The Inside Story of How High School Esports Began and One Man's $100 Million Bet

Delane Parnell likes video games for many reasons. For one, they appeal to his personality. “I’m super competitive,” he says. For another, when he was growing up, they were a great way for Delane, the second youngest, to bond with his brother, Daelon, and his cousins Emil, Emmanuel and Jalen. They’d all sit together in his grandmother’s basement, passing around the controllers for Nintendo 64 games like Donkey Kong and GoldenEye. “It was a lot of fun,” he says. “We’re a long way from those days, but it was a lot of fun.”

Most important, Parnell credits video games with keeping him off the streets of his Detroit neighborhood. Parnell grew up on the west side of Detroit in a neighborhood called 7 Mile and Burgess. According to census data compiled by Data Driven Detroit, the current median household income in 7 Mile and Burgess is $25,458—less than half the average in Michigan—and 81% of households with children are led by a single mother. Fifty-five percent of children live below the poverty line, and nearly everyone is eligible for free or reduced-price school lunch. 

It’s not the traditional background for entrepreneurs, who often come from money, but through hard work, savvy networking and relentless curiosity, Parnell was able to reinvent himself over and over, from retail employee to cell phone franchise owner to esports competition team leader to venture capitalist to founder of PlayVS, a company that has now raised $96 million and has 42 employees. As if his trajectory weren’t impressive enough, he already has his sights set on another goal: growing PlayVS into a company worth $50 billion to $100 billion.

Parnell’s first serious foray into the business of esports came in 2016 when he sold the Call of Duty competition team he’d created a year earlier. After that, the 23-year-old turned his sights to something even more ambitious: changing the competitive gaming industry itself. 

Already, the potential of professional esports was obvious. In March 2016, Newzoo, a games and esports analytics firm, proclaimed that “esports is the biggest disruption to hit our industry since the iPhone in 2007.” As evidence, the company pointed out the growth of esports spectators—from 115 million in 2015 to a projected 131 million in 2016—and the coverage of the sport on streaming platforms like Twitch as well as traditional media such as ESPN and Fox. 

Newzoo also cited the meteoric rise in advertising spends ($325 million in 2016, almost 150% that of 2015) and revenues that were forecast to break $1 billion by 2019. As bold as these predictions were at the time, they’ve held up. In fact, by the end of this year, esports will have revenue of $1.1 billion and 454 million spectators. Some predict that esports will even be an Olympic sport someday.

During a networking party at South by Southwest, Parnell was introduced to Peter Pham, one of the founders of Science, a startup incubator based in Santa Monica, California, that advised Dollar Shave Club, which was eventually sold for $1 billion. Pham was interested in esports, and after the two chatted for a bit, he asked for Parnell’s phone number. The following day, he called, and Parnell thought he’d finally have the support he needed to revolutionize the world of professional esports. Instead, Pham asked a very different question: Have you thought about high school? 

“I was like, ‘No, of course not,” says Parnell. “At that point in esports, everyone was thinking about pro and the layer immediately underneath pro. When he said high school, my immediate thought was ‘There are already a bunch of companies in high school [like the North America Scholastic Esports Federation and the High School Esports League] and none of them have had any success.’” 

Undeterred, Pham asked Parnell to fly out to L.A. from Detroit, where Parnell was living at the time, and over the next few months, he returned again and again. Instead of pushing Parnell to study the high school market or to start developing a product to launch, Pham saturated the 24-year-old in startup culture. “Peter was like, ‘Come out and spend time with a group of people who’ve built small companies from one person to a thousand people,’” says Parnell. “And that’s an interesting opportunity for a guy who wants to build a really successful tech company.” 

Eventually, Pham pushed Parnell to settle in L.A. permanently, but to do so, Parnell would have to leave the city where he grew up and cut his teeth as an entrepreneur.

When Parnell was 13, he started on the path that would ultimately lead him to become a tech entrepreneur. His mom found him a summer job working at a cell phone store owned by her friend, whom Parnell credits with teaching him the foundation of being an entrepreneur, everything from the logistics of operating a retail store to the specific benefits of one phone over another and knowing which products to push. Parnell didn’t have a particular affinity for mobile devices, but he says that’s not the point. 

“It didn’t matter what I was learning, whether it was cell phones or technology or business,” he says. “Just the opportunity to learn and to be doing something productive—that was meaningful given how limited the opportunities are for people who come from the place that I come from. I made sure I was there every day after school, and if I didn’t have school, I was there from open to close.”

Eventually, he decided he wanted to open his own franchise and partnered with two guys he met through a friend. “They were pretty young too,” he says, “but not as young as I was. I was still in high school, but they were young and motivated to make something of their lives.” Their one store turned into three, after which Parnell sold his shares and co-founded Executive Car Rental, which, according to its website, now has eight locations in Michigan and Florida. 

However, as Parnell’s ambition grew, so did the obstacles of being an entrepreneur in Detroit. Only 11% of residents in Parnell’s hometown have bachelor’s degrees and “there weren’t many really big companies,” says Parnell. “With the exception of the universities, the talent level was very low, and even at the University of Michigan, a lot of those kids commit to internships elsewhere. So in the summer, when most people focus on building startups, those kids are already working in Silicon Valley.”

“I’d never seen the apartment I was moving into,” says Parnell, “but I gave away everything I owned, and I moved with just a suitcase.” By now, Parnell was mostly convinced of the viability of the high school esports market—but not entirely. “At this point, I’ve got savings,” he says, “and I tell myself I’m going to dedicate one year to this experience. If it hasn’t worked out by 2018, then I’m moving on.”

Parnell landed late on a Saturday night and was immediately hit with culture shock. “Holy shit,” he remembers thinking, “there’s a grocery store that’s open 24 hours a day.” By Monday morning, though, he’d turned his attention to the problem that had brought him to Los Angeles. How could he build a product for a market that was seemingly already saturated? 

At the time, many companies had already eliminated a huge barrier to entry for prospective esports competitors: coordinating all the players. “If you want to organize a competition for six teams to play League of Legends, you need 30 people,” says Parnell, “and it’s super difficult to manually organize 30 people.” To penetrate the high school market, Parnell knew he’d have to offer more than just generating a bracket. 

For one, he’d have to verify that the competitors were actually students and that they were playing in a safe environment under the supervision of an adult affiliated with the school. He’d also have to get the school’s permission to use its equipment and its space after hours. Finally, he’d have to ensure that students’ data was private and protected, and, ideally, he’d get the support of the producers of the games, which Parnell calls “publishers.” 

Parnell says about the other companies at the time, “They kept relying on prize play. Like, ‘If you win, we’ll give you some scholarship money. If you win, we’ll give you a computer.’ But that’s not scalable, and it’s certainly not sustainable, and it kind of teeters on skill-based wagering, which is illegal.” 

For all its challenges, though, the esports market had major enticements. Of the roughly 15 million high school students in the country, only a little more than half play a sport, and though overall participation has been rising for the past 29 years, for some sports, it’s actually shrinking. Consider football, whose growth potential is already maxed out, according to Parnell. 

“The only way that [the participation] number grows would be if they built more schools that have football programs,” says Parnell. “Eleven men or women on the field, 53 people on the roster. That’s it. That’s the furthest you can go. At best, you can add a JV or freshman level, but even then, only so many kids play.” 

Video games, on the other hand, are a large and otherwise neglected outlet for aspiring high school athletes. According to a survey from the Pew Research Center, 72% of teens already play games on computers, game consoles or cell phones. Though there’s a sizable gap between girls (59%) and boys (84%), the numbers are relatively steady among household income brackets, races and locations, meaning that practically any high school in the country could easily fill a roster of experienced athletes. Plus, because the competitions are mostly remote and rely on equipment that schools already have, the sport is easily scalable. Within a few years, esports could conceivably be as widespread as football.

For the first few months in Los Angeles, Parnell devoted his time to investigating the market, starting with after-school programs, which already had the ingredients needed for an esports league: physical space, computers and adult volunteers. Through his network there, he was introduced to a contact at the National Federation of State High School Associations (NFHS), the high school arm of the National Collegiate Athletic Association and the governing body for most sports and activities. 

Parnell didn’t pitch the NFHS at first. Instead, he learned as much as he could about the organization and offered himself as a potential expert in the esports industry should the NFHS need one.

When Parnell learned that the organization was already considering sanctioning esports—that, in fact, they’d been considering it for the past year and had already whittled down their list of potential partners to five or six companies, including a few publishers—he asked for a meeting to pitch his case. “At the time, I literally had nothing,” he says. “I had zero figured out.” 

However, what Parnell did have was the expertise gained from studying the industry so exhaustively. For example, he knew that the NFHS was generally opposed to one activity dominating student life. As Parnell explains, “Football in some states could be a year-round sport, but there’s only one season because the NFHS doesn’t want kids to specialize in that one sport. They want them to go and be a multi-sport athlete because kids become better life citizens when they do so.” 

Armed with that knowledge, Parnell could argue that if the NFHS partnered with a publisher, which would grant them access only to that company’s games, it would be counter to that tradition. Likewise, he knew that the NFHS wanted the games to be team-based in order to promote camaraderie and group problem-solving, and that sanctioning the sport had a purpose other than expanding the roster of high school sports. It would incentivize good behavior. With official teams in place, administrators would be able to set eligibility requirements to participate, like an attendance standard and minimum GPA.

Beyond those standards, though, Parnell wanted the teams to be as accessible as possible—no tryouts, no separation between boys and girls, and no varsity team or freshman squad. Because there’d be no limit to the number of unique teams a school could have, even students with no background in gaming could participate. “While some kids will go on to play in college and pro, the majority don’t,” says Parnell, “and that’s who the NFHS really aims to service: the 99.9% of kids who don’t actually go pro.”

For the pitch, Parnell was accompanied by Peter Pham, the investor who originally convinced him to pursue high school esports, and a meeting that was supposed to be 45 minutes stretched into a few hours. When it was over, Parnell felt great—until the NFHS told him that they probably wouldn’t make a decision for 12 months. “I left that meeting super deflated,” he says. “Like, I’m going to have to continue to work on this for another year, which stretches past the timeline I had set for myself.” 

Two weeks later, he got a call. “They said, ‘We’ve never done this before, but we’d like to partner with you exclusively.’ We then went through a due diligence process, and during that time, people were starting to find out that this one-person organization that didn’t even really exist was going to get this partnership. So groups were trying to blow this deal up, publishers included, but the NFHS made a commitment. They trusted me, and they stayed true to that commitment.”

Before he could make the arrangement official, Parnell first had to incorporate his new business, which he did in January 2018. A week or so later, he signed with the NFHS.

On April 19, 2018, the NFHS and PlayVS publicly confirmed their partnership, and a few months later, they announced the games for their inaugural season: League of Legends, a multiplayer online battle arena (MOBA); Smite, another MOBA; and Rocket League, a sports-action game that combines soccer and driving. Around the same time, the platform offered early access to competitors in Connecticut, Georgia, Kentucky, Massachusetts and Rhode Island.

In a survey of the student-athletes, 42% reported that they were involved in a high school sport or activity for the first time, and 84% said that playing on the school’s esports team allowed them to find a community to connect with. Of the teams that made it to the finals that year, 40% were coached by women.

Today, the list of sanctioning states has grown to 15, though Parnell says that many more are in the process of approving esports or are waiting to officially announce it. Meanwhile, 13,000 schools have joined the company’s waitlist, and even those located in states not officially covered by NFHS can access the PlayVS platform, though they can’t compete for official state titles. 

As for funding, PlayVS has received support from all facets of the sports world. Its Series B funding was led by Elysian Park Ventures, the private investment arm of the Los Angeles Dodgers’ ownership group, and investors have included Adidas, the COO of Twitch, players from the NFL and NBA, Sean “Diddy” Combs, the CEO of Dollar Shave Club and the senior vice president of corporate development for Alphabet Inc., the parent company of Google. Since its founding, PlayVS has raised $96 million and grown from one employee to 42. 

On October 21, the fall season started for schools like Martha Layne Collins High School, a high school of about a thousand students in rural Shelbyville, Kentucky. The program there was founded by Seth Reinhart, a former competitive League of Legends player who had been considering starting a high school team when the Kentucky branch of the NFHS sanctioned esports and announced PlayVS’s Season Zero. 

The director wasn’t quite sure what esports were at the time, but after a bit of education he and the rest of Shelbyville rallied behind the team. Says Reinhart, “We were on the front page of the newspaper no less than three times.” 

Eventually, Reinhart’s roster grew to 15 students, though even more contributed to the team’s success. “We had people that would run the social media, do the live streams and moderate the chat during competitions,” says Reinhart. “And as these programs scale, there’s going to be a ton of accessory roles that build out around them as well, even down to analysis, just like in traditional sports.” 

Not only did he recruit students from every class year, but true to Parnell’s original ambition, he also attracted both current athletes and students who weren’t already involved in any high school activities. Reinhart mentions one student who “never really felt compelled to come out of his shell. But he wound up being kind of our superstar MVP of the team, and when he would wear his jersey in the school, people would fist-bump him in the hallway because he was like this celebrity.”

The team went undefeated until the semifinals of the playoffs, which were hosted at Martha Layne Collins, and Reinhart jokes that the team might eventually replace the football team. After all, their record is leaps and bounds better, though they’ll have to face this season with a new coach. Last April, Reinhart left the school and is now the player experience manager at PlayVS. 

Within two years, Parnell hopes to have partnered with all 50 states and D.C. However, his ambitions are much larger than that. He’d like to scale up and create the gaming infrastructure for all e-athletes, thereby becoming the de facto hub for esports. Says Parnell, “Eventually, the ideal outcome for PlayVS is that we built this platform, and people who want to play esports, regardless of the game, can come and they can gather, they can spectate, they can play and they can coach or administer their program.” 

For now, though, the focus is on high school and reaching all those students who haven’t found a sport they want to play. “Can we add 4 million athletes through esports?” Parnell asks. “Or even 6 million?” But the goal is even greater than that: More than 100 million gamers and a valuation of $50 billion to $100 billion. Says Parnell, “PlayVS is going to be the biggest company ever built in esports and one of the most valuable gaming companies in the world.”