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

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

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Author: Gregory T. Huang

Greg is a veteran journalist who has covered a wide range of science, technology, and business. As former editor in chief, he overaw daily news, features, and events across Xconomy's national network. Before joining Xconomy, he was a features editor at New Scientist magazine, where he edited and wrote articles on physics, technology, and neuroscience. Previously he was senior writer at Technology Review, where he reported on emerging technologies, R&D, and advances in computing, robotics, and applied physics. His writing has also appeared in Wired, Nature, and The Atlantic Monthly’s website. He was named a New York Times professional fellow in 2003. Greg is the co-author of Guanxi (Simon & Schuster, 2006), about Microsoft in China and the global competition for talent and technology. Before becoming a journalist, he did research at MIT’s Artificial Intelligence Lab. He has published 20 papers in scientific journals and conferences and spoken on innovation at Adobe, Amazon, eBay, Google, HP, Microsoft, Yahoo, and other organizations. He has a Master’s and Ph.D. in electrical engineering and computer science from MIT, and a B.S. in electrical engineering from the University of Illinois, Urbana-Champaign.