eSports and Chill: Caffeine & Discord

Michael Buono
Feb 28th, 2020
Video games have come a long way from the days of playing Mario on Super Nintendo. We’ve all read about the crazy amounts of money influencers are making on YouTube or Instagram, however, one of the hottest areas right now is video game streaming.

eSports, as it’s become known, is a form of sports competition where users play video games, either individually or in organized teams. According to SuperData, video gaming content brought in $6.5 billion in revenue last year.

Some of the biggest names in eSports are getting paid millions of dollars to compete and stream their gaming. Top video game streamers are getting paid upwards of $50,000 per hour to play new video games to generate a buzz. Last year, a 16-year old even won $3 million in a competition for the popular video game Fortnite.

All of the tech giants have gotten in on this popular new segment. Google's YouTube, Facebook Gaming and Microsoft's Mixer have all quickly become popular sites to stream video games. Twitch, which Amazon acquired for $1 billion in 2014, is still the market leader with 61% of total hours watched in the live-streaming gaming market. 

Despite the biggest companies in the world going after people’s eyeballs in the video game streaming market, that hasn’t stopped startups from trying to get in on this hot market.

Caffeine is a live-streaming site that launched just over two years ago but is quickly becoming a popular destination for video game streamers. Caffeine, which was founded by former Apple TV designers Ben Keighran and Sam Roberts features gamers streaming popular games such as Fortnite, World of Warcraft and Apex Legends. Video game streamers who have migrated to Caffeine have cited lower latency—which equates to a quicker response time to their streams, and a more intimate community with fewer bots as reasons they’ve been drawn to the startup streaming service.

Caffeine has already raised $146 million in 3 rounds led by 21st Century Fox, Andreessen Horowitz and Greylock Partners. The company’s most recent funding round, led by 21st Century Fox with chairman Lachlan Murdoch joining Caffeine's board, resulted in a valuation of $500 million.

Another popular startup in the space is Discord, which offers a free application for text, image, video and audio communication between video game streamers. The site, which launched in 2015, already boasts more than 250 million unique users.

Discord has also seen investors rush to fund it. The company landed $150 million in funding at a $2 billion valuation in December 2018 led by Greenoaks Capital with participation from Firstmark, Tencent, IVP and Index Ventures. The round brought Discord’s total funding to more than $280 million. The funding round came just 8 months after Discord raised $50 million at a $1.65 billion valuation.

Technology consulting firm Activate estimates that by 2021 eSports will have more viewers than every professional North American sports league, except the NFL. With people increasingly drawn to watching other people play video games, these startups should be able to capitalize on the trend in the years to come.
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