Telstra Ventures sees e-sports play a rival to Facebook and Google in the digital ad market

The first e-sports platform to go public in the US is growing fast and has ambitious plans to take on juggernauts Google and Facebook.

Telstra Ventures believes the first mobile e-sports company to go public in the US has the potential to join the likes of Apple and Facebook in becoming a big player in the digital advertising market.

San Francisco-headquartered mobile gaming platform Skillz plans to go public in a backdoor listing via a merger with Flying Eagle Acquisition Corp, a NYSE-listed special purpose acquisition company (SPAC).

Telstra Ventures has been an investor in Skillz for the past three years since it led a $US25m ($34.2m) series C raising for the company. It’s a move that has paid off.

Skillz plans to go public using a SPAC, which values it at about $US3.5bn, 15.5 times its forecast 2020 revenue of $US225m.

The company is also forecasting to more than double its revenue to $US555m by 2022 and Telstra Ventures general partner Yash Patel said it was well placed to secure a slice of the digital advertising market.

“By offering this competition engine that any mobile game developer can integrate into and create this layer of competition between players for real cash prizes, that mechanic drives a tonne of retention and engagement and ultimately monetisation,” Mr Patel said.

“This is more than just a simple platform to enable people to play games. This is really becoming a platform similar to Apple or Google or Facebook or other advertising networks that allow mobile game developers to monetise.

“And it’s sustainable. After COVID dies down you are going to see a lot of gamers continue to pick up Skillz games and gaming in general as a more permanent way of passing time as opposed to watching Netflix and live sports.”

Skillz was planning to go public via a traditional initial public offering next year, but by choosing the SPAC option has enabled it to hit the sharemarket more quickly and take advantage of a surge in demand for online gaming during lockdown, which appears unlikely to abate even when the pandemic eases.

“The reality is we have evaluated a lot of options — IPO and SPAC and to a smaller extent direct listing — and this unique window of opportunity to go public for companies that have benefited from COVID and have seen accelerations in the businesses, such as Skillz in the mobile e-sports space, is very unique,” Mr Patel said.

“In the case of Skillz specifically we are able to secure a quality investor base through this PIPE (private investment in public equity) that was part of the SPAC.”

The PIPE included Wellington, Fidelity, Franklin Templeton and Neuberger Berman, which committed a combined $US159m at a price of $US10 a share of Class A common stock of Flying Eagle. Total commitments exceeded $250m.

“The SPAC allows us to basically secure a high-quality investor base that will continue to support the float, while at the same time doing this at a much faster speed than a traditional IPO process,” Mr Patel said.