Is Sentinels’ esports future in doubt?

North American esports organisation Sentinels could close down in a few months’ time if it is unable to raise enough capital.

A document from Sentinels’ crowdfunding campaign on fundraising platform StartEngine revealed that the organisation is currently operating at a monthly burn rate of $695,000 (~£545,971). These are expenses related to player and content creator salaries, staff salaries, and funds required to acquire merchandise inventory.

If the company is only able to raise the minimum offering amount — set at $14,900 (~£11,800) — Sentinels highlighted that it may only be able to operate for two to three months. According to the StartEngine platform, Sentinels has already raised $64,898 (~£51,026) from 48 different investors at a price of $3.15 (~£2.48) per share.

The maximum offering amount set is $1.23m (~£971,000) with 392,063 being the total number of shares offered.

If Sentinels is able to raise the maximum amount of funds, 50% of the proceeds would be spent on player and content salaries, with 5.5% of the funds going to StartEngine. The remaining capital would be split between content creation and inventory, 34.5% and 10% of the total amount raised, respectively.

Following media attention surrounding the document, Rob Moore, CEO of Sentinels, provided additional information on the crowdfunding campaign via a Youtube video. In the video he looked to reassure fans and potential investors: “We’ve raised capital internally and our investment group is very committed to the strategy we have and the intention is that we’ll continue providing funding for the operation.”

Moore also explained why Sentinels decided to make a big investment in its VALORANT operations, stating that the organisation needed to catch up to other leading brands in North America and quickly close the gap.

On the crowdfunding platform, Sentinels also publicly disclosed its financials, stating it generated a net loss of $8.2m (~£6.45m) in its recent fiscal year-end. This, as well as the statements published in the Offering Memorandum, raise concerns about the organisation’s survivability.

In particular, the document highlights that even if Sentinels were to successfully crowdfund the maximum offering, its operating tenure could only extend to up to four or five months — unless additional funding is generated.

The Memorandum also mentions that 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”. These worries could be tempered slightly with Moore claiming that Sentinels’ investment group will continue to provide funding.

The overall economic downturn has hurt esports organisations’ ability to raise additional funds, with many companies in the sector going through an ‘esports winter‘.

With increasing costs, the esports industry is exploring all types of options to keep operations going. Gen.G Esports’ CEO Arnold Hur stated on Twitter that “no org wants to come out and crowdfund to keep operations afloat but this is part of the new normal in esports. Every org is trying to do new things to stay alive.”

Sentinels’ crowdfunding campaign is still ongoing and it will end on November 2nd, 2023.