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An investor puts $2 million into an esports organization in exchange for 20% ownership.
At first glance, the valuation looks easy to calculate:
$2 million ÷ 20% = $10 million
That number doesn’t necessarily mean the organization is worth $10 million, though.
If the investor received newly issued shares, the $10 million represents the implied value after the investment. Before that money came in, the implied value would have been $8 million.
Now suppose the investor also received preferred shares, special voting rights or priority payments if the company is sold. Their 20% interest might carry different economic rights than another owner’s 20%.
The calculation is correct, and we just need to understand what it represents. That’s what makes business valuation in esports so interesting to me.
The Valuations We’ve Seen in Esports
Esports has produced some impressive valuation headlines.
In December 2021, 100 Thieves raised $60 million in a Series C funding round at a reported $460 million valuation. By then, its business extended beyond competitive gaming into apparel and content creation, along with other commercial activities.
FaZe Clan is another interesting example. When FaZe announced its proposed public-market transaction in 2021, the deal contemplated an approximately $987 million combined-company equity valuation under specified assumptions. In March 2024, GameSquare acquired FaZe and later reported approximately $14.6 million in acquisition consideration for accounting purposes.
Those numbers are dramatically different, but they aren’t directly comparable, since they come from different transactions, financial circumstances and measurement dates. A valuation headline gives us a number, and it takes considerably more work to understand what that number represents.
Defining the Business Being Valued
One of the first things I’d want to understand is what the esports organization does day to day.
A company might operate competitive teams, but its revenue could also come from sponsorships, merchandise, streaming, content creation, licensing and creator partnerships. Each of those businesses has its own financial characteristics. Competitive rosters come with player salaries and coaching, plus travel and tournament expenses. Merchandise involves inventory, production and fulfillment, while creator businesses depend on talent relationships, audiences and commercial agreements.
The distinction became especially clear after GameSquare acquired FaZe. In 2024, GameSquare separated FaZe Media, its creator-led media business, from FaZe Esports, its competitive gaming operation. Transactions involving FaZe Media indicated an approximately $40 million valuation for that business, as reported by GameSquare, while GameSquare kept 100% ownership of FaZe Esports.
The same recognizable brand was connected to two different businesses. So before calculating anything, we need to know which assets, revenue streams and operations are included in the valuation.
Looking Past Revenue
Let’s imagine two esports organizations. Organization A generates $15 million in annual revenue, while Organization B generates $8 million. At first glance, Organization A looks more valuable.
Now suppose Organization A spends $17 million a year operating the business, while Organization B generates $1.5 million in operating profit. That changes the conversation.
Organization A might have a larger audience and more room to grow, but it also needs capital to fund its losses. Organization B might be smaller, with more sustainable financial results. Neither fact settles which one is worth more on its own.
From there, we’d want to know if Organization A’s losses come from temporary growth investments or an ongoing problem in the business, and how likely Organization B is to keep its profitability.
Revenue shows how much business an organization brings in. The owners care about something different, which is the economic benefit they can expect to receive.
Where I’d Start With the Financials
If I were valuing an esports organization, the financial statements would only be the beginning. I’d also want to review:
Revenue by business line. Sponsorships, competition, content, merchandise, licensing and other activities.
Sponsorship agreements. Contract terms, renewal history, sponsor concentration and fulfillment costs.
Player and creator contracts. Guaranteed compensation, revenue sharing, contract lengths and termination provisions.
Roster expenses. Salaries, coaching, travel, housing and support staff.
Profitability and cash flow. Historical results, recurring expenses and future capital requirements.
Intellectual property and league rights. What the organization owns or licenses, and what it can transfer.
I’d also look for unusual expenses or transactions that might need adjusting to get a clear picture of normal operating performance.
One especially important piece is how dependable future revenue is. Suppose an organization generates $4 million a year from sponsorships, but $3 million of that comes from one sponsor whose agreement expires in six months. The organization has a history of bringing in $4 million in sponsorship revenue, but keeping it there depends heavily on one relationship.
The same concern applies to creators. When an organization’s biggest streamer leaves, some share of the audience and sponsorship revenue may leave too.
These risks don’t necessarily mean the business has little value. They affect how confidently we can project its future financial performance.
The Details Behind the Complexity Deal
Complexity Gaming is a useful example of how real esports transactions can inform a valuation.
In March 2024, GameSquare sold Complexity to an investor group led by founder Jason Lake for announced consideration of approximately $10.36 million. The deal included $750,000 in cash, with most of the remaining consideration provided through a seller-financed promissory note.
That distinction is important. Receiving $10 million in cash today is economically different from receiving a smaller cash payment and a note collected over time. GameSquare’s later financial reporting reflected a lower accounting fair value for the consideration, partly because the note was discounted.
If I were using this transaction in another valuation, I’d want to understand the assets transferred and the financing terms, the circumstances of the sale, and how Complexity compared with the organization being valued. A transaction gives us useful evidence, and the details tell us how much weight it can carry.
Choosing a Valuation Approach
Once we understand the business and its financial performance, we can look at the traditional valuation approaches.
The income approach focuses on the economic benefits the organization is expected to generate. That could involve projecting revenue, expenses, capital requirements and future cash flow while accounting for the risks involved.
The market approach uses pricing evidence from comparable businesses and transactions. Finding comparable esports organizations can be difficult when their revenue streams, profitability and business models differ so much.
The asset approach looks at the value of the organization’s assets and liabilities, including intellectual property or other assets whose economic value may not be fully reflected on the balance sheet.
Each approach fits some situations better than others. The purpose of the valuation and the financial evidence available help decide which methods make sense.
The Rights Behind an Ownership Stake
Let’s go back to the investor who paid $2 million for 20% ownership. That investment implied a $10 million post-investment equity valuation.
Someone who already owns 10% doesn’t automatically hold an interest worth $1 million, though. We’d need to understand that owner’s voting rights, distribution rights and transfer restrictions, along with any other contractual provisions. We’d also want to know if the new investor received preferential rights that existing shareholders don’t have.
These considerations become especially important in shareholder transactions and ownership disputes, as well as estate or gift tax valuations. An ownership percentage counts for a lot, and the rights attached to it can count just as much.
One Organization, Several Sources of Value
An esports organization can operate competitive teams, build a recognizable brand, produce content, sell merchandise and develop relationships with millions of fans. Each of those activities can add to its value.
Understanding what the organization is worth takes more than looking at revenue, tournament results, social media followers or the last investment announcement. We need to understand the business and the assets it owns, along with the financial benefits it can generate and the risks that come with them.
That’s why two organizations with similar audiences can have very different values, and why a financing-round valuation, an acquisition price and a minority-interest valuation aren’t automatically interchangeable.
For me, the interesting part of esports valuation is seeing how those pieces fit together and working out what the financial evidence can reasonably support.
Walking Through the Numbers Together
Valuation tends to make a lot more sense once you can see what sits behind the number, and that’s something I like going through step by step with owners, investors and advisors. You can book a meeting with me , and we’ll go through your organization’s numbers together.
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