Investing in Team SoloMid is risky.

This isn’t a hot take. This shouldn’t be considered a hot take. This doesn’t mean that Team SoloMid is not successful.

Team SoloMid’s ability to pull blue chip sponsors is an asset. Team SoloMid was one of the first to be able to show the influence Esports has and its ability to promote a product or service. The team’s streamers bring in thousands of views and have massive social media followings, giving the team the ability to charge a premium for creating sponsored content.

However, my personal concern comes with the longevity of the North American Esports organization. Despite the previous mentioned sponsorship pull and the success of Team SoloMid’s star League of Legends line-up, the organization has its flaws. Let’s start with some information

I’m going to compare Esports organizations’ projects (or teams) to a financial portfolio. This isn’t a stretch. An organization will invest in a team or title for the same reason a member of society will buy a stock or bond: to hopefully make money. Teams and stocks also experience similar types of risk: systematic and unsystematic risk.

Systematic risk (market risk): uncertainty inherent to the entire market or market segment

Business examples: Interest rates, recession, wars

Unsystematic risk (specific risk): company or industry-specific hazard that is inherent in each investment.

Business examples: New competitor, a regulatory change, a management change, product recall.

What is more concerning, regarding Team SoloMid, is unsystematic risk. Why is this? Let me introduce you to Harry Markowitz’s Modern Portfolio Theory (MPT),a theory used in discussing “portfolio optimization.”

The MPT is summarized into three basic concepts:

(1) Asset allocation: investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon

(2) Diversification: a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within a portfolio

(3) Rebalancing the portfolio.

Team SoloMid’s portfolio isn’t that diversified.

As of this moment, Team SoloMid has only one team in the four major Esport titles: their League of Legends team. The organization has shown no interest in joining the Dota 2 scene, the organization has been subject to criticism by the CS:GO community for their handling of their past two rosters and Team SoloMid pulled out of competitive Call of Duty, a title that has blown up since departure over a year ago.

Team SoloMid still has their investment in Smash Bros. While the title is able to pull massive audiences on stream, prize pools aren’t as large as other titles and is hurt by the lack of acknowledgement or support from Nintendo. While ZeRo and Leffen have been stars in their given titles, both have their issues. Leffen missed out on North American tournaments due to a visa issues and will skip events or drop out of brackets for focusing on singles matches or personal issues. ZeRo, the former king of Smash 4, has hit a rough stretch, only winning a B-tier tournament this season and occasionally struggles at handling his emotions after losses, examples being deleting his Twitter account and occasional poor sportsmanship actions.

Team SoloMid has the top Vainglory item; however, the team has only brought $52,250 in tournament earnings from the title.

TSM also invested into PLAYERUNKOWN’s Battleground, however the title is still in early access, still being worked on and still susceptible to declining, similar to its counterpart H1Z1. PUBG has shown their willingness to work with streamers and players through their partnership program, however the benefits and longevity of said program is still to be determined. There seems interest in Esports for the title however it is still unproven how successful it will be.

Team SoloMid has purchased a number of League of Legends related sites and has produced video series showcasing talent and fulfilling sponsor obligations. While the sites may bring in traffic, in the ad-block era and lack of sponsored content hurt the value of said sites.

And then, there is the streaming.

There is a lot of confusion regarding streamers. Team SoloMid does not make much, if anything, off of streamers, other than money through their flat deal they’ve made through Twitch and money off of sponsors. Other than that, not much off of streamers.

Team SoloMid also has merchandise and has in the past done well with said merchandise. For being the best team, you’ll bring in a lot of money with merchandise. However, there is the issue of the costs with merchandising, the lack of physical stores promoting merchandise. While Team SoloMid’s changing uniform has allowed for repeat customers, purchasing the latest jersey, other products continue to sit on shelves due to overproduction or lack of interest.

From an outside perspective, Team SoloMid is reliant on its League of Legends’ success and sponsorships. Sure, they have other projects however most revolve around their League of Legends teams or aren’t risk investments — often requiring little support from the organization. That should be slightly concerning. Even if the team is succeeding, what if they don’t? What if a major player leaves? What if they don’t qualify for Worlds? What if Team SoloMid doesn’t even make it into franchising because of (hypothetical) concerns over their reliance in League of Legends to succeed as an organization? Why is no one else bringing the last question up?

The only response I get to that final question is, “Team SoloMid is too big of a brand to not get into LCS again.” Where is their success in another big title? Where is the growth into different titles? Where is their name changing a scene like an OpTic Gaming, FaZe or even a Cloud 9?

Team SoloMid does have a large following on paper — having 1.4 million followers on Twitter, 527.8k on Facebook and 245.5k on Instagram. However, through the website Influencer.gg, their interaction rates aren’t taking complete advantage of their strong following. Team SoloMid has less interactions for the past thirty days on Twitter than their League of Legends counterpart Immortals, who has nearly one million less followers. In fact, their interaction rate on Twitter was the 24th best among Esports organization, losing out to the likes of eUnited, Echo Fox, NRG eSports, Team Liquid, Phoenix1, Counter Logic Gaming, Cloud 9, Splyce.

Team SoloMid has the ability to pull follows however their use of their power hasn’t been shown. Their lack of promotion shows, choosing to limit tweets, which would be smart if what is posted put out meaningful information or information promoting sponsors. Then again, this is coming from a guy who worked with a marketing agency and has been forced to see meaning in every company tweet.