Building an E-Sports Empire: How John Fazio Took Nerd Street Gamers from Bootstrap to $25 Million

John Fazio has a vision, and it’s focused on video games. While competitive gaming has been in and out of mainstream culture over the past few decades, John foresees esports surpassing the popularity of athletic sports in as little as 10 years.

Beyond competition, he believes esports will permeate the world of apparel, shopping, hotels, restaurants, and more. It’s a market poised for enormous growth, and John wants to ensure this brave new world isn’t reserved just for the privileged few who can afford a $3,000 PC or high-speed internet at home.

John is the founder and CEO of Nerd Street Gamers, a national network of esports facilities and events built to provide young people access to opportunities for training and competition. 

As a kid, John was into technology and sports, training and competing at a high level in both soccer and PC gaming. But while his soccer teammates were being recruited to colleges and offered scholarships, there was no such ecosystem in place for esports.

John realized, “Video games have a bigger picture here in our society. Video games can do a lot more than they're doing. It's not just about entertainment, there's real-life opportunity that can come from them.”

Since he launched the business in 2017, Nerd Street Gamers has hosted some of the biggest esports tournaments in North America and established relationships with thousands of high schools, universities, and even a city parks and recreation department. They have opened seven esports centers — called Localhosts — across the U.S., with many more to come thanks to a strategic partnership with retailer Five Below.

To fund this vision, John has raised $25 million from investors, including SeventySix Capital, Comcast Spectacor, and Founders Fund.

On an episode of the How I Raised It podcast, John talks about how he went from a tech-smart teenager who had given up on VCs to the head of a fast-growing company built through well-aligned partnerships.

Find investors who align with the vision

At the age of 18, John had a clear vision for building an ecosystem of talent and career development in the gaming world. In 2005, he drew up a business plan for a network of video gaming arenas, but he wasn’t able to interest investors. Frustrated with the process and soured on the idea of working with venture capitalists, John shelved his idea and started a software company instead.

A decade later, he had built enough capital to revive his dream, and Nerd Street Gamers opened its first Localhost facility in one half of John’s Philadelphia office space. The store was packed non-stop and needed more room, and that’s when Wayne Kimmel of SeventySix Capital reached out for a meeting.

The team at SeventySix had an idea to bring esports to shopping malls, a sort of “arcade 2.0.” But that wasn’t John’s vision, and despite the need to grow his fledgling company, he had no trouble telling the investors what he thought.

“I think what happened in the beginning of that conversation was I was like — no, that’s not right,” John says. “You have to get on board with what we’re doing.”

They did, and John realized the opportunity that lay in front of him — to work with experienced investors who could each bring something to the table, whether it was Wayne’s 20 years of VC guidance or managing partner Jon Powell’s experience in developing high-end retail and sports teams.

SeventySix came on board in the pre-seed round, and John continued to find investors that aligned closely with Nerd Street’s trajectory. Seed round funding was led by Comcast Spectacor, whose gaming division had just acquired the Philadelphia Fusion esports franchise. 

When Five Below came to the table for Series A, John wasn’t sure what a discount retailer could offer, but once he visited a store (during a Mortal Kombat tournament, no less) and met with CEO Joel Anderson, he saw the connections. 

“Joel gave me this strong vision about how Five Below was about bringing the high-end consumer experience to a more affordable market, and that was so aligned with what we were trying to do,” John says. 

Five Below pledged to open up to 70 stores across the U.S. with adjoining Localhost locations, connecting the experience and accessibility for youth across America.

Seek out the one-star reviews

When Wayne and the team at SeventySix Capital first reached out to John, he wanted to be sure that taking venture capital funding was the right move for Nerd Street Gamers. 

“I always knew that once you take the first check, you've got to continue to fuel that growth,” John says.

The answer came from an unexpected source. As he had often done when vetting clients for his software company, John reached out to someone who had not had a great experience with SeventySix, hoping their review would complete the big picture of what it might be like to work with the investors. This founder felt that they had been pushed to grow too fast and build too big. 

“All of those things were exactly what I knew comes [with accepting venture capital], and that’s exactly what I wanted,” John says. “It was one of those interviews where the ‘bad’ was exactly what I wanted to hear. He ironically closed the deal for me.”

Snail mail: Reach out to those who inspire you

When the COVID-19 pandemic closed down all of Nerd Street’s retail locations in early 2020, the company pivoted to focus on their digital platform. It took off running, growing its membership by 219% in one year. 

By early 2021, Nerd Street Gamers had secured an additional $11.5 million from San Francisco-based Founders Fund, a VC firm known for backing the likes of PayPal, SpaceX, and Airbnb, and one that had long been at the top of John’s list.

The deal started with a letter that John wrote to venture capitalist Joe Lonsdale after hearing him interviewed on a podcast.

“It’s a habit I have of sending people who inspire me letters,” John says. 

A couple of weeks later, John realized that Joe, who was also an early backer of Palantir Technologies, had connections to Founders Fund. John sent an email requesting an introduction, and the rest is fundraising history.

Nathan Beckord is the CEO of Foundersuite.com which makes software for raising capital. Foundersuite has helped entrepreneurs raise over $3 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.