Not since SportsEngine’s rise has Minnesota seen the type of growth in a sportstech venture like SportsHub is experiencing right now by “hunting and building,” as he puts it. Let’s hear it directly from the source:
We’ve seen multiple acquisitions by SportsHub Technologies since you formed it…are you in the midst of a rollup play?
Exactly… Before the latest acquisition of MFL 10’s, we also bought Whatifsports in Cincinnati from Fox Sports, which I couldn’t really publicize at the time.
In the case of MFL10s, Mike Hall (CEO of Myfantasyleague), decided that the compliance and taxes were too much of a burden for him and he wanted to move the asset under a bigger umbrella.
The reality is there’s a lot of pain and suffering due to the duopoly out there between FanDuel and DraftKings…it’s bad for a lot of the smaller players in the fantasy sports business, but the good is that we’re setup to take advantage of things by consolidating and running a larger scale business with centralize corporate. As much as it fits into our strategy, it’s frustrating as a long- time fantasy sports guy to see the damage done to the smaller companies in the space.
It can be $50k just to get licensed now on a state by state level not to mention the ongoing compliance and audit costs to operate in this business. It’s anti-competitive behavior that hurts customer choice.
That sounds like some strong words?
It’s good for people to understand the state of the industry. Fan Duel and DraftKings invested enough money to influence laws using lobbyists, which created a legal moat for them and the rest of the smaller companies (start ups and season long businesses). If states really understood what they were doing, they could have done it differently to allow for the smaller guys to be protected and competitive. It’s really hard to make money now…and the only way for most is to exclude the states that have high buy in fees, and then the residents suffer by lack of choice. That’s the real tragedy.
Where does SportsHub Technologies and your strategy come into play then?
We can absorb the new fee structure that these state law makers have put in place and we can on-board smaller fantasy players to us. We also have the backbone of the daily fantasy sports engine rebuilt so that it appeals to the average avid fantasy player that we estimate is 20 million strong. The pros play on the big sites, but we’re interested in low dollar, high volume players who are on a level they can compete and actually win. Do you think you can beat the person who has over hundred and fifty derivations of a lineup? It’s so unhealthy and doesn’t spur growth for them or the industry. I think they’re shooting themselves in the foot.
Where is the opportunity?
By appealing to the mid market avid player I can get to 20x the players than they can…there’s 56m overall players and I want 60% of the market.
Do you see yourself as the number three player in the market then?
Not right now…we be though! We’re going to execute on our alpha, raise more capital, and get on our way. I’m already giving away too much of our strategy…
How many users do you have collectively?
How much have you raised to date?
Do you plan more acquisitions this year?
Yes. We want good managers, users, and cash flow…if you’ve got all three we can talk.
How many employees do you have now?
22 in Minneapolis, 13 in Connecticut, 2 in Wisconsin, 5 in St. Louis…so we’re in the 40’s overall at this time.
If the sports betting landscape in the US were to change radically in the next few months based on a pending supreme court ruling…what effect do you think it would that have on the fantasy sports industry?
Seven states have ‘pre-passed’ laws and are waiting for the sports betting gold rush…. we’re all wondering and waiting. For us, fantasy sports is generational and it is played at an avid and social level and the money is fun…it’s woven into our fabric across the country and is not going to go away even if sports betting is passed.
Sports betting could certainly raise those stakes by elevating the game and creating almost much more of a ‘day trading’ approach towards sports betting. I think the sites like FanDuel and DraftKings are the losers in the scenario because their top tier players would likely level up and get into that realm of things.
What does an exit look like for SportsHub?
I don’t know? We’re just having fun building right now!
Is there anything else you would like to add?
We’re harvesting an accretive layer of revenue with zero customer acquisition cost by marketing to all our acquired season long customers and encouraging them to play more and win more – that’s our long game.