Asia’s upcoming unicorn

Chatri6

THERE’S a new Asian unicorn in town.

Unknown to many, Sequoia Capital led a round of Series D funding that invested US$166mil into a start up in October 2018.

The investee company - ONE Championship - is Asia’s largest sports property media company with a footprint in 138 countries and 1.7 billion potential viewers.

Heliconia’s latest round of funding effectively gives ONE a valuation of US$1bil - a valuation that makes ONE difficult to ignore.

ONE is also backed by A-star institutions such as Temasek Holdings, GIC, Iconiq Capital, Mission Holdings, and Greenoaks Capital.

Heliconia Capital Management and Sequoia sit on the board of ONE.

For comparisons sake, Grab had a valuation of US$3bil three years ago, and today is Asia’s first decacorn (start up that has a valuation above US$10bil) with a valuation of US$10bil.

Can ONE deliver the kind of growth that Grab did?

Looking at its expansion over the last three years, it does not appear impossible.

For the uninitiated, ONE Championship is a Singapore-based mixed martial arts organisation that was launched on July 14, 2011 by entrepreneur Chatri Sityodtong.

Harvard-educated Chatri was already a successful hedge fund manager with his own fund - Izara Capital Management, a US$500mil New York hedge fund.

He specialised in long short global equities and was making more money than he could dream of.

Nonetheless, Chatri felt an emptiness and a lack of purpose. With a lifelong passion in martial arts, Chatri felt that his life couldn’t revolve around the stock market.

At the same time, Chatri noticed a gap in the market. Every region besides Asia has its own sports media property - in America there is the NFL (National Football League), NBA (National Basketball Association) and MLB (Major League Baseball). In Europe, there is the English Premier League, Formula One, and the Bundesliga among others.

“Worth billions each. But there is absolutely nothing like that on a pan-Asian basis,” says Chatri, who was introduced to Muay Thai as a teenager by his Thai father.

Of Thai and Japanese ethnicity, Chatri has 30 Muay Thai fights to his name.

Another thing that bothers Chatri is that across Asia, everyone’s favourite team or athlete is either David Beckham, Christiano Ronaldo, Liverpool or Manchester United.

“All this has nothing to do with Asia. Asian broadcasters were importing all western sports, and we were idolising Western heroes - that makes no sense,”

Furthermore, as most sports are western-originated, it becomes very hard for Asians to be the best at that sport.

“Asians will never be the best at basketball, or soccer. However martial arts originates from Asia where we have 5,000 years of history. We have the most number of practitioners, and the biggest talent pool to choose from. So Asians generally are the best in martial arts in the world,” he says.

Prior to ONE, Chatri has started his own chain of martial arts gym - Evolve MMA - back in 2009.

But much to his mother’s horror, Chatri together with his partner Saurabh Mittal coughed out US$50mil of their own capital and started ONE in July 2011.

“I wrote down our mission for the company then which was to unleash real life superheroes into the world. This is what inspires and motivates me and my team,”

Chatri believes that people are not put on earth just to pay bills, buy a big house, and drive a nice car.

He believes that human beings are here to unleash their potential so that they may give back to the world.

Martial arts has the incredible ability to change lives, turn weakness into strength, mold fear into courage, and transform the ordinary into the extraordinary.

Chatri, 47, still practises martial arts everyday.

He would rather be working out with his world champions than having a business dinner.

(He has a resting heart rate of 53.)

The first three years were tumultuous at ONE.

“I got rejected from every broadcaster, advertiser and sponsor. No athlete wanted to join us, and governments didn’t want to hold our event. I got my ass kicked and failed everyday for three years.

“If I didn’t love martial arts or believe in our mission to inspire the world and that Asia needed its own sports property, I would have given up.”

Growth ignites

It was during Chatri’s darkest moment, that ONE finally got its break. ESPN Star Sports (now Fox Sports Asia) decided to take a bet on ONE and gave it a 10-year broadcast deal in January 2012.

With ESPN’s coverage, viewership started to increase, and the heroes from ONE started to ignite following.

ONE is Asia’s largest sports media property with presence in 138 countries. It has an average of 20 million viewers per event and potential viewers of 1.7 billion.

Over the last 2½ years, ONE has grown exponentially. From a mere 700,000 views per event three years ago, ONE has grown to a staggering 20 million viewers as of 2018.

Its social media video views have grown 13,461 times to 4.2 billion as of end 2018 from 312,000 in 2014.

More importantly, ONE’s viewership has now reached the levels of the biggest global sports properties in the world.

The NFL has 17 million viewers per event while the NBA gets four million viewers per event.

ONE has 20 million viewers.

In terms of size, broadcasting rights and other social media metrics, ONE is already of the same size, if not slightly larger than Formula One (F1).

While F1 started in 1950, ONE only came about in 2011.

ONE made headlines recently when it expanded its fighter roster with high-profile signings from the US-based Ultimate Fighting Championship (UFC).

Eddie Alvarez and Demetrious Johnson signed for ONE in October 2018, followed by Sage Northcutt in November.

ONE has some 500 fighters in its roster, with 110 of them being world champions.

For 2019, it intends to hold 45 events.

The organisation plans to further expand into Japan, India, South Korea and Australia in 2019.

Why has ONE been so successful over such a short period?

Chatri says it has to do with Asian values and the fact that martial arts, like football is highly-scaleable across the continent.

“With a 5,000-year history in Asia, it is a part of every country and fabric of society. Why do parents put their kids in martial arts school all over the continents?”

“It is not because they are trying to teach children how to fight, but to teach them good work ethics such as humility , honour, respect, courage, discipline which are the bedrock of the Asian society,” says Chatri

“We are celebrating Asian values with Asian heroes. That’s never been done in history,” he says.

Still early days

Despite the impressive numbers, Chatri says the fan base and reach of ONE are still at the early stages of the addressable market, and have yet to reach their full potential.

It is Chatri’s ambition to make ONE the most valuable sports media property in the world - larger than the NFL, NBA and the MLB.

“I believe that we are low single-digit penetrated in terms of where we are. If there are four billion people in Asia, maybe only 100 million or 200 million are fans of ONE. This is the reason blue chip investors like Sequoia Capital and Temasek see the potential in ONE. Asia has yet to have a multi-billion sports property,” says Chatri.

With a US$20 trillion economy compared with Asia’s US$23.5 trillion, the Unites States has a US$200bil ad market. Asia has a US$165bil ad market. If America can produce the NFL, which is only played in one country, I don’t see why ONE cannot surpass the NFL,” says Chatri.

Will ONE e go with a pay per view business model eventually?

“I am not saying I won’t, but it’s too early. I want to give our contents to as many fans as possible. We are still at such an early stage,” says Chatri.

He points out that the Asean market is considered one of its most successful markets.

Rapid growth

Over the next three years, ONE hopes to grow its viewership per event from 20 million to 100 million.

This would put it on par with the with viewership garnered for the NFL’s Superbowl.

Aside from the Olympics and the World Cup, the Superbowl presently has the highest viewerships in the world.

From the present 45 events per year, ONE is looking to hold 104 events over the next three years. This means holding an event every Friday and Saturday throughout the year.

It aims to in 194 countries.

“We are at the beginning of our journey. I want four billion fans. There is no reason why ONE cannot have every Asian watch its content on social media or free-to-air TV everyday and every week,” says Chatri.

Meanwhile, for investors eyeing to hop on the ONE bandwagon, StarBizWeek asked Chatri whether ONE needs more funding.

“We’ve investors lining up but we just don’t need money now,” says Chatri.

Furthermore, the recent funding round by Heliconia will fulfil the company’s funding requirements over the next three years. Major deals

Last December, ONE announced a three-year partnership with Turner Sports to distribute its live event coverage in the United States.

Turner presented its first live ONE event on Jan 19, with 24 overall events scheduled in 2019.

This will be the first time that a major US broadcaster paid for media rights for an Asian sports property.

ONE is expected to announce a major television deal in India over the next few weeks.

“We are working on a major India TV deal,” Chatri said.

Besides growing ONE’s fanbase and market share, Chatri is aiming for the company to achieve profitability in three years. Although still preliminary, ONE is targeting for an initial public offering by then.

ONE has raised a total of US$270mil for investors.

Profitability seen

ONE has been operating at a financial loss for at least the three years. Over the 2015 to 2017 period, losses increased although annual revenue grew almost 30% , according to a report by Bloody Elbow.

Total accumulated losses were reported at US$67mil.

Chatri has said the long-term goal was to capitalise on broadcast and digital media deals and to make the most of a “media rights war”.

“Whichever company is able to integrate content, community, and commerce into a single platform seamlessly will win the war,”

He adds that the business model of ONE will be similar to other sports media properties.

As in the case of the NFL, out of its US$13bil revenues it achieved last year, some US$7bil came from media rights.

There are also other revenue streams such as advertising sponsorship. merchandising, brand licensing and ticketing,

ONE’s major driver is advertising sponsorship and media rights.

It expects significant contribution from its merchandising division this year.

With the popularity and increasing value of the ONE brand, the company has set up an athleisure subsidiary to compete against the likes of Nike, Reebok, Adidas and Under Armour.

Brand licensing is one revenue stream that ONE has not ventured into, although offers have been pouring in, such as franchising ONE gyms and energy drinks.

“We have said no to all the offers but certainly there is a massive opportunity to create a lot of different products around the One brand.

“We are launching our video game and it is in the early stages now,” says Chatri.

He believes his greatest skill as a CEO is in finding, attracting and retaining the best people.

“Why has ONE achieved what it has in seven years in what would have taken decades for other companies?

“Its because of the phenomenal team. We hire dreamers, superstars, rebels, adventurers. achievers, rockstars, people who are so passionate to give 1,000% of themselves to the company.”