Inside Cloud9: How this couple built an e-sports empire worth millions

Cloud9 Esports Inc.’s efforts are trailblazing in the nascent competitive video gaming industry. (March 21, 2017) (Sign up for our free video newsletter here

Jack and Paullie Etienne, co-founders of professional e-sports teams, are so obsessed with winning that they cut off their players' Internet at 2:15 a.m. to encourage decent rest before practice.

The Etiennes measure how much players practice, including on their own time, and how encouraging they are toward teammates. Rule breakers get a talking-to. And they afford players at Cloud9 Esports Inc. a full range of paid benefits, including meals and trainers, healthcare and retirement plans, to reduce their stress.


Cloud9's efforts — many of them trailblazing in the nascent competitive video gaming industry — have turned the Etiennes and their Los Angeles operation into a dependable source of ideas for their peers. But in Cloud9's latest move, they're the ones catching up with the crowd.

The company announced Tuesday it had received an unspecified investment of at least several million dollars. The money probably will pay for entry fees and also could go toward university partnerships and a more central headquarters.

Cloud9 has 10 teams whose more than 1 million fans collectively spend 15 million hours each month following their exploits. The Etiennes said that audience has the foundation for building an entertainment and sports company that will be around for decades.

"There's no person better to learn this industry from than Jack," said Dan Fiden of lead investor FunPlus Ventures. "This is the most important e-sports team in North America."

The Etiennes hadn't needed outside financing before. The married couple had used their own few thousand dollars in 2013 to start Cloud9 after quitting their sales jobs in tech. They secured sponsorship agreements before ever signing a player, enabling their business to be profitable from Day One. That cash has fueled expansion to a series of regularly top-finishing teams across several video game leagues.

But it's possible that getting into competitions, let alone maintaining excellence, could get very expensive. League operators such as Activision Blizzard and Riot Games are exploring charging teams for rights to compete. That would be a massive upfront cost in addition to keeping up with rising player expenses.

Many e-sports teams have taken investment in recent years from venture capitalists, basketball team owners and professional athletes. The Etiennes, who first considered selling Cloud9 amid the escalating challenges, realized they'd rather follow suit with raising money so they could be winners for years to come.

"I am the only owner of a team that goes to every game and sits with my team every day because I … love this," said Jack, 44, using colorful language. "I'm 100% driven on winning and not interested in things that don't get us there, but the money is going to be going to make sure I can actually play the game."

Cloud9 investors include the investment arm of video game company FunPlus and United Talent Agency. Individuals contributing were Tesla Motors board members Antonio Gracias and Kimbal Musk, early Tesla investor Bill Lee and Reddit co-founder Alexis Ohanian. Dodgers co-owner Todd Boehly and Golden State Warriors co-owner Chamath Palihapitiya invested too, as did professional baseball player Hunter Pence and professional basketball player Andrew Bogut.

Ohanian, a football and video game fan, bought into Cloud9's long-term road map over coffee with Jack in San Francisco a few months ago.

"There's teams like the Yankees — I'm not even a baseball fan — that have transcended a sport and become a gateway for people to get into the sport," Ohanian said. "It sounded like a vision for that. It requires a really disciplined patience, and there's going to be people distracted by shiny objects. You want someone who can hold the course."

The Etiennes, who had a child shortly before launching Cloud9, credit their pairing and work experience for their initial success.

Many early e-sports owners were former players. By contrast, Jack sold software for Xerox and ads for video-streaming service Crunchyroll. Paullie held sales roles at Xerox and commercial real estate marketplace LoopNet.

Cloud9's "League of Legends" team goes over the replay of a recent online game at the house where they live and practice.
Cloud9's "League of Legends" team goes over the replay of a recent online game at the house where they live and practice. (Rick Loomis / Los Angeles Times)

Now, they put their knowledge to work during weekly meetings with Cloud9 sponsors to walk them through ad plans and performance. The people on the other side of the table are taking a gamble betting on an unproven sport, and Jack said it's his job to make sure those people have enough information to boast about when they go back to their bosses. Those sponsorship deals have became an industry standard, he said.


On the other side of the operation, his experience as talent scout for a "World of Warcraft" computer game group has served him well in evaluating players to sign and how to help teams gel.

It also was Crunchyroll where the entire journey began. Jack got introduced by a client there to a backward-hat, shorts and tank-top wearing gamer whose "League of Legends" video game fan website was taking off. Andy Dinh, then 17, wanted help selling ads and offered Jack the job immediately.

"I was thinking, no way am I quitting a paycheck to work for this kid," Jack recalled. But Jack was open to helping out if he could keep his day job.

Crunchyroll and Dinh agreed, and the partnership flourished. Dinh had enough cash to start his own professional team, and it quickly became championship-caliber. Jack relished in the success, but doing well came with increasing duties.

It wasn't long before he went all in and formed his own team, and his wife agreed to come along. They moved to Los Angeles from San Francisco.

"We wanted to do something for ourselves," Paullie, 39, said, and coming off maternity leave, "it seemed like really good timing."

Marcus "Dyrus" Hill, a former title-winning player for Dinh's team, described Jack as someone who's committed to guiding "his players to be the best they can be."

That's essential because as the second most popular North American team, Cloud9 keeps Dinh's squad "on their toes," Hill said.

Jack had waited several dates to describe his obsession for gaming to Paullie, who didn't share the passion, and even fibbed about the amount he played.

When Paullie saw the real number was 40 to 50 hours a week on top of a regular job, she didn't balk.

Instead, she's gone on to become Cloud9's chief operating officer. The husband-and-wife duo, she said, make a great team, with Jack coming up with ideas and Paullie bringing them to reality.

Subscription box company Loot Crate expands into sports
A Clayton Kershaw bobblehead doll is representative of the types of collectibles Loot Crate plans to send sports fans.
A Clayton Kershaw bobblehead doll is representative of the types of collectibles Loot Crate plans to send sports fans. (Loot Crate)

E-sports might be the future. But at least one start-up isn't giving up on traditional sports.

Loot Crate, which has a surging business selling subscriptions to a monthly box of video-game-related products, has launched a new offering aimed at baseball fans.

Sports Crate debuted with 10 teams as partners, including the Dodgers and Giants. Subscribers should expect clothing and toys, among other items, the company said. People pay about $40 a month to get $80 in goods, with Loot Crate using exclusive deals and bulk purchasing to balance out its cost.

Each box is themed, with the initial boxes focused on teams' opening day pitchers.

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Coming up

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The Israel Tech Meetup in L.A. on Tuesday night features Jeff Zwelling, the chief operating officer of human resources software start-up ZipRecruiter, discussing why the company set up its technology office in Tel Aviv.

Twitter: @peard33