Sentinels officially launched its crowdfunding campaign on Friday, Aug. 4. But even if the organization is able to hit its maximum offering amount, it would still need to raise additional capital to keep the lights on for more than a few months.
The campaign was launched via StartEngine, allowing potential investors to buy in with a minimum investment of around $300, at the current rate of $3.15 per share. Investing certain amounts unlocks additional perk level bonuses such as jerseys and office tours. Like with any company, the goal of offering stocks to the public is to raise capital to invest in expansion or growth.
As of 11:34am CT on Aug. 8, the campaign has raised $72,589.49 across 46 investors.
The offering has a deadline of Nov. 2, 2023, to reach its maximum funding goal of $1.23 million, which equates to 392,063 shares. But even reaching that goal doesn’t ensure the long-term stability of Sentinels. In its offering letter submitted to the U.S. Securities and Exchange Commission prior to the launch of the campaign, the company said it still needs to rely on additional investment, as well as both growth and consolidation of the esports market.
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Under the Risk Factors section of the letter, the company writes, “Even if the maximum amount is raised, the Company is likely to need additional funds in the future in order to grow, and if it cannot raise those funds for whatever reason…it may not survive.” This section also outlines the risk of a crowdfunded investment losing value if the company is forced to issue more equity to attract more investors.
Without additional capital raised via existing shareholders or other outside sources of financing, Sentinels estimates the company would be able to operate for four to five months if it raises the maximum amount, but only two to three months if it raises the minimum. Sentinels attributes this to approximately $695,000 spent monthly on player, creator, and staff salaries, and funds required to acquire merch inventory.
If the maximum number of $1.23 million is raised, exactly half of that would go toward retaining and signing players and content creators, according to Sentinels’ offering letter. Just over a third of it would go to more content creation in general, and 10 percent would go toward efforts to bring its merchandise operations in-house.
The letter also includes information about Sentinels’ financial performance over the past couple of fiscal years. Revenue from merch and sponsorship sales went up, but revenue from digital goods went down, which was attributed to the VALORANT team not reaching Champions in 2022 like they did in 2021, due to the team not getting a cut of the skin bundle. While generated revenue did go up, the overall net loss did too due to a substantial increase in operating expenses. But Sentinels does claim it is in the “growth stage” as it is now generating revenue and will continue growing following “substantial investments.”
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In its letter, Sentinels expects the esports market to continue to grow due to the rising popularity of games, esports, and the growing investment in esports infrastructure. It also noted, though, that it believes “a substantial consolidation will take place in esports over the next one to two years.”
Still, Sentinels noted in several sections of the letter that “substantial additional capital” is needed.
