The other, and one of our portfolio companies is doing this, is K-Pop.”
Proman explains that K-Pop, or Korean pop music, is “as cultish as it gets” in the entertainment space, meaning that consumers of the product are extremely passionate and represent a globally addressable market opportunity. He says that cult-like behavior is an underappreciated tool companies can use to succeed.
“When I think about companies that I find very attractive I very much value the cult factor”
Michael Proman, Scrum Ventures
“When I think about companies that I find very attractive I very much value the cult factor,” he says. “I know that seems kind of bizarre, but it’s the same in sports, right? I was wearing my Justin Jefferson jersey last night. I could be at a sports bar, I could be at US Bank Stadium surrounded by 65,000 other people with the same thing on who I have no idea who they are but we’re on the same team, we’re in the same cult. So it’s the same thing. How do you take something that is incredibly sticky, incredibly cultish and find ways to export that genre?”
While many of the companies that Scrum has backed engage with the Japanese market, Proman says that is not a defined part of the firm’s investment thesis. It is merely a product of its partners’ networks and its dual headquarters.
“We don’t want to get typecast as purely the gateway to the Japanese market,” he notes. “We are [a gateway] for a lot of these companies, but Japan as a point of interest is not a prerequisite for our investment strategy. Of course, given our LP base, my partners in the fund and their respective networks, our ability to transform businesses and help them break into markets like Japan that are incredibly difficult to access is there.”
Proman says the sports and entertainment focus of the fund is not a departure from Scrum’s historical investment thesis, but rather a capitalization on timing and interest from LPs and consumers.
“We like the ability of being able to invest in new emerging sectors that could be attractive for us in the future,” he tells VCJ. “Oftentimes we get our cues from our partners in Japan, where their interests are, not just here and now but in the future. Sports was just the right opportunity at the right time. A lot of that was driven by the 2020 Olympics in Tokyo and the interest around that. I don’t know what the next big thing is going to be, we’re just focused on this fund and making it as good as it can get.”