Michael Duffy, a partner at Saul Ewing, works at the intersection of venture capital, emerging technology, and digital media, advising startups, investors, and esports organizations as they launch and scale their businesses. His practice often involves guiding companies through seed and growth-stage financings, negotiating intellectual property licensing agreements, and helping digital-first businesses build the legal structures needed to manage their assets and withstand investor scrutiny over the long term.
As private equity firms and institutional investors have shown increasing interest in esports teams, gaming platforms, and related media ventures in recent years, Duffy has helped clients navigate the legal complexities behind the industry’s rapid growth. His work often involves evaluating the sustainability of sponsorship-driven revenue models, addressing cross-border data compliance issues, and ensuring that intellectual property rights are properly protected.
In this interview, Duffy discusses the legal pitfalls founders often overlook during venture financings, the key due diligence issues investors should consider in esports deals, and how companies can build the legal infrastructure necessary to support sustainable growth.
Question: Given your work with venture capital funds and early-stage companies, what legal pitfalls do founders most often overlook during seed and growth-phase financings?
Answer: In seed and growth rounds, the focus is typically on the preference rights, control, dilution, vesting and other big-ticket items that are the highlights of the term sheet stage, and can be analyzed ad nauseam by the parties. What is often overlooked by founders is the due diligence that starts immediately after the term sheet is signed, by failing to make appropriate preparations to endure the scrutiny of savvy investors and undertake some basic corporate hygiene.
Startups frequently arose from lawyer-free beginnings, with founder trying to put their business together themselves on a shoestring. Legal requirements can easily be misapplied or overlooked. There may be “side” arrangements (advisors, influencers, strategic partners) that only live in email chains. There may have been one or more friends-and-family SAFE rounds that were treated as casual transactions with bare papering, but even “simple” rounds need a functional final agreement and clean exemption story (e.g., Rule 506(b) vs. 506(c), general solicitation limits, and accredited investor diligence). Once institutional money arrives, all this and more must be disclosed to the investors. The startups will need to demonstrate pre-money cap table integrity. It is universally better to review and address such matters prior to the start of a transaction, rather than making them into due diligence revelations that can scare away investors, provide ammo for imposing more investor-friendly terms and require last-minute remediation attempts.
Q: As esports organizations increasingly pursue private equity investment and M&A activity, what unique due diligence or valuation issues should investors be watching closely?
A: Esports looks like traditional sports on the surface, but the asset investors are underwriting is typically a bundle of contracts wrapped around publisher-owned IP. A focus of diligence can be the durability of the revenue stack: sponsorship and advertising often drive the economics. Those often have short terms that are category-restricted and performance-dependent, which investors need to be comfortable with. There are risks to consider on the publisher/league side as well, which can involve looking into participation rights, content monetization, and media/streaming rights, which may be left in the hands of third parties.
A current flashpoint is sports betting sponsorships. That can be meaningful new money, but it brings integrity, regulatory, and reputational risks. Anything related to that will show up in diligence and in post-close compliance obligations.
On valuation, I have been seeing more focus on “quality of earnings” (revenue concentration, renewal rates, rights actually owned vs. licensed) and less appetite for projection- and hype-based multiples.
Q: Your practice includes intellectual property licensing and commercial agreements—how do these capabilities position you to support esports teams, game developers, or platforms built on digital IP?
A: In esports, IP is quite literally the playing field. A team, developer, or platform’s value is typically tied to rights to use game footage, trademark, player handles, creator content, music, likenesses, etc. I’m constantly coordinating with outstanding specialized IP and regulatory colleagues at my firm, so the contract says what the company can actually do. We aim for licenses with clear scope/term, exclusivity and territory that match the business model, and revenue mechanics that survive later investor diligence. Because these are digital-first businesses, we’re also blending classic licensing with creator and platform terms, disclosures, content approvals, and brand-safety controls.
Q: Many esports and gaming startups operate globally from day one. Based on your international business experience, what cross-border risks or structuring challenges should these companies anticipate?
A: The IP component remains a major consideration when there is any international presence. If there is any meaningful value in a given international jurisdiction, esports and gaming companies should take the steps necessary to secure and defend their intellectual property there. On the corporate side, esports and gaming startups with cross-border components face the same issues as any other company when it comes to tax structuring, parent/subsidiary setup, inter-group finances, immigration issues, etc. On data, global reach can trigger global rules. One of the ongoing scary dragons of privacy compliance remains the GDPR. The GDPR can apply when you offer services to people in the EU or monitor their behavior, even if you’re U.S.-based. On structure, companies should think early about where IP sits, how cross-border royalties will flow, and whether they need local entities for hiring, tax, or regulatory reasons.
Q: When serving as outside general counsel to high-growth companies, how do you help clients balance rapid scaling opportunities with the legal and operational discipline needed for long-term success?
A: I enjoy a simple and scalable approach toward reliable legal infrastructure. Some frequent fliers in that space are to tighten the cap table, build a simple contract intake/approval process, and create playbooks for the company’s highest-volume deals (publisher/platform agreements, sponsorships, creator deals, and key vendors). It can help to have good templates, known fallback positions, and escalation triggers tied to basic metrics. That should be built on crisp historical corporate governance memorialized by disciplined record-keeping, so when a strategic buyer or PE partner shows up, diligence is a non-event instead of a fire drill.
