Esports organization Sentinels’ financial situation was laid bare today as a memo indicated it was just 2-3 months from running out of money.

US esports organization Sentinels are reportedly at risk of running out of money within the year according to a memo published by the company on crowdfunding page StartEngine. The memo was produced as part of the crowdfunding campaign to subsidize Sentinels, and gained public notoriety on August 8.

The damning memo paints a dire picture of a company years away from breaking even. The company estimated that if it raised the minimum amount in the crowdfunding drive, it would be able to operate for just 2-3 months. If it raised the maximum amount, that lifespan would instead be closer to around 4-5 months. It estimated its monthly expenditure at around $695,000.

Why are Sentinels running out of money?

The memo detailed a bleak financial situation (Image via StartEngine)
The memo detailed a bleak financial situation (Image via StartEngine)

These expenses and short lifespan are explained by figures elsewhere in the document. Sentinels has operated at a loss since its founding. It places the gross margins of 2021 as $1,333,612 dollars compared to $8,240,165 of expenses. This rose in 2022 to $1,923,301 gross and expenditures of $10,127,880. 

It is common for companies to operate at a loss during their first few years, and Sentinels appear to be on the right track, increasing revenue by 65% between 2021 and 2022. However, the company's expenditure also increased by 22% during the same period. At that rate, it will be several years before the company breaks even.

Wild expenditure in the Sentinels

(Image via Sentinels)
(Image via Sentinels)

Within the document, the salaries of multiple members of the c-suite were listed. CEO Rob Moore's salary was listed at $360,000. COO Eric Anmin Ma’s compensation was listed at $215,000, while both CMO James Riley Jamison, and CRO Aileena Zu both took home $200,000, with the latter also receiving 2.5% of any sponsorship revenue. This means almost a million dollars of expenditure goes to four members of the company's executive team.

The stated goal of the Sentinels in the document is to “take a leadership role” in the consolidation of the esports market which the Sentinels organization believes will take place over the 1-2 years. The primary aim of the crowdfunding was to continue the organization's operation so that it could capitalize on this consolidation.

Its crowdfunding listing on StartEngine would allow fans to own a piece of Sentinels, with perks being offered for quick investment and the amount invested. However, it’s unclear whether stocks purchased through StartEngine would be tradable, or instead would be akin to a membership club. 

In the memo, it’s stated “the Company has contemplated additional future sources of capital including selling additional units to the current investors and raising capital from outside sources.” Successful crowdfunding or not, Sentinels appear to be operating heavily on borrowed funds with little sign of attracting more money or revenue streams. 

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