2025 Letter from the Chairman

P. KAHARI, CHAIRMAN

TO OUR VALUED INVESTORS AND FUTURE PARTNERS

The global economic landscape is in constant flux, but amidst this evolution, certain sectors emerge as beacons of transformative potential. One such sector, rapidly redefining the confluence of sports, entertainment, and digital innovation, is esports. What began as a passionate, niche pursuit has demonstrably matured into a formidable global economic powerhouse, and GLU eSports stands poised to lead its next wave of growth.

 

Growing up in Michigan, my favorite winter hobby was playing video games. I absolutely despised cold, snowy weather conditions. I remember 7 year old me asking myself, of all the places on planet earth, my family chose this cold ass place. So each winter I told my friends no everytime they invited me to go sledding and instead proceeded to turn on my gaming console. The first one I had was some old thing I can't remember the name of, then I had a PlayStation, then a Xbox 360. As I'm writing this letter, many good memories are flooding back to me.

 

At the time, video games were still just a hobby, nowadays players are signing six figure & multi-million dollar contracts to do what I used to get yelled at for doing "too much" of. Just goes to show how technology and time can rapidly change societal norms and our world's economy.

A Vision for the Future: Capitalizing on the Global Esports Revolution

 

The Transformative Power of Esports: A New Frontier for Investment

The world is witnessing a profound digital transformation, and at its vanguard lies the esports industry. This dynamic, rapidly expanding sector is not merely a fleeting trend; it is fundamentally reshaping the landscape of sports and entertainment in the digital age. Far from being confined to basements, esports has blossomed into a legitimate, globally expanding, and highly investable industry, attracting millions of enthusiasts and substantial financial backing. It signifies a self-motivated and rapidly developing industry at the juncture of gaming, sports, and entertainment, embodying a "sunrise sector" with inclusive reach, a diverse player base, and a flourishing ecosystem.

This evolution represents a deeper societal integration and acceptance of competitive gaming. The shift from a niche hobby to a cultural powerhouse indicates a fundamental change in consumer behavior and leisure spending, creating a new asset class for discerning investors. This is not just about direct revenue generation; it is about capturing mindshare, cultivating cultural relevance, and building new forms of digital community and engagement. For investors, this translates into a more stable and resilient market, less susceptible to transient fads, and capable of generating long-term value through sustained engagement and diversified revenue streams. This profound shift aligns with the broader economic principle of channeling capital into industries that reflect societal evolution and create widespread prosperity, embodying a modern iteration of the capital markets' role in fostering economic growth.

Market Dynamics: Unprecedented Growth and Economic Impact of Esports and Gaming

The foundation for the esports market is the colossal video game industry itself. This broader market provides a fertile ground, valued at approximately USD 274.63 billion in 2024 and projected to reach over USD 721.77 billion by 2034, accelerating at a Compound Annual Growth Rate (CAGR) of 10.15%. This massive industry serves as the wellspring from which esports draws its talent, technology, and expansive audience.

Within this vast landscape, the esports market, while a distinct subset, is experiencing exponential growth. Global esports market size estimates vary across reputable sources, reflecting the industry's dynamic and evolving nature and the challenge of precisely segmenting "esports" from the broader "gaming" market. Projections indicate a value of USD 4.14 billion in 2024, growing to USD 8.28 billion by 2032 at a 9.04% CAGR, or even USD 1.79 billion in 2025, a 16.2% increase from 2024. Despite these variations, the consistent theme across all analyses is undeniable rapid expansion. This dynamism is not a weakness but a characteristic of a nascent industry in its high-growth phase, where market definitions and measurement methodologies are still evolving to keep pace with innovation. For GLU eSports, this signifies a market ripe with opportunities for agile and strategically positioned entities.

The growth is underpinned by a burgeoning global audience, projected to surpass 640 million by the end of 2025, a substantial increase from over 380 million worldwide previously. This dedicated, youthful, and technologically savvy fanbase forms the bedrock of the industry's monetization potential. A significant portion of this audience, over 80%, is concentrated in the Asia-Pacific region, with China and the Philippines alone contributing over 40% of global esports fans. North America also holds a dominant position, securing a significant revenue share and benefiting from the institutionalization of esports through collegiate and high school programs.

The industry's monetization strategies have evolved significantly, moving beyond traditional game sales to encompass robust and diversified revenue streams:

• Sponsorships remain the dominant force, accounting for a substantial portion of total revenue, with new lifestyle and non-endemic brands increasingly allocating dedicated budgets to esports.
• Media Rights are poised for the highest CAGR, emerging as a pivotal revenue-generating sector due to the regular occurrence of numerous individual leagues, championships, and events broadcast on diverse streaming platforms.
• Advertising generates significant revenue, particularly from increasing viewership on platforms like YouTube and Twitch, with in-game product placements and branded team skins also growing in prominence.
• Merchandise and Ticket Sales from direct-to-consumer channels and event attendance contribute substantially to the ecosystem.

Beyond direct revenue, the esports industry creates multidimensional value with significant economic impact. It fosters substantial job creation across a diverse range of roles, including software development, gaming hardware, broadcasting, event management, content creation, coaching, professional playing, and analysis. The broader gaming industry in the U.S. alone supports nearly 1.8 million jobs. Esports also drives tourism and local economic growth, as major events fill arenas and attract millions of viewers, stimulating local businesses and cultural tourism, as exemplified by the Shanghai Major 2024 which drew over 70,000 offline attendees. Furthermore, the industry accelerates technological advancement and innovation, with developers leveraging AI and machine learning to improve gameplay, and integrating virtual/augmented reality for immersive experiences. Emerging technologies like 5G and blockchain are also enhancing connectivity, security, and transparency within the ecosystem. The rise of esports as a professional career path, driven by attractive international prize pools and streaming revenue, further underscores its growing societal and economic significance.

GLU eSports: Our Strategic Position at the Forefront of Innovation

GLU eSports is strategically positioned to capture a leading share in this burgeoning market. Our vision is built on three core, interdependent pillars: competitive dominance, diversified monetization, and robust infrastructure development. This strategy is not merely a general approach but a highly targeted one, designed to capitalize directly on the key growth drivers and revenue streams identified within the broader esports market. By focusing on competitive excellence, we aim to attract the viewership and fan engagement that fuels sponsorship and media rights value. Our diversified monetization strategies are designed to capture value from this engagement through merchandise and events. Simultaneously, our commitment to robust infrastructure provides the essential foundation for player performance, event hosting, and long-term asset value. This holistic approach mitigates risk by not relying on a single revenue stream and builds a sustainable, high-performance ecosystem. GLU eSports is not just participating in the market; it is actively shaping its future, creating a virtuous cycle where success in one area amplifies returns in others.

Building a Dynasty: The GLU eSports Strategic Blueprint

 

Our Core Pillars: Competitive Dominance, Diversified Monetization, and Robust Infrastructure

Our strategic blueprint is designed to create a self-reinforcing cycle of success, with each pillar enhancing the others:

• Competitive Dominance: Attracting and nurturing top-tier talent is paramount. Our investment in professional player housing, state-of-the-art equipment, and dedicated coaching staff provides the optimal environment for our teams to achieve competitive excellence. This directly translates into higher prize winnings, increased media visibility, and elevated brand prestige, attracting more fans and sponsors. The success of our teams on the global stage is the primary driver of audience engagement and brand value.
• Diversified Monetization: We are building multiple revenue streams from inception. Our focus on merchandise and e-commerce capitalizes on the strong fan engagement and demand for branded products. Strategic marketing and influencer collaborations will amplify our brand awareness and reach, driving viewership and attracting lucrative advertising and sponsorship deals. This multi-faceted approach ensures revenue resilience and scalability.
• Robust Infrastructure: Our commitment to establishing high-performance team housing, acquiring land for future expansion, and developing a Michigan-based headquarters with a blueprint for a dedicated esports stadium lays the physical foundation for long-term growth. This infrastructure not only supports our teams but also enables us to host events, generate ticket sales, and contribute to local economic development. The true power of these pillars lies in their interdependency. Competitive dominance drives viewership and fan engagement, which is the fuel for diversified monetization. The robust infrastructure provides the necessary environment for players to achieve competitive dominance and for the company to efficiently manage and monetize its assets. This holistic approach creates a self-reinforcing ecosystem, making GLU eSports more resilient and scalable than a team focused solely on prize money or sponsorships.

The Strength of Our Foundation: The Texas C-Corp Advantage

Our choice of a Texas C-Corp structure is a deliberate strategic decision, reflecting a sophisticated understanding of venture capital financing and a clear path towards potential public market access. This structure is universally recognized and preferred by institutional investors, providing the flexibility and scalability necessary for significant growth and future capital raises. For venture capital investors, a C-Corp is the standard and preferred legal entity. It simplifies future funding rounds, allows for multiple classes of stock, and is the prerequisite for an Initial Public Offering (IPO) or acquisition by a larger entity. By choosing this from the outset, GLU eSports demonstrates foresight and a commitment to scalability and investor liquidity, reducing friction for future capital injections and potential exits. This proactive legal structuring builds investor confidence and signals a serious, long-term business plan, not merely a lifestyle venture. It signals our long-term ambition and commitment to providing clear liquidity pathways for our investors.

Partnering for Prosperity: Details of Our Seed Investment Round

 

The $10,000,000 Seed Capital Infusion: Fueling Our Initial Strategic Blueprint

GLU eSports is pleased to announce its seed funding round, targeting a total aggregate investment of $10,000,000 (Ten Million US Dollars). This critical capital infusion is meticulously designed to provide the necessary runway for GLU eSports' initial strategic blueprint execution, establishing a robust foundation for rapid growth and competitive positioning. This investment is crucial for translating our ambitious vision into tangible assets and operational excellence.

 

The Simple Agreement for Future Equity (SAFE): Flexibility and Investor Alignment

This investment will be structured using a SAFE (Simple Agreement for Future Equity). The SAFE instrument is widely adopted in early-stage funding rounds due to its inherent flexibility, allowing for the deferral of a precise valuation until a subsequent, typically larger, priced equity round (e.g., a Series A). This mechanism benefits both GLU eSports, by avoiding the complexities and time consumption of a valuation negotiation at a very nascent stage, and our investors, by providing a clear and streamlined path to equity conversion without the complexities of debt instruments such as interest rates or maturity dates. In a fast-evolving industry like esports, the agility provided by a SAFE is a strategic advantage. It allows GLU to quickly secure capital and deploy it to seize emerging opportunities without being constrained by lengthy and complex valuation negotiations that might become outdated quickly. This nimble approach is vital for maintaining a competitive edge and accelerating market penetration.

 

SAFE Conversion for a $10 Million Seed Round

We are seeking a $10 million investment via a SAFE (Simple Agreement for Future Equity). This investment implies a $100 million post-money valuation ($10M / 10% target equity).

 

Understanding Our Investor Protection

We've designed the SAFE with two key protections to ensure our early investors receive the most favorable conversion terms, reflecting the value of their early-stage support.

The Valuation Cap: Securing Your Upside

The SAFE includes a $100 million valuation cap. This sets the maximum valuation at which your investment will convert into equity. If a future Series A round is priced above this cap, you will convert at the $100 million cap, not the higher Series A valuation. This guarantees that your initial $10 million investment will translate into a minimum of 10% of the company's equity, protecting you from excessive dilution if we achieve a significantly higher valuation in a subsequent round.

The Discount: Rewarding Early-Stage Risk

Investors also receive a 10% discount off the Series A valuation. This means you will convert your investment at a price per share that is 10% lower than what new investors pay. If the Series A valuation (after the discount) is less than the $100 million cap, the discount applies. This ensures you get the better of the two options—the cap or the discount—effectively rewarding you for the early-stage risk you're taking. Our SAFE terms are intentionally structured with this dual protection to demonstrate our commitment to rewarding our most strategic and high-conviction partners.

 

Beyond Financial Returns: Strategic Benefits for Our Valued Partners

Beyond these robust financial terms, GLU eSports is offering several strategic benefits designed to foster deeper engagement and alignment with the Company's long-term vision. These benefits are not merely perks; they are mechanisms for co-creation and leveraging investor networks, transforming passive capital into active partnership. This approach aligns with a broader vision of expanding markets and fostering more active participation.

• Naming Rights for Stadiums or Tournaments: This provides investors with a unique opportunity to prominently associate their brand or name with GLU eSports' physical assets and high-profile esports events, offering significant marketing and visibility. This aligns with the industry's increasing reliance on sponsorships and brand integration.
• Early Access to Merchandise Collaborations: Investors will receive priority access to exclusive and collaborative merchandise releases, often before they are made available to the general public, serving as a tangible perk and a symbol of their insider status. This leverages the growing merchandise revenue stream within the esports market.
• Advisory Board Seats: Qualified investors may be offered positions on an advisory board, granting them a direct role in shaping the franchise's strategic direction and contributing their invaluable expertise. These advisory roles provide a structured mechanism to integrate external expertise and networks, directly impacting strategic direction and potentially accelerating growth for the company.
• Exclusive Media Exposure: Investors will receive prominent visibility and exposure through various media channels associated with GLU eSports, leveraging the Company's growing platform for mutual benefit. This taps into the power of media rights and advertising in the esports ecosystem, turning investors into active brand amplifiers.

These enhanced benefits are specifically tailored to attract strategic investors who can contribute not only capital but also invaluable industry connections, brand synergy, and media reach. The cultivation of such value-add partnerships is crucial for accelerating growth and establishing a formidable market presence.

Strategic Capital Allocation: Driving Accelerated Growth and Value

The $10,000,000 (Ten Million US Dollars) raised through this seed round will be meticulously allocated across several critical operational and strategic areas. This allocation is designed to ensure the rapid growth, infrastructure development, and competitive positioning of GLU eSports from its inception. The detailed breakdown reflects a strategic approach to building a robust foundation for the Company's ambitious vision. While seed rounds are often heavily weighted towards rapid product development or aggressive user acquisition, GLU's allocation directly supports these objectives within the unique context of an esports franchise. Each expenditure is designed to contribute to accelerated revenue generation and market dominance, rather than solely sustaining initial operations.

 

Meticulous Allocation of the $10,000,000: A Detailed Breakdown

The table below provides a clear and transparent overview of how the seed capital will be deployed, allowing investors to quickly grasp the financial blueprint and understand the immediate impact of their capital.

Maximizing Return: How Each Investment Area Fuels Performance, Revenue, and Brand Prestige

Each expenditure within this allocation is strategically designed to drive accelerated growth and market dominance, rather than merely sustaining initial operations. The investment in Pro Team Housing & Equipment and Team Salaries & Talent Acquisition directly impacts competitive performance. Superior competitive outcomes lead to higher prize winnings, increased viewership, greater brand appeal, and more lucrative sponsorships, effectively serving as the "product development" and "user acquisition" for an esports franchise. Esports Event Travel & Attendance is crucial for brand visibility, player exposure, and direct prize winnings, acting as both a marketing platform and a direct revenue opportunity.

The allocation to Marketing & Influencer Collaborations is a direct investment in audience growth, brand awareness, and attracting sponsors and advertisers, representing aggressive market penetration. The Merchandise & E-Commerce Platform establishes a clear and immediate revenue stream by capitalizing on brand appeal and fan engagement. Investments in Real Estate & HQ Lease provide foundational infrastructure for long-term scalability, including future stadium development, which will unlock new revenue opportunities through events and ticket sales. Finally, Legal, Compliance, IP & Corporate Operations ensures the company's long-term stability, protects its intellectual property, ensures regulatory compliance, and builds investor confidence, all of which are critical for sustainable growth and future monetization. This comprehensive allocation demonstrates a clear understanding of the esports value chain, channeling capital into productive assets that generate future returns and establish GLU eSports as a leader in this burgeoning industry.

Our Commitment to the Future: Transparency, Growth, and Shared Success

 

Cultivating Active Partnerships and Long-Term Value Creation

GLU eSports is more than just a professional eSports franchise; it is a vision for the future of digital entertainment and a commitment to building enduring value. The strategic choice of a Texas C-Corp structure, our transparent approach to fundraising via SAFE notes, and the meticulous allocation of capital all underscore a dedication to best practices in venture-backed growth. The company seeks not merely passive capital, but active partnerships that contribute invaluable industry connections, brand synergy, and media reach. The offering of advisory board seats, naming rights, and exclusive media exposure are designed to integrate investors into the fabric of GLU eSports, fostering a symbiotic relationship that enhances market presence and accelerates revenue potential. This sophisticated approach to investor relations is built on mutual benefit and a shared commitment to long-term success.

 

The Enduring Potential of GLU eSports and the Esports Ecosystem

The esports ecosystem is a vibrant and rapidly expanding frontier, characterized by unprecedented audience engagement, diversified revenue streams, and continuous technological innovation. GLU eSports is strategically positioned to capitalize on this growth, leveraging competitive dominance, robust infrastructure, and a multi-faceted monetization strategy. The industry's broader economic impact, including job creation, tourism, and technological advancement, further reinforces its significance as a valuable asset class in the modern economy. The company's blueprint is designed to not only participate in this growth but to actively shape it, creating a virtuous cycle of performance, engagement, and financial return.

 

A Call to Action: Joining Us on This Transformative Journey

GLU eSports invites you to join us on this transformative journey. Your partnership will not only fuel our initial strategic blueprint but will also contribute to the broader evolution of an industry that is redefining entertainment and creating new avenues for prosperity in the digital age. We are confident that with your support, GLU eSports will establish itself as a dominant force, delivering exceptional value to our investors and shaping the future of competitive gaming.

 

Sincerely,

P. Kahari Chairman and Founder, GLU eSports