Since becoming legalised in the US a few years ago now, sports betting has exploded in the region and the market is growing at an unprecedented rate. Swathes of customers are constantly signing up to gambling services and wagering on the countless different events and markets available.
Unsurprisingly, many new businesses are popping up to take advantage of this continued boom in an attempt to carve out their own slice of the sports betting pie. The problem is that the pie is already enormous and it’s growing by the day. Things have gotten quite competitive worldwide.
So, how does a small bootstrap business go about successfully establishing themselves in such a huge market? Well, you’d be hard pressed to find a more suitable example than DraftKings and we can use their success story as a blueprint.
Now one of the most significant betting and fantasy sports empires in the US, DraftKings started out of a spare room in Paul Liberman’s Massachusetts home. Liberman, along with Matthew Kalish and Jason Robins saw an opportunity in 2012 to develop a company within the fantasy sports market. So, they launched DraftKings in 2012, focusing solely on baseball at first. With other start-up competitors entering the same industry, the trio soon realised they needed to raise venture capital.
They pitched their business countless times, but it wasn’t until Accomplice Ventures saw some potential and put some money behind them, followed by others, amounting to a $1.4 million seed round.
So, DraftKings had the capital it needed to get its foot in the door. What the company also had was a clear vision of what would work in its industry; a unique product and unmatched customer experience.
In 2012, most fantasy sports offerings were season-long ones, but DraftKings was focusing on daily fantasy sports, which provide new competitions and opportunities to win on a daily basis.
The following year, Major League Baseball invested an undisclosed sum into DraftKings, clearly seeing the value of the brand. DraftKings attracted investment from yet more companies throughout the same year and managed to establish itself as one of the world’s leading fantasy sports sites.
In 2014, DraftKings made one of their biggest acquisitions to date when they purchased DraftStreet - one of their largest rivals - and increased their membership base by 50%.
From there, DraftKings then began partnerships with other sporting juggernauts to further establish itself as a market leader. In 2014, DraftKings became the official daily fantasy sports brand for professional hockey after a landmark deal with the National Hockey League.
Soon after, they signed a $250 million advertising deal with ESPN, the biggest sports broadcaster in the US.
With the capital to spend, DraftKings launched advertising and marketing in almost every corner of the sporting industry, from TV spots to billboards and sponsorships. By 2016, daily fantasy sports had become wildly popular and DraftKings was at the forefront of this.
Riding this wave, they continued their aggressive marketing and DraftKings stock soared dramatically. The boom in the daily fantasy sports industry over those couple of years benefited DraftKings immeasurably.
As mentioned, in 2018 the landscape changed forever. The Supreme Court ruled that the previous ban on sports betting in the US was unconstitutional and, suddenly, the practice was now legal in most states. DraftKings wasted no time in getting involved, launching in New Jersey and developing an impressive mobile betting platform. This form of sports betting is still not allowed in most states but that is gradually changing and, as it does, the DraftKings empire will only continue to grow.
Over the space of eight years, DraftKings has gone from a bootstrap business built in a spare room to one of the largest fantasy sports and betting suppliers in America. With some hard work and a bit of luck they bootstrapped their betting business to success.
Obviously, it’s impossible to just replicate the success of DraftKings but there are plenty of lessons to focus on in their story. First, it’s essential to have a strong business plan.
Liberman, Kalish and Robins spent almost a year trying to come up with an idea with enough legs for them to properly pursue and once they did, they fully committed. Recognising some sort of gap in the market and planning the foundations for a company to plug that hole is the smartest first step to make.
From there, investment is needed, and a comprehensive business plan will go a long way to attracting relevant investors. As with DraftKings, if a business can drum up a solid initial sum of money, its chances of success increase exponentially.
Plenty of that capital will need to go into marketing, as this is how brand awareness is spread and more customers are attracted. As your bootstrapped business grows, it’s likely that you’ll need to make your own investments, perhaps in smaller competitors, to solidify your position and continue expansion.
The sports betting market is a daunting beast, but it’s not impossible to crack. The going might be slow at first, but with a strong enough business plan a bootstrap company will have opportunities to grow, provided it can mark itself out from the pack.
