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L.A. Tech: Sports titans jump into competitive gaming with e-sports acquisition

A job in software sales and consulting gave Steve Arhancet a car and house. Quitting that position and moving across the country to Culver City to become a professional video game player might just buy him a mansion.

Last week, Arhancet and business partner Victor Goossens announced they sold a stake in their e-sports club to a multifaceted investment group that includes Dodgers co-owners Peter Guber and Magic Johnson. Terms of the agreement were not disclosed, but the deal probably valued Arhancet’s Team Liquid at more than $10 million based on similar recent transactions.

Friends and relatives who criticized Arhancet’s move four years ago never could have imagined the payday, he said. Arhancet didn’t have a real business strategy. He simply wanted to play games full-time, having spent many weekends globe-trotting to tournaments.

“The one main driver to come into e-sports was love of video games,” he said. “It wasn’t much more than that.”

Arhancet joined an e-sports team that was eventually sponsored by gaming software firm Curse Inc. That company later tapped Arhancet to be director of e-sports. He gained ownership of the team after spinning it off from Curse.

Early last year, he merged with Goossens’ teams, which had competed in tournaments for different video games.

Team Liquid has offices in West Los Angeles, where about 20 players live and train, and the Netherlands. The club competes in 10 games.

But as rivals received outside investment over the last two years, self-funded Team Liquid struggled to match their spending on players and consultants. About 10 months ago, Arhancet and Goossens started digging out emails they’d once ignored about investment offers.

In an online post prior to the acquisition announcement, Arhancet asked fans to imagine what the “League of Legends” team — knocked out in the first regional post-season round this year after a 9-9 regular season — will accomplish in 2017 with the greater financial flexibility.

The funds come from AXiomatic, a holding company that plans to launch other e-sports businesses. The majority of Team Liquid will remain in the hands of Arhancet and Goossens. Their stake in AXiomatic wasn’t divulged.

Well-funded investment groups such as AXiomatic have been both lauded and questioned for entering e-sports. On the one hand, they’re aiming to provide increased professionalism and publicity to a nascent industry. But their cash could squeeze out longtime owners while any absenteeism by the new owners increases the possibility of poor spending decisions.

Arhancet said they accepted AXiomatic’s offer in large part because its chief executive, former Mattel and Sony executive Bruce Stein, displayed over several meetings the integrity and drama-free nature they valued.

Guber, who also owns part of the Golden State Warriors basketball team, is joined in the ownership group by Washington Wizards owner Ted Leonsis, Dodgers Chief Financial Officer Tucker Kain, Dodgers Chief Marketing Officer Lon Rosen and Warriors President Rick Welts.

It hardly ends there. Some of the other holding company co-owners are AOL founder Steve Case, Google Ventures general partner Blake Byers, Susa Ventures general partner Chad Byers and Tom Kartsotis, co-founder of watch companies Fossil and Shinola.

Together, they’ve committed millions of dollars. Guber said either he or Leonsis could have acquired Team Liquid alone. But many more wanted to be involved and they thought it prudent to put together a “bouquet” of industry leaders.

“When you look at combined track record of people involved, you’d have to believe this group has the best chance to execute on our plan,” Guber said. “Ted is in huge businesses. And there’s not much hair on the other people. If you’re going to war, these are the best people.”

They screened potential investors by warning them that they must remain active in backing e-sports ventures and provide enduring support through inevitable struggles.

“Some have less capital in, but all are pulling equally to get the same results,” Guber said. “The feet, tongue, heart and will are going in the same direction.”

BlackLine seeks to go public

Therese Tucker is poised to become the first woman to lead a venture-capital-funded company in Los Angeles into an initial public offering.

Her accounting software firm, BlackLine Inc., filed paperwork last week to list on Nasdaq under the ticker symbol “BL.”

The company generated $55.6 million in revenue during the first half of 2016, a 48% increase from the first six months of 2015. It lost $16.9 million during this year’s period, compared with $10.8 million a year earlier.

That sets up the company to be the latest test of whether public-market investors want to bet on fast-growing but unprofitable tech companies as much as private-market investors have.

BlackLine employs 490 people. Tucker controls about 16% of shares. Investment group Iconiq, backed by Facebook founder and Chief Executive Mark Zuckerberg, controls about 23% of shares, and Silver Lake Sumeru holds 47%.

Its software automates certain tasks, taking some of the grunt work out of accounting. BlackLine counts Costco and Boeing among its clients.

ServiceMesh accused of cheating $98 million from its parent 

Federal prosecutors alleged last week that Santa Monica software developer ServiceMesh Inc. cheated $98 million out of its parent company.

The prosecutors say senior executives at ServiceMesh funneled money to an Australian bank executive in exchange for him steering $10.4 million worth of contracts their way. ServiceMesh, whose software helps companies manage their online file storage systems, reached a key sales target because of the alleged scheme.

As a result, Computer Sciences Corp., which acquired ServiceMesh for $163 million in 2013, issued a $98-million bonus to the company.

The Australian, Keith Hunter, is charged with wire fraud and conspiracy to commit securities fraud and wire fraud. Prosecutors said he received $630,000 from the bonus payment, for which he now faces up to 45 years in prison. U.S. officials expect him to respond to their charges after he completes a forthcoming sentence in Australia, where he pleaded guilty to similar charges.

The FBI said the case was part of an ongoing investigation, with court documents mentioning at least three unnamed co-conspirators who also allegedly benefited from kickbacks. CSC and ServiceMesh co-founder and former CEO Eric Pulier are engaged in dueling lawsuits tied to the bonus.

Investor admits his advice to female entrepreneurs was ‘dreadful’

Venture capitalist John Greathouse suggested tech companies borrow the orchestra world’s use of blind auditions to counteract gender biases that might affect hiring and investment decisions.

There’s nothing necessarily wrong with that advice — in fact some companies already use blind exams to find engineering candidates. But Greathouse in an online essay last week went further. Women business owners should try to hide their gender from investors by using only initials and removing photos from their online profiles, he wrote, “however unfair it might be.”

The advice drew widespread anger on social media, including from Greathouse’s partner at the Santa Barbara firm Rincon Venture Partners. Jim Andelman said in a Twitter post linking to the essay that he “could not disagree with this more.” Women said Greathouse’s comments exemplify the type of discrimination they face in the workplace — and the onus of ending it shouldn’t be on them.

Greathouse apologized a day later, calling his words "dreadful."

He declined to comment beyond a statement, which said: "I told women to endure the gender bias problem rather than acting to fix the problem. I hurt women and I utterly failed to help.… Women have a tough enough time having their voices heard and my insensitive comments only made matters worse."

Elsewhere on the Web

Los Angeles online media company Evolve Media shut down AfterEllen, a popular website for lesbians, gays, bisexuals and transgender people, because of struggles attracting advertisers, according to Engadget.

Los Angeles start-up CodeSpark received $4.1 million from investors such as Kapor Capital to further develop an app that teaches pre-schoolers and elementary-schoolers how to develop software, according to TechCrunch.

Home goods maker Honest Co. is removing a controversial chemical from its products, months after saying it didn’t use the ingredient and didn’t plan to reformulate them, according to the Wall Street Journal.

Hollywood stars who’ve benefitted from marijuana are investing big money in companies that market weed despite legal and cultural hurdles, according to the Hollywood Reporter.

Electronic dance music deejay Steve Aoki has invested in an e-sports team that competes professionally in tournaments for the team-based shooting game “Overwatch,” according to ESPN.

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The documentary “Generation Startup,” which is playing in Santa Monica, puts a human face on millennial start-up culture. 

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Coming up

Executives from online video companies including YouTube, YouNow and Big Frame gather alongside the stars of the videos themselves to talk diversity at the SoGalFest on Saturday at the Cross Campus co-working space in downtown Los Angeles.

paresh.dave@latimes.com

Twitter: @peard33

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