How Nerd Street Gamers is pivoting during the pandemic while raising a Series B

Like every company with a storefront-based model, Nerd Street Gamers (NSG) has had to make some changes to its operation during the worldwide coronavirus crisis.

The company launched out of Northern Liberties with its first Localhost station — a space for IRL gaming competitions — a few years ago. Quickly, it grew: In 2017, SeventySix Capital invested in the company, and shortly after, investments from Comcast Spectacor and Five Below followed.

Heading into 2020, NSG had helped cement Philly as a hub for esports, and make gaming events and tournaments a regular occurrence. But as the coronavirus pandemic shut down most in-person events indefinitely, the company has had to pivot.

“We were privileged enough to be able to put our store staff online to work and really focus our events online instead,” CEO John Fazio told Technical.ly on Friday.

And the company saw a level of membership growth somewhere around 900% this spring, as thousands more people signed up to play from home. (In general, entertainment shot up during the pandemic, Comcast found.)

While the company is able to run many of their tournaments and events online, Fazio said he’s mostly concerned about the loss of the in-person experience. Some players were coming into Localhost facilities because they don’t own the equipment themselves. And they’ve seen how access to internet for families — proven to be a challenge Philly is still facing — is affecting not only play, but basic necessities like schooling or online work.

“We’ve seen demand there, and the community in general is really eager to get back,” Fazio said.

Nerd Street Gamers CEO John Fazio. (Courtesy photo)

This past weekend, the company partnered with T1 Entertainment & Sports to produce a weekend-long VALORANT Ignition Series event, a global series of tournaments created by Riot Games in partnership with VALORANT players, teams, content creators and tournament organizers. The partnership aided the first VALORANT Showdown in North America.

It helped demonstrate the NSG’s ability with remote broadcast and event production, Fazio said. The company had been doing online tournaments since 2013, so transitioning to fully remote play wasn’t too big a challenge.

Shutting down the stores and moving them fully remote also made for a better, more high-quality streaming and play experience, he said. The online events space has become very crowded, but their experience with streaming events makes the CEO feel like the company is uniquely positioned.

“Four months ago I couldn’t get ESPN on the line, now they’re calling us for pregame stuff,” he said.

And although the pandemic has made it hard in general to fundraise, Fazio said, the company is in the middle of raising a $35 million Series B round, following its $12 million Series A later last year. So far, the company has issued $10 million as a convertible note and has received $5.4 million from existing investors.

Last year, Nerd Street had reached more than 50 full-time employees and about 100 contracted employees. Fazio said he and company leaders built the company with a recession in mind, and the recent pivots and remote access are keeping up with demand for now.

But he does know there is demand for their Localhost facilities — currently in Pennsylvania, Colorado and California — to reopen because players just aren’t getting the same social experience from their homes.

And there will be some post-pandemic changes, Fazio said, like turning in keyboards for sanitation between player use and the use of masks for the foreseeable future. And he also sees the future of gaming venues, like the Fusion Arena coming to South Philly, might be in a bit of limbo.

“In the industry, it was beneficial to be filling big stadiums for esports,” Fazio said. “I don’t think that will happen very much any time soon. They might be more interested in a small, intimate venue.”