SAN FRANCISCO — DraftKings has been on a roller coaster over the past few years, to say the least. But co-founder and CEO Jason Robins spoke on stage today at TechCrunch Disrupt and made it clear that the company has righted its ship, despite some reports noting the “implosion of the daily fantasy industry.”
DraftKings, founded in 2011, experienced huge growth after raising a $300 million venture round in July 2015. Its TV advertisements dominated the sports media world before and during the 2015-16 NFL season, promising massive cash prizes to users who could best predict how well professional athletes would perform on a given day.
But the Boston-based company hit a major roadblock shortly thereafter and found itself in controversy as regulators around the country scrutinized the legality of the business model. DraftKings argued that its contests are skill-based and legal, but some lawmakers said the service and competitors like FanDuel violated state gambling laws. DraftKings suspended operations in states like New York and saw its valuation dip by nearly $1 billion.
Now, though, the company seems to have recovered from the legislative issues. It has passed bills in eight states over the recent months, bringing the total to ten.
“We’ve had an unprecedented run in state legislators over the last six or seven months,” Robins said today.
DraftKings, which has seven million customers, also this month reeled in a $153 million round that included participation from Washington Capitals and Wizards owner Ted Leonsis. In addition, today it released a new app called DK Live that shows real-time fantasy-related scoring updates and breaking news, signaling its focus on expanding in the sports media world beyond just the fantasy contests themselves.
Robins, a lifelong sports fan who started his career in marketing for companies like Capital One, noted that DraftKings was “prepared mentally” for the legislative battles. He recalled standing in front of the company last year before the legal issues hit, talking about the skyrocketing 10X year-over-year user growth and partnerships with leagues like MLB, NBA, MLS, and others.
“It was just like we were a darling, really,” Robins said.
But he also told employees to stay level-headed.
“This feels great right now and let’s celebrate, but building a big company is about ups and downs,” he told them. “We can’t get too high or too low. It’s not always going to be this way.”
That perspective came about largely because of the company’s struggles to raise money from investors in the early days of DraftKings. Robins and his two co-founders, Paul Liberman and Matt Kalish, went through 50 to 60 investors before finally finding someone to invest in its seed round. They went through the same struggle for their Series A round.
“It was very hard to raise in the beginning,” Robins said. “It was brutal.”
But Robins said for the company’s Series B round, he began pre-qualifying investors and doing his homework, rather than taking a “shots on goal” approach that DraftKings used for its earlier investments. On Monday, he advised other entrepreneurs in the room to learn from his mistakes and do their due diligence before pitching potential investors.
“One big piece of advice I have for people is target. Your time is the most valuable thing in the world.”
Fast forward to today, and DraftKings has raised more than $600 million in four years — a majority of which has arrived in the past 18 months. Its valuation may not be at the reported $2 billion from last year, but the company seems to be in better shape than earlier this year.
“No one ever took their eye off the ball,” Robins said of his company. “In some ways, [the legisltative battles] helped rally the company to feel like, OK, it’s us against the world. It actually really helped a lot in terms of pulling everyone together.
Robins noted that attrition rates over the past year have been below average, which “is remarkable for a company that went through such a trying period,” he said.
“People are passionate about the product and our mission,” he added.
Despite the pushback from some lawmakers, Robins said that there was an “amazing response” from the legislative community. He said there were close to one million combined emails, phone calls and social media posts made to legislators around the country in support of the site.
There was even one New York lawmaker that told Robins he’d never seen as much outreach and support for something in his 25 years working in politics.
“That really meant a ton to me that people cared enough and wanted this enough,” Robins said. “That’s the difference, really, between why we’ve been successful and not.”
Beyond getting past legal hurdles, perhaps the key ingredient to DraftKings’ success is its investments and partnerships from sports leagues like MLB and several pro teams/owners.
Robins said the interest from leagues and team owners is largely because the technology helps grow interest in their respective sports. Robins cited data that shows 80 percent of users report that they consume more sports content after playing on DraftKings, and half say they started following a new sport they didn’t closely watch before.
“Helping boost other industries allows you to create unique partnerships,” he added.
The leagues and teams also control their own content, which is crucial, Robins said. For example, if DraftKings wants to eventually implement video highlights into its new DK Live app, those partnerships are required.
“If we want those things, it’s very important we have close relationships with the people who own the IP and content,” Robins said.
Robins also said DraftKings is focusing more on the social aspect of its contests, and noted today that “social play” is up 3X year-over-year. He also said there were almost 1.5 million entrants in a $3-entry NFL game this past Sunday, with the winner taking home $1 million.
Finally, Robins said that a potential merger with its main competitor FanDuel is still possible, noting that the companies have been “on and off for the last year-and-a-half.”