Mark Cuban's latest investment has "unicorn" written all over it.

The Shark Tank host has joined a group of investors including Binary Capital to invest $7 million in e-sports company Unikrn (pronounced "unicorn"). The startup, founded last November, is hardly the only company going after the e-sports industry, where large groups of people team up in competitive video game playing. But Unikrn is focusing on a new dimension: letting consumers bet real money on the outcomes of these video game competitions.

"We've built a safe, virtual arena for people to watch these sports, and we heighten the experience by adding a betting component," says Unikrn founder Rahul Sood, who left his position of general manager at Microsoft Ventures in November to start Seattle-based Unikrn. For now, however, Americans can't do any betting; Unikrn only takes bets from people living in countries where betting on e-sports is legal.

While referring to video game playing as "sports" might sound like a stretch, e-sports are already being recognized by U.S. universities, some of which are giving out athletic scholarships to students based on their video game skills. Last year, Chicago-based Robert Morris University gave a $15,000 athletic scholarship to a computer networking student for his video game skills.

"What people don't realize is that these games that are coming out are highly technical," says Sood, a serial entrepreneur who previously founded VoodooPC, the first personal computer company for gaming, and sold it to Hewlett-Packard in 2006. "You will soon see Ivy League schools giving out scholarships for e-sports."

Sports networks are also already getting in on the action. Some 27 million people tuned in to watch the 2014 world championship for the video game League of Legends, broadcast by ESPN. For comparison, 24 million watched the last game of the most recent World Series, and 18 million people watched the NBA Finals.

Tuesday's investment round brings the total amount raised for Unikrn to $10 million. Other investors participating in the round include 500 Startups, Advancit Capital, Freelands Group, Indicator Ventures, and Australia-based Tabcorp, one of the world's largest publicly listed gaming companies. 

So what convinced Cuban to invest in Unikrn? 

"I only put my name on the companies that I feel will be successful, truly advance an industry, and have a leadership team that I respect," Cuban said in a statement, adding that e-sports has created an entirely new category for competition. "Unikrn fits all these requirements." 

According to the company, industry experts predict e-sports could match the NFL in number of fans by 2017. Unikrn plans to release a new version of Unikrn Arena in early July. 

"These tournaments are not only actively watched online, but the players that play them are famous," Sood says, adding that the No. 1 ranked player of League of Legends, Korean teenager Lee Sang-hyeok, is a celebrity in his home country with millions of dollars in sponsorships.

"He's got two shoe deals."

Mark Cuban on Why the Pro Sports Business Differs From All Other Businesses
Published on: Jun 30, 2015