Another Run at a Sports Stock Exchange

Well I guess in light of the financial crisis and economic meltdown, in a world where everyone’s net worth has taken a dive of 30% or so since this time last year, it’s as good a time as any to fund another sports stock exchange business.

OneSeason.com just announced a $3.5 million round led by CRV and my buddy George Zachary (Note: George was the first VC in on Shutterfly where I spent nearly two years back in that company’s early days). Here’s the TC post on the raise.

Out of the gate my gut reaction to OneSeason raises several questions as to whether they can be successful:

1. A number of companies (TradeSports, HSX, ProTrade) have taken a run at doing this to little success. In fact, ProTrade (now chasing a different opportunity as CitizenSports) has some of the smartest brains in the digital sports space and they weren’t able to get traction with the concept.
2. Sports fanatics aren’t the same as fantasy sports fanatics — the number of the latter is skewed heavily by football and even that number is overestimated by the sources that are most often cited when sizing the fantasy sports space. Just as important, fantasy sports fanatics aren’t the same group of guys who are “traders”. Like the aforementioned sports stock exchanges, there will be a loyal, fanatical user base — it just may be a small niche crowd.
3. What are you buying here? The buying and selling seems to be based on a “beauty contest” — not on any underlying metric that provides some fundamental value of what a player should trade. Feels like a good breeding ground for the young Bernie Madoffs of the world. If I put my cash in to the OneSeason market and my player stocks go up and I want to cash out, what happens if everyone who is “up” wants to do the same? Doesn’t this imply a bunch of people have to be losing money on the other side so that the house isn’t exposed?
4. I’ll assume that this passes the legal sniff test — for now. But what about the SEC or whomever is supposed to be regulating “markets” in this country. Now that Obama is in D.C., might somebody pay attention to something like this? And the Leagues I am sure will be big fans of this.
5. And the argument that this is playing in to the multi-billion dollar virtual goods market? What are the virtual goods that I’m buying and getting to own here? I don’t see this as the same as buying a new sofa for my virtual world room or some additional ammo for my shoot ’em up MMOG.

So given the above, conventional wisdom would have it that OneSeason.com will get some initial interest, a few people will kick the tires on it for the novelty factor, but eventually it will settle in at a fairly low active user base of “investors” who won’t generate enough transactional volume to make this big exit.

Ok, that’s conventional wisdom — which has been known to be wrong. I suspect there is more to the OneSeason story that hasn’t been revealed. George and CRV I am sure dug in to this one pretty significantly to get comfortable with the various risks and market opportunity here.

This will be an interesting one to check back on in a year.