Amid an ongoing funding winter, the world of startups and new-age companies is gearing up for a little resurgence in sporting events during the second half of this year, driven by cautious yet strategic spending decisions, as per industry players.
As the startups set their sights on upcoming sporting spectacles like the World Cup, these enterprises are exploring diverse avenues beyond traditional sponsorships, adapting to the digital age, and prioritising profitability.
A notable trend observed earlier this year was the conspicuous absence of several startups and new-age companies from the list of sponsors for the Indian Premier League (IPL).
According to industry leaders, well-funded startups remain committed to achieving profitability, making a comeback as they harness the rapid growth of digital broadcasting.
Although ad budgets have swelled among many startups and new-age companies, the decision-making process has matured beyond the "fear of missing out." These enterprises are now focused on measured and strategic advertising efforts. Shifts in sponsorship strategies for sporting events are evident, reflecting a long-term commitment to this arena, they added.
Startups’ involvement in sports events
When asked about whether there has been a noticeable resurgence of startups engaging in sponsorships or active participation in sporting events, particularly in the latter part of this year, despite the ongoing funding winter, Nagaraj Krishnamurthy, Chief Strategy and Analytics Officer, Madison Media, said that funding winter has eased.
"Recently, B2B fintech firm Perfios raised $229 million, and martech startup Pixis raised $485 million. In public markets also, there is an increased positive story about new age companies, be it Zomato, Paytm, etc.," Krishnamurthy said.
"This is reflected in what you have called resurgence. Startups are increasing their customer acquisition budgets, but they are more cautious. Currently, they are favouring digital options with a keen eye on total cost per acquisition," he added.
Krishnamurthy emphasised that sporting options, especially cricket, deliver high reach, which is critical in the brand's early life. It helps build brand awareness. Cricket is a jumpstart option for all digital brands.
“As brands mature, continuity becomes critical rather than just impact. For a digital brand that has decent spontaneity, there are many more equally effective but more efficient options. For example, many brands have used KBC integration to amplify brands' core values,” he added.
On the other hand, Agnishwar Jayaprakash, Founder and CEO, Garuda Aerospace, said that the company is fortunate to have been associated with IPL 2023 as the official partner, marking the first-ever drone partnership for the team.
"Regarding funding challenges, it is a universal truth that the funding winter has affected the entire startup ecosystem. However, there are times when strategic spending on marketing for brand visibility is necessary to pursue growth. Fortunately, we maintain an asset-light approach and have remained profitable," he added.
Jayaprakash highlighted that while upcoming sporting events like the World Cup are exciting, in today's digital world, there are numerous options to explore. These include opportunities such as product placement in movies or offering drones as part of a barter arrangement for partnerships.
“We are becoming more creative because drones represent emerging technology, and we consider them supercomputers on wings',” he added.
Pratik Gupta, Co-Founder, Zoo Media, said that while the funding winter did occur, it was primarily aimed at ceasing the funding of startups that were not actively progressing towards profitability.
"Startups that have been dedicated to achieving profitability still possess adequate funding. These particular startups curtailed their marketplace expenditures, as they had already established strong brand awareness and were now focused on converting a substantial portion of their existing consumer base through bottom-funnel strategies," he added.
Gupta believes that as this extensive season of cricket and festivities unfolds, it offers an opportune moment for brands to re-engage in awareness marketing within the sporting ecosystem.
“Anticipating this shift, we have projected a potential increase in ad expenditure ranging between 5% and 8% for this year. While ad expenditure experienced a decline earlier in the year, we foresee a substantial uptick as we approach the festive season,” he added.
Impact of startups' involvement in sports on advertising spends
On being asked if startups are indeed making a comeback in sports events and if their participation is leading to an overall increase in advertising spends, Jayaprakash said, "I believe that successful startups, which are profitable and sustainable, will make a comeback. Today, startups like Garuda Aerospace are focusing on revenue analytics and converting leads into sales rather than just aiming for high website traffic. With the rapid growth of digital broadcasting, we are making wise spending decisions to fuel our growth.
According to Krishnamurthy, many startups and new-age companies have increased their ad budgets. However, unlike in the past, their advertising decisions are not based on “fear of missing out” but are more measured.
“Specifically, gaming startups: They used to invest aggressively in cricket. However, the GST Council's decision to levy 28% GST has made them cautious. The big ones from this sector will continue to spend, but the smaller ones will be circumspect,” Krishnamurthy said.
“E-commerce/food delivery/payment: Many brands have achieved high awareness. They now need to add new users and make infrequent users consume more. If they want to increase female users, go after less tech-savvy ones, or increase usage frequency, they could prioritise continuity over impact. If they prioritise continuity, they will try to be more media efficient than large-format sports shows,” he added.
Jayaprakash pointed out that he has noticed shifts in the sponsorship strategies of startups for sporting events compared to previous years.
"There are a lot more creative opportunities for barter partnerships out there. Social media influencers are playing a significant role, and compared to previous years, India's sporting events are attracting a much larger viewership. It's not just cricket; Indians have started excelling in all sports, which is further increasing viewership," he added.
Jayaprakash believes that this resurgence of startup participation in sports events is a long-term play.
"Very often, in media projects, only movie stars are celebrities who command a huge following, but we are witnessing how sportsmen are getting into that bracket as India is turning into a sporting nation. Startups will associate more and more with sportsmen rather than other celebrities, as startup culture can relate to the sports culture of determination and pursuing excellence," he added.
Fintech continues to dominate startups ad spends
Krishnamurthy highlighted that many startups are finalising their ICC World Cup strategy. Moreover, traditional advertisers have contributed to the bulk of committed spends.
Krishnamurthy pointed out that not many in edtech are doing well. In fact, the ones who did not aggressively spend on large formal sporting events like Physicswspendingallah are doing well. I do not see a huge surge in their spends.
“Fintech is dominated by deep-pocketed players. The ones who have already invested in large sporting events will continue their investment, as they will not want to let their well-heeled competitors upstage them. I do not see new players coming up to invest aggressively,” he added.
According to Gupta, the edtech sector has experienced a significant downturn in funding, leading to the withdrawal of several edtech brands from the market. Consequently, there is a noticeable absence of edtech companies actively participating in the sporting ecosystem. In contrast, the Fintech industry has emerged as the new focal point, with many entities striving to position themselves as Fintech companies or neo-banks.
“These organisations are targeting the younger demographic, encouraging them to take an interest in their financial well-being by opening bank accounts, applying for credit cards, and exploring microloans and microservices, particularly during the festive season. As a result, you can expect to witness their active involvement in various initiatives and events,” Gupta said.
“In the realm of Indian cricket, the current landscape reveals a resurgence of well-established brands. Notably, Tata has stepped into the spotlight, sponsoring events such as the Tata IPL and Tata Women's Premier League. Furthermore, IDFC First Bank has also joined the ranks of sponsors for the Indian Home Series. When examining the sponsorship landscape of the ICC World Cup, it becomes evident that these enduring brands have maintained a consistent presence over an extended period,” he added.
“The primary departure from this trend can be observed in the considerable investments made by fantasy sports startups, as they allocate substantial resources towards cricket-related initiatives,” he added.
People have begun reinvesting in advertising, encompassing both traditional and emerging brands, including startups, unicorns, and soonicorns. However, it's worth noting that the resurgence in Indian and global cricket has primarily seen the return of brands with historical associations to the sport, rather than the newer entrants, Gupta said.