Sentinels: 2023 Financial Analysis

Founded in 2016 under the name Phoenix1, Sentinels made its first steps into esports through League of Legends, with a relatively anecdotal stint in the NA LCS between 2016 and 2017. Despite a strong third-place finish in Spring 2017, Phoenix1 had only finished 8th in Summer 2016 and 9th in Summer 2017. The team thus had to play in the promotion/relegation tournament twice to maintain its spot in the North American elite. The following year, the NA LCS became a franchised league. According to Jacob Wolf, Riot Games then rejected the club’s franchise application, which led to the team leaving the MOBA in November 2017.

Seven months later, in June 2018, Phoenix1 became Sentinels. Shifting to Hearthstone, Fortnite, Wild Rift, and more recently Apex Legends, the organization led by Rob Moore is now focused on only two games: Halo and VALORANT. On Riot Games' FPS, Sentinels had an excellent start to 2024: the team won the VCT Americas Kick-Off and the Masters Madrid. Despite a rough patch during the two stages of the local league, the club managed to participate in Champions last August, thanks to its early-season successes. At Worlds, the team bounced back and reached 4th place.

A few days after the end of Champions, Sentinels revealed its financial results for 2023. According to the figures disclosed by the organization, the club's revenue grew by 20% compared to 2022, reaching $2.92M. This amount allowed for a gross margin before expenses of $2.672M, also a significant increase of nearly 40%. According to this report, early 2023 also marked the internalization of the club’s merchandising services, enabling them to quickly capitalize on the success of their VCT team. Indeed, Riot Games announced that Sentinels was the club that sold the most VCT capsules in the Americas region and the second worldwide. The company can also rely on the promotion of its brand by one of the most prominent faces in Valorant esports: Tarik. The streamer was renewed for two years with Sentinels last June.

However, Sentinels face colossal operational costs, amounting to €11M for 2023, despite efforts to proportionally reduce expenses. This represents more than $916,000 in monthly operational costs... for $243,000 in revenue. As a result, the club has suffered a net loss of over $16M over the past two years. To ensure the continuation of its activities, Sentinels’ investors will inject more than $16.5M over two years, notably through JAG Future Ventures LLC increasing its stake to 24.2% for a total amount of $3M, with the remainder supported by the club’s historical shareholders.

Despite its growing popularity — the club gained 800,000 Twitter followers between January 2021 and March 2023—and its strong sporting results, Sentinels has so far been unable to monetize its brand to meet its immediate cash needs sufficiently. The crowdfunding launched by the organization in 2023 highlighted this issue. The club initiated a campaign aimed at its supporters, valuing itself at $30M according to the fundraising page on StartEngine. Sentinels aimed to raise $1.23M, with a minimum initial investment of $300 and a share price of $3.15. The campaign closed on November 4th and brought in $192,984 from 110 participants, six times less than the initial goal.

"We’re extremely proud of the company's growth over the past year. We have made a significant investment in our brand, and as we move through 2024, we are beginning to see considerable returns on our investment. We project our revenue will be close to double from 2023, substantially reducing losses. Also, we are on track to reach break-even next year. The strategic decision to invest in our brand is already yielding tangible rewards, and we are excited about the progress ahead. Sentinels supporters can visit our website for detailed investor information" commented Rob Moore.

Despite the challenges, Sentinels presents an optimistic vision for the club’s future. The organization even anticipates reaching financial stability by 2025, driven by strong sponsorship prospects if their advertising goals are met, all supported by international success in esports and a growing fanbase.