'Data is the most valuable asset we have': Oninvest interview with Brag House CEO

«If Discord, Instagram, Twitch, and DraftKings had a baby – it would be the Brag House»: this is how Lavelle Juan Malloy II, cofounder of the latter, describes his company. He gave an interview to Oninvest at the recent LD Micro conference in New York.

Brag House is an esports platform for nonprofessional college gamers and their communities to compete and even bet in virtual currency. The company went public in March. 

What is the business model of Brag House?

Lavelle Juan Malloy II is from New York City but attended the University of Texas. His biggest passion was sports: He played baseball and dreamed of becoming a professional athlete. Recalling this, he shows the signature «Hook 'em Horns» hand signal of the University of Texas. 

But an injury ended his athletic career. «I was devastated. So, one of the things that helped me is that I played a lot of video games,» he recalls. 

Malloy eventually became a corporate lawyer on Wall Street, but he never gave up on sports. In 2014, together with his university friends who played in the NFL, he created a marketing company, WollerMalloy Management Group, which helped NFL rookies to sign marketing contracts. In 2017, he sold it, though he has not disclosed details of the deal. Thus, he says, he got his first capital. 

His second business was also sports-related. «A friend of mine came up to me and asked, 'Hey, Lavell, any chance you'd be interested in buying a soccer team?' I hate soccer; I know nothing about soccer,» the entrepreneur recalls.

Nevertheless, he bought a team and invited kids from a Portuguese neighborhood in New Jersey to join. «When they played, the whole neighborhood came to watch. Everybody wants to support people from their neighborhood,» Malloy explains. As soon as 2018, he sold it for a seven-figure sum, he says. «But the most exciting thing was sending two kids to play in Portugal. That’s been the best experience of my life,» he says. 

After that, the entrepreneur quit his law firm and focused on the sports business. He learned that the College Football video game, popular with American college students, where virtual athletes had the names and appearance of real college football players, had stopped coming out. At the time, the game's publisher, EA Sports, failed to come to terms with the NCAA on the rights to use the players' likeness. «EA was making billions of dollars from gaming and college sports. And they just got rid of their game,» Malloy marveled. 

Then in 2018, he decided to build his company, a digital platform that would combine college sports, socializing, and gaming. «Once I started working on this, I figured out that my target audience, the ones who liked all three things, was Generation Z, college students,» he explains. 

Thus came Brag House, where users could bet in a made-up currency called «brag» and play video games together. 

But building a streaming service turned out to be challenging. «I was working with some of the best Ukrainian engineers, but they all told me that developing a project like this would take a very, very long time. At some point, I just got so fed up with hearing that, I decided to figure it out myself — and ended up becoming a full-stack developer through Columbia University School of Engineering,» recalls Malloy. He did not plan to write code himself, but he wanted to understand the technical process.

He was the head of the startup. Besides him, there were only two employees. The first was Daniel Leibovich, whom Malloy had invited to cofound it and become COO. Leibovich is a Columbia University finance graduate who built a career in real estate, cybersecurity and IT. «He's my complete opposite: I love thinking big picture and generating ideas, whereas for Daniel, every little detail has to make sense.» 

The other employee helped with technical issues, with the rest of the work outsourced.

The entrepreneur and his team spent all of 2019 developing and testing the platform. Malloy and Leibovich did so with their own money, which included hiring programmers, communicating with future ambassadors, and paying for Amazon servers. 

Brag House launched in March 2020, at the height of the pandemic. It attracted its first users thanks to ambassadors hired through the career platform Handshake. Malloy conducted about a hundred interviews and chose six ambassadors, who were students from different universities.

«We had a real people, real leaders in their communities, like college athletes. People listen to and get behind other people like themselves,» says Malloy. He did not want to involve big bloggers in promoting Brag House, believing regular students are better influencers as far as Gen Z goes. «Your friends are going to listen to you way more than some fake person on the internet who is just getting paid to say what they are doing,» he explained. 

Malloy gave himself a year to find investors, vowing to stop developing the platform if he did not raise money: «If you don’t set a deadline for yourself, you’ll just keep burning through your money and chasing success until it all runs out, and then you’re back to looking for a corporate job.» He claims to have «met with a hundred investors,» but without success. 

«I was heartbroken because the deadline I’d given myself was almost gone,» the entrepreneur recalls. In summer 2020, Malloy finally found his first investor: Frederick Adler, founder of the venture capital firm Food & Fun Ventures. How much money Adler invested, Malloy will not say. Judging by data from Crunchbase, it could be as much as $300,000. Thanks to Adler, Brag House now had a chance.

After receiving its first investment, the company focused on generating revenue. The first method of monetization was advertising: Brag House attracts advertisers interested in college-aged consumers, gamers, and gaming fans, according to the company's 2024 report. 

Its first advertiser, in 2021, was the marketing agency Moroch, which helped Brag House to hold tournaments sponsored by McDonald's and Coca-Cola.

Malloy argues that with Brag House, advertisers get more bang for their buck with campaigns: Judging by the investor presentation, users spend an average of 19 minutes viewing Brag House tournaments, which is 1.7 times higher than the esports industry average (11 minutes). 

The second source of revenue was esports tournaments among college students. Brag House contracts with corporate clients to organize them, either on a one-time basis or as a package of several competitions. Brag House is responsible for all event preparation and execution, from planning and marketing to recruiting players and organizing a live stream. 

Currently, tournaments with corporate sponsorships are the company's primary revenue stream. In five years of operations, Brag House has held 27 tournaments, seven of which were sponsored by corporates, including Fortune 500 companies. That brought in a total of about $667,000 in revenue, according to the company. 

In March of this year, Brag House also formed a new partnership with Learfield, a college sports marketing company representing more than 200 of the nation's top collegiate properties. Together with Learfield and the University of Florida, Brag House recently hosted a Fortnite solos tournament.

To date, the company has raised $4 million, according to Crunchbase. The pre-seed round came from Adler, and the next $2 million, which came in early 2022, from venture capital funds. The company also issued $1.7 million in convertible bonds in late 2022. «We [had] two clear paths: remain private and repay the note with interest, or pursue a public exit that would eliminate the debt and strengthen our balance sheet with a cash infusion. We chose the latter,» Malloy told Oninvest.

On February 14, 2022, the company published a draft registration statement for a public offering. But with the outbreak of war in Ukraine in 2022, the IPO market froze, as did talks for investments and future advertising partnerships. 

As a result, Brag House postponed its IPO. In addition, the company was forced to cut more than half of its employees. «We made a classic startup mistake: We hired too many people,» Malloy admits. Since then, the company has only seven permanent employees. 

It was not until summer 2024 that the company published a prospectus announcing plans to list 1.6 million shares at $5 apiece on the Nasdaq. Brag House hoped to raise $8 million in the IPO.

The actual results were more modest: On March 7, the company announced it had raised about $6 million by placing 1.475 million shares at $4 each. Including subsequent additional offerings, the IPO raised $6.7 million.

Malloy and Leibovich own approximately 13% of the company's stock, according to the company. 

In the first month after the IPO, the share price peaked at $6.96, having risen more than 50%. But as soon as April 1, it collapsed more than 80% in a day, to $1.27.

On May 14, the company reported it had fallen victim to «potential illegal naked short selling.» Naked shorting is the illegal practice of selling short shares that have not yet been determined to exist or that the trader has not secured in some way. 

The company said it received information from the Depository Trust Company that the trading volume on April 1 was nearly three times the volume of shares offered in the IPO, nor did the company see the expected delivery of shares. According to the press release, there were «persistent discrepancies» in the delivery of shares in the second half of March and the first week of April. The company reported the information to the U.S. SEC and Nasdaq. 

Since then, the share price has not recovered. On June 4, the stock closed at $0.60 per share. According to Nasdaq rules, the company can be delisted if its stock stays below $1 per share for 30 days. Still, issuers have six months to take steps to restore the share price. Malloy is confident the company's third-quarter performance will energize the stock. 

For 2023, the company had revenue of $366,400 and a net loss of $4.7 million. Revenue for 2024, however, was just $105, with the net loss dropping to $3.3 million. The company attributed the top-line drop-off to lower tournament activity last year.

The company plans to add a new revenue source this year, Malloy mentioned to Oninvest. By the end of the year, Brag House will introduce memberships for users with five tiers. The company is still looking for the right prices, but preliminarily they range from $2.99 to $7.99. By comparison, subscription rates on interactive livestreaming service Twitch range from $4.99 to $24.99. 

The second way to make more money involves selling data to brands. «Data is the most valuable asset we have… A lot of businesses just have passive data — like where a user is located, or how much time they spend on a site. We, on the other hand, can predict how our users will react to specific ad campaigns,» explains Malloy. 

The company has decided to launch a service in early 2026 that will provide corporate clients with paid access to anonymized aggregated data about Brag House users. This is set to become the company's biggest revenue source, the entrepreneur believes.

Software developer Artemis will help create the service, which is to be based on machine learning that will aggregate and analyze Brag House user data. In return, Artemis got a stake in the business: 937,500 common shares of Brag House.