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Topgolf, Tophockey, Topfootball, Topbaseball, and Topzombies

Not long ago, the experience of taking in a live sporting event was simple and straightforward. Buy your tickets, enter the stadium, grab a hot dog and a soft drink, and settle in. Today, after the evolution of venue hospitality development, much of this has changed. Sure, the old ways still exist, but those who are willing to fork over a few extra bucks can watch their team play from the comfort of a luxury box, complete with a fully stocked bar, private restrooms, a never ending buffet of fine and varied cuisines, and many other amenities. A trip to the movies used to be an uncomplicated process too. Stand in line, get your ticket, purchase a bag of popcorn, and enjoy the show. Not anymore: the world’s largest cinema chain, AMC Theaters, has been transforming the industry with pre-assigned seating customers can reserve online, larger screens fitted with the most up-to-date audio and video technology, oversized reclining seats, and expanded concession items (after all, they make most of their money in popcorn, nachos, and Junior Mints). Many AMC venues even have full dine-in options, and their Crispy Bacon Brussels Sprouts, Royal Bacon Brie Burger, and Truffle Potato Wedges are really quite delicious.

Since its founding twenty years ago, Topgolf Entertainment Group has been taking the concept of transforming an established tradition into a thoroughly pumped up version to an even greater degree. The idea of going to a driving range had always been quite predictable, whether it was at an exclusive country club or a municipal 9-holer: grab a bucket of balls, choose your tee station, and start hacking away. Topgolf has taken that activity and injected into it an extreme level of fun and creativity suitable for everybody from scratch golfers to those who are unsure about which end of the club to grasp. Don’t believe us? Click here to watch them show their stuff. Twin brothers Steve and Dave Joliffe loved to work on their drives, but they wanted to make something more. They implanted microchips in the golf balls, and these chips were tracked by sensors along the range to offer detailed trajectory analysis. The Joliffes’ venues shunned the mundanity of whacking a ball, placing hands on hips while watching the ball fly, teeing up another, and repeating. They incorporated games and competitions among patrons, making it much more entertaining, and they immediately knew they were on to something. In Watford, just outside of London, Topgolf’s inaugural year brought in revenue that was eight times what that range’s previous owner had earned.

From that “a-ha” moment in 2000, Topgolf has embarked on a campaign of expansion, improvement, and outdoing itself in grand fashion. Guided by visionary developers and supported by shrewd venture capitalists, Topgolf’s evolutionary journey has been nothing short of remarkable. Perhaps the best example resides, naturally, in Las Vegas. That Topgolf location boasts more than 120 climate-controlled hitting bays, five unique bars (two of them being swim-up bars in the middle of pools on different levels), a 48-foot TV screen, VIP cabanas, private event spaces, and a 900-person concert venue. In other words, not just a bucket o’ balls.

What has motivated this extreme transformation (and further enriched the VC’s) is, of course, the identification of a great moneymaking opportunity. Each new Topgolf outlet, with a $20 million buildout expense, generates an average of $30 million in annual revenue. 2020 revenue is expected to approach $2 billion, and some analysts predict that the company’s valuation could soon reach $7 billion. This is why there are currently 58 Topgolf locations, and that number is increasing quickly. Recently, the company inked a deal to franchise out venues across Asia (see Topgolf’s Asian Invasion, November 21, 2019 from Iron Edge VC).

Astute observers might detect an Achilles heel in the business model. In order to consistently generate such numbers, access to large metropolitan areas is crucial. Topgolf has steadily kept their hitting bays filled, but this admittedly couldn’t be accomplished at a large-scale attraction in, say, Rock Springs, Wyoming. One could conclude that this means Topgolf’s opportunities are finite. Furthermore, the real estate closest to the big cities tends to be very pricey, inflating the company’s location costs and tax expenses. Not surprisingly, Topgolf has come up with a response to that bump in the road.

In a move more closely associated with computer technology than with all-inclusive entertainment businesses, Topgolf is testing what amounts to a miniaturization of its product. Last week saw the debut of Topgolf’s scaled-down offering in Kirkland, Washington, called “Lounge by Topgolf”. This location maintains a strong emphasis on first-rate cuisine, with menu items like coconut curry mussels and sausage orecchiette served up in a room with seating for around 225 diners. At less than 10% of the roughly 100,000 square foot extravaganzas we’re used to seeing, the Kirkland destination replaces the huge outdoor driving ranges with indoor simulated swing suites. These are essentially virtual driving ranges. To broaden the appeal to those with other sports-based interests, Lounge by Topgolf also provides simulated hockey, football, and baseball games. Other activities include a challenge called “Zombie Dodgeball”, in which players fend off an approaching Army of the Undead by hurling those familiar red inflatable balls from gym class at the lurching onscreen images. Chuckle at this if you wish, but who will be laughing when the actual zombie apocalypse is upon us, and only regular Topgolf attendees are properly prepared?

Topgolf’s innovations have fundamentally disrupted the way people view the game of golf, changing it from a polite and genteel activity often reserved for people of greater financial means to an inclusive entertainment experience. With the introduction of Lounge by Topgolf, the company has upped the ante by irresistibly drawing in hockey enthusiasts, football fanatics, baseball aficionados, and doomsday warriors. Most importantly, this development points clearly to how Topgolf Entertainment is adept at capitalizing on whatever the market demands, and expanding aggressively in the process. Furthermore, it does much to quell concerns that the company is overly reliant on a strong economy.

Topgolf is not yet publicly traded, but there is a way to claim a piece of this exciting company before any public offering. We at Iron Edge VC are very proud to offer investments in Topgolf today. In the world of pre-IPO investing, Topgolf shares are notoriously hard to find, but we have them. What’s more, our pricing reflects a valuation significantly lower than what most professional estimates of the company suggest.

If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.

As always, shares in our Fund are available on a first come, first served basis.

5f6e0d464e388c4975685025 Paul Min

Paul Maguire

Founder And Managing Partner