Cardinal Sports, Hot Paper Lantern Form $100M Startup Accelerator
Financial services business Cardinal Sports Capital and marketing firm Hot Paper Lantern Digital Sport are combining efforts into an accelerator program that will, in part, help Cardinal invest up to $100 million in sports betting and sports technology ventures and use the resources of both businesses to hone startups’ approaches.
“A lot of startups have great ideas, great management groups, but need access to capital to grow,” Cardinal partner Scott Secord said in a video call. “Especially in the sports gaming space, you don’t have the luxury of taking your time to get from point A to point B, because everything is moving so quickly. We have a wide variety of investors that want to participate in companies that either Hot Paper Lantern identify or we identify.”
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Cardinal Sports Capital is a Toronto-based venture started in 2021 that has already invested about $25 million into sports-related businesses, according to Secord. It’s looking to invest $75 million to $100 million more in the next 18 months. It also has a partnership with brokerage Canaccord Genuity to help portfolio companies access larger financing pools and pursue “liquidity events”—going public or being purchased.
HPL Digital Sport is a division of Hot Paper Lantern, a New York communications firm. It has worked with Monkey Knife Fight, Sportradar and Rush Street Interactive, among others. In the accelerator agreement between the two businesses, to be announced later today, Ed Moed, CEO of HPL Digital Sport, said his business may also invest in startups the pairing identifies while using its marketing expertise to help clients gain users, media attention and follow-on investments.
“There are so many emerging companies that come to us and say they’re ready to start a marketing program or build their name but haven’t been able to establish their financing or look at how their model will work with partners and investors,” said Moed, also on the video call. “We [Cardinal and HPL] sit in a room and strategize as one team and help them as one advisory team.”
While the pairing is informal, in that each remains an independent business, Cardinal and HPL Digital Sport say they have found themselves working with the same client companies enough that combining forces made sense. Hot Paper Lantern, for instance, helped Cardinal Sports identify some of the targets for their initial investment round, Moed said.
One is WagerWire, a Los Angeles group developing a secondary market for bettors to sell their wagers. Cardinal Sports invested $3 million in WagerWire from investors found in part through HPL Digital Sport’s network. Since then, Moed’s group has been working with the business on shaping its strategy in the business-to-business sports betting sector. The two parties have also worked with Cardinal portfolio companies Quarter4, an AI-driven predictions service, and ThriveFantasy, a daily fantasy contest.
The accelerator should help target businesses deal with two dynamics in sports betting right now: the continued swift opening of state and provincial wagering markets in North America, and the fact investor funds are harder to access after the six-month bear market in sports gambling stocks soured a lot of the market.
“It’s tougher to get capital,” Secord said. “I think you’re going to see valuations are going to be tightened a little bit, and there are groups that are going to be much more strategic on where they place capital. But you still need to move quickly with business strategy,” given the advantages first entrants have in sports betting.
“We believe there is a lot of saturation in the marketplace,” Moed said, “so what’s different about a model, a product and offering—is there something based on where the market needs to go?”
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