David Becker via Getty Images. Illustration by Lorenzo Gordon
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Most people would consider Roger Ehrenberg a risk-taker, as one of the most prolific sports venture capital investors of the past few years. After all, it’s all his money backing the $130 million sports-focused Eberg Capital, and he invests it where many VC consider too risky: in the seed stage of company development, where he likes to be the lead investor and write checks between $250,000 and $2 million to get in on the ground floor of the sports business’ next big thing.
“The stuff I’m doing is still very much art mixed with science, as opposed to just pure science, so I’m living on the riskiest part of the risk-reward continuum,” Ehrenberg, 58, said on a phone call. But, he says, on a risk-adjusted basis, he’s “living in the best part of that continuum,” given he has the chance to directly influence the development of the businesses he enters.
“I’ve built my career on the step before people are making money, helping founders who have great ideas design the experiments to work towards product-market fit.” Ehrenberg said. “Once it becomes more of a scaling issue than a product-building issue, venture dollars become largely commoditized.”
The sports focus could be considered the third stage of Ehrenberg’s career. The first was a couple of decades spent in the high-stakes world of global derivatives trading and running a $6 billion hedge fund. Then he made the unusual transition from trading and its minute-to-minute obsessions to venture capital, with its preponderance of self-styled visionaries and five- to 10-year-long bets. His first VC firm, IA Ventures, scored some significant wins, including backing The Trade Desk, now a $42 billion (market cap) leader in the massive world of digital ad sales, and cloud-commuting security firm Datadog, now worth $38 billion.
IA entered both in similar, seed stage fashion as Eberg does now. While it’s risky—only one in three startups will ever grow enough to raise more capital—the presence of a deep-pocketed early investor dramatically improves the odds: Fully half the companies that raise $1 million or more in a seed round will later raise more money, according to a 2021 study by Crunchbase.
For Ehrenberg, the move to sports came in 2021 when he stepped back from managing IA after a series of personal epiphanies detailed on his Medium blog led him to refocus what he wanted from life. Sports was a natural area given his passion for games, including baseball, which led him to buy a limited partner stake in the Miami Marlins. At the same time, the investor in him couldn’t help but notice a void in sports investing: Large funds were investing in later-stage VC rounds—that “commoditized” money—or teams would be investing as VC more with an eye toward gaining visibility into technology than building new businesses.
“There was literally no one like me operating in the space, by which I mean … nobody doing pre-seed and seed in an institutional way,” he told Sportico. It also dovetailed with a desire to work with his two sons, Ethan, who is with Eberg full time and also working toward a degree in sports management from Columbia, and Andrew, a data scientist who splits his time between the sports fund and other family investments in real estate and hospitality.
Over the past three years, Eberg Capital has amassed a portfolio of at least 26 companies, according to its website, including in collectibles start up Alt, made-for-TV and betting sports producer Pro League Network of CarJitsu fame, and athlete income sharing startup Commonwealth Sports.
Given his desire to invest early and be able to help mold a business with its founders, Ehrenberg doesn’t have a list of parameters other VCs often demand—like needing an investment to be cash-flow positive or growing customer count at some hurdle rate. Instead, prospective companies need to suggest a shot at being deeply impactful. “Can they truly disrupt a segment of the market or to help unlock assets in a market that are currently undervalued or underserved?” Ehrenberg detailed. “What is the problem that they’re addressing? And is that problem an important problem, both from a customer standpoint and [being] of a scale that could potentially generate venture-scale returns?”
Eberg’s investment in Betr displays his thinking. Eberg led an investment round last year into the sports betting and media venture, valuing the business at $300 million about a year after its founding by Jake Paul and Joey Levy. At the time, the U.S. sports wagering market already was separating into FanDuel and DraftKings and a bevy of also-rans.
“You look at the betting landscape, and you say, ‘It looks like the game’s over,’” Ehrenberg said. But Betr’s focus on the entertainment aspects of sports betting intrigued him. Paul and Levy combine micro-betting with the desire to control the user experience from front to back, which means developing its own technology rather than using third parties for mission-critical functions.
“Having an immediate business that, on a standalone basis, earns money and at the same time lowers customer acquisition costs … with Betr that was a disruptive take on the market that could ultimately take share from the incumbents and vanquish the smaller players,” Ehrenberg said, though he admitted, “We’re very early in that bet, so talk to me in a decade.”
To his point, however, there was a time when The Trade Desk seemed like it could never break Google and Facebook’s grip on the digital ad broker world.
Long term, Ehrenberg says he aspires one day to own a franchise himself. “I love all sports,” he said—the family is also invested in MLS’ Real Salt Lake and Alpine F1—“but baseball is both my favorite and the place that I believe I could have the greatest impact, to be honest.”
Perhaps a fourth career stage is on the horizon.
