Bright sparks: The most eye-catching startups bidding to disrupt the online sector

Despite crowded markets, regulation and compliance stymieing entrepreneurs from launching gambling-related startups in recent years, there are still plenty of fledgling businesses carving out niches and looking to make their mark. Perhaps understandably, the explosion in online sports betting in the US is where much of the VC money is being directed as investors hope to strike gold by unearthing another FanDuel or DraftKings. But, look closely and you will find innovative startups throughout the sector. Here, in the first of a three-part series, we speak to those behind PrizePicks and Betr.

PrizePicks

Category: Daily fantasy sports

Launch: 2017

HQ: Atlanta, Georgia

CEO: Adam Wexler

“I always loved the concept of daily fantasy sports (DFS) but I was never a fan of its execution – it was always a little more cumbersome and time consuming than it needed to be,” reveals Adam Wexler, founder and CEO of PrizePicks, which bills itself as the largest independently owned DFS platform in North America. “I just wanted to make the concept easier and simpler for the casual sports fan, and that is how we ultimately landed on PrizePicks.”

Launched in 2017, the Atlanta, Georgia-based startup offers a fast-paced ‘pick-em’ format with binary choices related to player stats across sports instead of having to draft athletes from the same sport while staying within a salary cap, as is the modus operandi with traditional DFS products.

For example, will Kansas Chiefs quarterback Patrick Mahomes’ total passing yards in Sunday’s game exceed 270.5 yards? Or will Lebron James score more than 30.5 points tonight for the Los Angeles Lakers? Users go above or below the anticipated total for between two and five player stats to win up to 10x their stake, although predicting four of five stats is the riskier route but with the highest potential pay-outs. To try to prevent churn due to the all-or-nothing nature of the product, ‘Flex Play’ allows you to win money even if one or two predictions miss. “There’s been a wave of companies trying to do these pick-em-type games, but I don’t think anyone is at a similar scale [to us] and trying to enhance this particular format, which we think is the most mainstream format of these pick-em games,” says Wexler.

PrizePicks, which offers markets for over 50 sports leagues, including esports, says it’s about pitting your skills against the numbers rather than a pool of thousands of players. And since it went live five years ago, more than $500m (£427m) has been paid out in winnings. Total revenue rocketed 600% between 2020 and 2021 as sport returned after Covid, while FY 2021 revenue has already been eclipsed in the first six months of 2022. This goes some way to explaining why PrizePicks was recently recognised as the fastest-growing sports company and the 66th fastest-growing private company overall in the 2022 Inc. 5,000 Fastest-Growing Private Companies in America list.

“That was a pleasant surprise,” Wexler says. “We didn’t expect to be the fastest-growing sports company in the country, but I guess you can’t be too surprised because of the explosive growth we had last year.” That recognition, along with being crowned Fantasy/DFS operator of the year at the EGR North America Awards 2022, was probably music to the ears of the firm’s investors, which includes 16-time World Series of Poker bracelet winner Phil Hellmuth, as well as former NBA champion Andrew Bogut and ex-Atlanta Falcons quarterback Matt Ryan, to name a few. Boasting a headcount of more than 100 in the US, supported by a team of 35 in the Philippines, PrizePicks was also recently singled out as a ‘Top Workplace’ by the Atlanta Journal-Constitution.

PrizePicks, which has racked up more than one million iOS downloads, is available in 30 states plus the District of Columbia and Canada (except Ontario). Its US footprint encompasses California, Texas and Florida – three of the top four most-populous US states, with a combined adult population of almost 70 million and which don’t have legal sports betting. Yet.

“I knew it was going to take a long time for a lot of the southern states to legalise,” Wexler comments. “So, how can sports fans like me in the southern United States legally play, and with an added layer of player engagement? That was the original premise for PrizePicks.”

That said, would the founder have been quietly cheering if PASPA hadn’t been struck down in 2018, if looking at it purely from a business perspective? Wexler insists he is happy to go up against sports betting apps as more states legalise wagering. “Because US consumers have grown up with fantasy sports, I think there is going to be one app centred around player predictions and another based on betting. So, the two [DFS and sports betting] can coexist.”

As for the prospect of PrizePicks one day branching out into sports betting, Wexler replies: “All options are on the table. Obviously, we’ve seen what FanDuel and DraftKings have done by extending their brands. The playbook that I very much admire is what Unibet did originally – they built a portfolio of geographically focused B2C brands and, about 15 years in, created this B2B offshoot with Kambi. I’ve always said we could follow a similar path as it’s a little more interesting than jumping directly into sports betting.”

Watch this space.

Betr

Category: Sports betting

Launch: 1 September 2022

HQ: Miami, Florida

CEO: Joey Levy

If you are seeking to generate media coverage about your upcoming sports betting business, announcing that YouTuber-turned-boxer Jake Paul is behind the shiny new online venture will more than likely do the trick. So, when Paul, who has more than 70 million followers across social media, was unveiled in August as the co-founder and president of Betr alongside fellow co-founder and CEO Joey Levy, the news caused quite a stir. Personalities aside, what’s its USP? Well, Betr trumpets itself as the first direct-to-consumer sports betting company to focus predominantly on so-called ‘micro-betting’.

In other words, putting money on whether the next at-bat in baseball will be a single, double, triple, home run, walk or out? You could even bet on the speed of the next pitch. Or in American football, will the next drive result in a touchdown, field goal, punt or turnover? Who will be the next player to catch a pass? Will the next pass be complete or incomplete? “If you think of the cadence of US sports, Major League Baseball is driven by pitches and at-bats,” says Levy. “American football is driven by plays and drives, which also feature a start/stop cadence. And even the NBA has dozens of possessions and a lot of scoring […] the composition of US sports is perfectly suited to moment-to-moment betting.”

The opportunity to disrupt US sports betting (currently live and regulated in 31 states plus DC) – or more specifically in-play betting – is one reason why a $30m Series A funding round earlier this year led by Florida Funders was oversubscribed.

Therefore, another $20m was raised in a Series A1 spearheaded by Aliya Capital Partners and Fuel Venture Capital. “We are very focused on getting to profitability off the current raise and controlling our own destiny to decide if we go out for additional rounds of financing,” Levy asserts.

Headquartered in Miami, Betr has already amassed a dizzying array of institutional and individual investors, including athletes, celebrities and sports team owners. Evidently, everyone wants in. “Since announcing the business, there has been a ton of interest from people who want to invest,” the CEO adds.

Levy previously co-founded Simplebet, a B2B supplier that uses machine learning to provide micro-betting in-play markets to operators. Leveraging Simplebet’s technology and pricing, Betr has been released into the wild as a free-to-play app across all 50 states to boost its brand presence ahead of a state-by-state real-money sports betting rollout, the first being Ohio.

Joey Levy, Betr

The startup states it has market access in “multiple” US states via “equity-based partnerships”. And having Paul onboard puts Betr in front of millions of Gen Z eyeballs. “I don’t think anybody in the industry, with the exception of Barstool Sports, has done a really good job of capturing true brand affinity,” says Levy.

“Jake is uniquely positioned to lead what is effectively a sports media company that we are incubating with Betr […] he’s one of the world’s best, if not the best, content creators.”

To underline the role social media and content creation will play, Levy highlights how Betr already has the third-highest number of followers on Instagram for a sports betting media account (109k at the time of writing), and he predicts his company will top that list in “a year or two from now”. Tellingly perhaps, the press release announcing Betr’s upcoming launch had Paul cryptically describing micro-betting in a quote as the “TikTok-ification of sports betting”.

Either way, the duo are striving to make sports betting more approachable to casual bettors and those who have never before placed a wager. That was the original premise of Simplebet. In fact, Levy suggests the “tables, lists and grids” on bookmaker apps displaying moneylines, spreads and totals is akin to “interacting with a spreadsheet when it should be an entertainment product”.

“Unintuitive” and “cluttered” are two other criticisms. “I don’t think anybody in the industry from a product standpoint is doing anything differently. There are 55 or so direct-to-consumer brands and I challenge you to load up their apps and see if anything is different aside from the brand colour scheme.”

For Levy, changing consumer habits is driving his desire to disrupt sports betting with micro-betting. [We’ll leave it for another day to discuss the debate around whether the prefix ‘micro’ should be axed, or the potential responsible gambling (RG) issues of rapid in-play betting].

“Consumers have increasingly lower attention spans and are constantly seeking more instant gratification in all aspects of life,” he states. “Micro-betting is the final level of instant gratification in sports betting. In a way, it’s a bit like how daily fantasy added instant gratification to season-long fantasy sports.”

If Betr manages to nail the UX and Paul can attract a new cohort of casual bettor as well as poach users from the incumbents, then the pair really could have something big on their hands. It’s a big ‘if’ of course, but Betr isn’t short of ambition, just like it isn’t short of financial backers and followers.