DraftKings is at the forefront of sports betting but where did it all begin?
Key takeaways
- An idea over a couple of drinks started DraftKings
- The founders were rejected 50 times by venture capitalists
- 2018 was a pivotal point for the sports betting world
For most sports bettors and daily fantasy sports (DFS) fans, Draftkings needs no introduction. The company started as a one-on-one baseball competition that launched on the MLB’s opening day in 2012. Still, it has since added contests and betting in the NHL, NFL, NBA, PGA, NASCAR, XFL, MMA, the Canadian Football League, and more.
Today Draftkings employs over 3,400 people in six countries and reported 7.3 million cumulative unique paid users across its services as of December 2021. From its founding in 2012 to 2020, the company raised $719.4 million, and in April of 2020, it went public under the ticker DKNG—a deal valued at $3.3 billion.
To help us understand Draftkings meteoric rise, let us begin when it was only a nascent start-up.
The start-up days
Those familiar with Draftkings as a leading company in sports betting and daily fantasy sports may not realize that the company wasn’t always at the forefront of its industry. In the early 2010s, two friends and coworkers at Capital One, Jason Robins and Matt Kalish, would spend their evenings pitching each other business ideas over drinks.
After almost a year of brainstorming, Matt sat Jason down and said, “Hey, I think I got it.” Over the next year, the partners would work nights and weekends in a spare bedroom in fellow Draftkings co-founder Paul Liberman’s Watertown, Massachusetts house until they had a prototype for a daily fantasy sports company.
Venture capital and the rise of DraftKings
On the advice of their lawyer, the Draftkings co-founders, set out to raise venture capital. According to Jason Robins, the team was rejected over 50 times before Ryan Moore of Accomplice Ventures injected their start-up with capital, followed by a $1.4 million seed round collected from Peter Blacklow of Boston Seed and others.
By the Spring of 2013, the MLB invested an undisclosed amount into Draftkings, making it the first major sports league to invest in a daily fantasy sports (DFS) company. By the summer of that year, the company was paying over $50 million in prizes through its contests and accumulated 1 million registered players.
The rise of sports betting
2018 was a significant turning point for Draftkings and the sports betting world. In May of that year, the Supreme Court ruled that The Professional and Amateur Sports Protection Act (PASPA) was unconstitutional, giving states the right to offer sports betting.
Draftkings capitalized on this new market opportunity by launching the first legal mobile sportsbook in New Jersey and quickly climbing to the top of the NJ sports gambling market. Following their success in New Jersey, DraftKings expanded their mobile betting and retail sports betting to half a dozen other states.
The future of DraftKings
Draftkings has secured a spot at the top of the US online sportsbooks totem pole. The company has plenty of growth opportunities, with over 40 states yet to approve mobile betting. In an interview with The Motley Fool, Jason Robins said, “There are some states that have yet to legislate, But as we see more and more states do that, we’ve seen the overall LTV [lifetime value] of our customers rise.”
The future of sports betting is likely to incorporate NFTs, digital currencies, and the metaverse in some form or another. As an early entry, and a significant player in the US sports betting industry, DraftKings is poised to take advantage of these technologies and retain its crown.
