The Key to Fantasy Sports Startups? Marketing & Data, Says DraftKings

7/19/12Follow @gthuang

The latest seed investment to be announced by Cambridge, MA-based Atlas Venture is DraftKings, an online fantasy sports startup in Boston. Atlas led a $1.4 million financing round for the company earlier this year, but today the founders are saying more about what they’re building.

Fantasy sports is kind of an odd duck. It’s male-dominated and has been moving toward daily online formats in the past few years, where you can choose players for your team and compete against others with outcomes on a daily basis (instead of at the end of a sports season). As a business, it’s sort of like social and casual gaming, only different. Although its target demographic is fairly narrow, its players are fanatical.

So a slew of companies have popped up to grab a piece of the pie. Locally, that includes DraftKings and also StarStreet, which began as a stock market for trading “shares” of pro athletes but now also does daily fantasy games. I checked in with both companies this week to hear about how they’re doing and what their latest challenges are in building their businesses.

From DraftKings’ perspective, co-founder and CEO Jason Robins says, “I think the biggest challenge in this sector is driving awareness. There is a massive market of fantasy sports players (30 million in the U.S. alone) and an even bigger market of sports fans, but the vast majority have never heard of this format. I myself play in a dozen season-long fantasy leagues every year, but I only discovered [daily play] very recently.” Robins adds, “As a fan of the games, I find the format to be superior to traditional season-long fantasy sports, but the main issue is that most people have simply never heard of it.”

So I wondered if it’s difficult to get enough revenues quickly in the daily-play sector. Most companies take a cut of all transactions—real money is at stake—but that depends on having enough people trying to win cash every day. StarStreet’s founder and CEO, Jeremy Levine, says it’s not tough to make money in fantasy sports, even as a young startup. He adds that StarStreet’s daily-play business, which started in February, is doing well.

Meanwhile, DraftKings was founded last year and … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • jack w

    me and my friends were looking into starting up a fantasy site, but have no idea where to start and how? We’ve been putting thoughts together but still don’t know how to start. Any tips?