In today’s Finshots, we explain why companies are in a mad rush to throw money at sports teams and leagues.

The Story

On 19th January, Twitter user Varun Sangani tweeted to Rohit Sharma, captain of India’s white ball cricket team, writing— “need your help on perfecting my pull shot. Not able to generate power when I am trying to control it.”

Sharma, who is also the captain of Mumbai Indians tagged his team and replied in a rather cryptic manner: “Don’t worry… if the bowler pitches it short, just slice it.”

If you follow cricket, you’d know that the words “just slice it” isn’t typically the kind of advice that coaches dole out when it comes to perfecting the pull shot. So, what was Rohit Sharma hinting at?

Well, it didn’t take us too long to find out. Barely a day later, on 20th January, Mumbai Indians announced that it had a new principal sponsor for the 2022 season — the Bengaluru-based fintech company Slice. Millions of people who tune in to the IPL will now see the words Slice printed in bold on the team’s jersey. And they will also likely see Slice ads featuring Mumbai Indians players. The 3-year contract is estimated to be worth ₹90 crores. And is the largest sponsorship deal in IPL's 15-year history.

But why is a 7-year old startup spending all this money to sponsor an IPL team?

Well, multiple reasons. Slice just raised $220 million recently and is a unicorn now — a company with a valuation of over a billion dollars. And sports sponsorships — Well, it’s what all the cool kids are doing. 8 out of the top 20 most valuable venture-backed companies in 2021 have either signed sports partnerships or committed to media investments. Consider, for instance, the football league in Italy. After consistently featuring on the shirts of Serie A champions Inter Milan for over 25 years, tyre maker Pirelli made way for crypto exchange last year. Over in the US, the Staples Centre — home to the NBA's Los Angeles Lakers for 20 years is now the Arena. 9 of the top 20 teams in English Football have partnerships with startups.

The old economy is making way for the new.

And the sporting ecosystem is at the centre of it all. Young companies have an opportunity to connect with a super passionate community. One study in Australia tried to quantify this loyalty. They compared sports fans to fans of performance arts. And here’s what they found — More people attend artistic events in person. But 22.2% of all sporting fans attended six or more events in a year, compared to 8.5% of the performance arts audience.

It tells you that sporting fans are extremely loyal to their team. They’ll always show up no matter what. And this loyalty translates to better monetisation potential. Especially when it’s a sponsorship deal.

“TV advertising just informs someone that a startup exists, but sponsoring a football club creates an immediate emotional connection with the brand,” says Andreas Kitzing, CEO and founder of sports sponsorship marketplace Sponsoo.

In India, the IPL is the biggest sporting event. Nothing draws more eyeballs. It could be television, OTT streaming, YouTube shows or something else. IPL is the kingmaker. During the 2020 edition, people consumed 400 billion minutes of cricketing action. And almost 50% of IPLs viewership can be attributed to those below the age of 30.

But that aside, people from all walks of life watch the IPL. High-income earners, low-income earners, rural folks, urban folks — everyone. And for Slice, a company that calls itself the credit card challenger, this is a massive opportunity. The company has tied up with the State Bank of Mauritius and is now issuing cards that pretty much work like the Buy Now Pay Later apps that you see everywhere. The only difference is that they are the 3rd biggest credit-based card issuer in the country right now — only behind HDFC and ICICI bank. Tack on some Mumbai Indians co-branded cards and perhaps they’ll be making a play for the top.

But will the return on its investment be worth it?

Well, we don’t know for sure. Startups in hypergrowth mode seldom care for return on investment. They’ll take a punt and hope for the best. And with global sports sponsorship expected to jump from $57 billion in 2020 to almost $90 billion by 2027, who knows? Maybe Slice is an early mover. Maybe this is a sign of things to come.

Until then...

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PS: Even age-old brands are looking to use sports to appeal to the younger demographic. Like the Tata Group’s sponsorship of the IPL from 2022.