Betting on a Touchdown with Jason Robins (DraftKings) | Disrupt SF (Day 3)
6:40PM Sep 7, 2018
daily fantasy sports
For our next guest that season just started right now, actually last night with the NFL season kicking off, so with that I'm going to welcome our next guest. Please welcome him to the stage. Jason Robbins, the CEO of DraftKings and your moderator Fitz Tepper.
How are you? Thanks for taking time off your holiday weekend to spend time with us.
Yeah, absolutely. I love TechCrunch Disrupt. I've been here three years straight now.
That's, yeah, wow. What's like the internal, that means I've been here for three years. What's like, tell me about the internal vibe in the office like leading up to Sunday. Like, are there all nighters pulled? Is it, like, crazy?
You know, most of what we needed to do to get ready is done already, so if there's all nighters, it's people stand up and watching the numbers and just excited I think. Obviously there's always some last minute things to get done. So people are still working really hard, for sure. And we just launched our sportsbook product. So I think there's like a lot of intensity around doing everything we can to get as much as possible in before Sunday for that. So that team's really burning the midnight oil right now, for sure.
You kind of beat me to the chase. But it's been a crazy time for you. You've raised about 600 million over the last five or six years, faced probably like the toughest regulatory fight out of Uber and Lyft, like maybe out of any startup recently. And now I've kind of had this like crazy born again moment, as sports betting the Supreme Court decided that sports betting can be legalized by states on a state by state basis. How excited are you, I guess?
I'm very excited. It's also you know, I hate to put it this way, but a little relieved because you're right. It's been a long road and not in very long time, but it's felt like a long road. Always going into starting the business for sure our thought was that some point, I don't know when, but at some point in the future people, will be able to do things like bet on sports. And we thought that fantasy was a good way to start to get into that market and get a lot of customers. And I don't think that the path that it follow was exactly what we were expecting. But this is where we expected to be.
And it was interesting because obviously, you know, there were moments in the, in the, middle that were completely unpredictable, at least for us. And and I would never million years guess, but we have drawings of the whiteboard in my co founder spare bedroom, which is where we started the company mapping out where we thought the US landscape was going to be over time. And it's interesting to see it play out, you know, where the result is the same, but in a completely different manner than I thought it would.
If sports betting was legalized when you started the company five or six years ago, would you have gone straight into that instead of daily fantasy sports?
Yeah, I think so. I mean, you know, our thought at the time was I love both, so it's, you know, I don't think it's an either or, I know a lot of people think one is a substitute product for the other, but I don't. Our thought at the time, though, and means our thought now, is that sports betting's bigger market, so I think we would have started with what we thought the bigger market was, but it would also depended on what the competition was.
And, you know, maybe fantasy sports would have still been the angle if it was very competitive market, I don't know. But if it were completely wide open it it had just been legalized that day, then I think, yeah, we would have probably gone straight into that.
The process of the Supreme Court making this decision was kind of drawn out because they don't announce you know, when they're going to decide a case, so it's kind of a surprise until that day. At what point I guess after the arguments happened leading up like did you think, hey, maybe this is going to happen, hey, this is really going to happen, hey, like we better start to get ready for this?
Well, we were starting to get ready pretty much as soon as the Supreme Court announced that they were taking up the case which was late June of last year, it was actually coincidentally the same week that we learned that the merger we were pursuing with Fanduel was getting challenged by the FTC, and I went back to the team, and we talked about it and we decided the next day that we were going to walk away from the merger, and we're going to basically go all in on sports betting.
Before the case was even heard.
Yeah, way before, like within a day of hearing that it was getting taken up. And it was partly because we felt like hey, this is such a big opportunity, and how can we not be ready, and we have a lot of work to do, cause this is new for us. It was also partly and that's why I mentioned the merger. This is something really interesting that we can rally the team around that will maybe you know, we have to come back and deliver some bad news, say the merger is not happening.
But we got something really cool and exciting and I was a little worried that that could end up with the same exact outcome, that I was gonna have to come back later and say, hey, you know, twice in a row now, um, but at the time it was at least, you know, we were kind of thinking in a six month interval at that point that it was a good way to get everybody rallied for the NFL season and excited and, you know, keep people retained and all that kind of stuff.
Did you have like any kind of internal odds at that point, when you decided to kind of start investing in this business was a really just like on a whim?
I wouldn't say we had odds. But I think we felt like from what we were hearing from lawyers, from pundits, that there was a pretty good chance that there is going to be some kind of change that, they wouldn't have taken up the case if they didn't think that that was a likely outcome. And if you looked at the stats, about 70 something percent of cases they take up, they reversed in some way a lower court ruling.
The hard part about it is everybody thought, and I didn't know this at first, when we first start working on it, but as we learn more, everybody sort of, I think not everybody, but a lot of people probably thought it was black and white. Either they're going to rule that sports betting is okay or it's not, but there were lots of in between outcomes that would have created like a partially open or partially restricted market and market that only New Jersey based on how they did it.
So there were there were like in between outcomes to that wouldn't have been nearly as good for us. And so I think it was hard to like handicap exactly what's going to happen, but this is basically the home run outcome.
And then the day it was legalized or not legalized with the day the Supreme Court made that decision, about three months later, you launched a product in New Jersey, what was it like internally, you know, during those three months, was all the resources kind of shifted to sportsbook.
We were already, I mean, so, we, my, my co founder, Paul told me back in, I think like probably q1 that if the Supreme Court overturned, we were targeting August 1 to launch the product. They literally launched it August 1. It was amazing. And I think it was like they set this deadline and people just were just killing themselves to get it and hit it and we were the first one. There was nobody else in the market for almost a month after we launched, which I thought was pretty remarkable considering there were a lot of companies that were already running online casino apps in Jersey, those same companies had online sports betting apps in Nevada and other parts of the world.
So I was surprised, frankly, that we were able to get the first one out, but it's because we started focusing on it so long beforehand, and sometimes those bets work out, sometimes they don't, this time it did.
No pun intended.
No pun intended.
Let's talk about the competitive landscape a bit because daily fantasy sports was essentially a duo duopoly I mean it was you and Fanduel kind of leading the industry but sports betting is nothing like that. You have brick and mortar casinos and New Jersey, not well, now in New Jersey, but in Las Vegas you have bookies all over, will it remain super fragmented or do you think there'll be one or two leaders?
I think if history is any indication, which it usually is of future, you're going to have initially a fragmented, highly competitive market that will consolidate over time. There's definitely benefits to having economies of scale. So there will be economic reasons for combinations to happen over time. And there'll also be, you know, money and venture startups and things that doesn't pan out.
So I think that's what will happen. It's a little bit different than fantasy sports in that with fantasy sports, you get this liquidity that just, you know, the games we can run are so much bigger than anyone else besides Fanduel. It's very hard for a new upstart I think to break in, you need to be able to dump a massive liquidity right away onto your product and even then, probably be hard to compete with us.
That doesn't exist in sports betting. While there's certainly benefits to scale, the product itself is not inherently better because you have way more people doing it other than maybe the company could invest more in the product and tech and stuff. But it's not like the prize pools are bigger kind of thing in a peer to peer game. So it will be interesting to see how that affects the competitive landscape.
But arguably, that should make it less of a winner take most or winner take all. And while I still think there'll be cotton consolidation for that reason, I think it'll take much longer to play out than fantasy sports did. Daily fantasy sports took about 4, 3, 4 years before it kind of became that two horse race. If you look at UK, I mean, now there's a lot of consolidation happening in the online sports betting industry. But it was, I don't know, 15, 20 years since since that industry really started emerging. So I think you'll see something similar here.
What do you think will happen like to the concept of a bookie if people can bet legally. It's like a huge industry whether we like to talk about it or not, I mean, estimated like hundreds of billions of dollars a year. Do you think there could be a similar effect to like what Lyft and Uber did to the taxi industry?
So it's interesting is that the bookie and the you know, sort of the person I call that, you know, puts down the bet for me since has been getting disrupted for years by the online and mobile black market. That is where by far the majority of money is bet from the US today. So while some of these bookies are still out there and they're still operating, I think because people in that demographic have chosen to, even though there's plenty of online and mobile options continue to bet through their bookie over the years, it's probably not a demographic that is very likely to immediately jump on to online.
I mean, maybe some will, because it's legal now, but the bookie was never legal. So that was never the issue, I think. It was discomfort with transacting online or mobile or just habit or whatever, right? So I think where we're going to disrupt the most and it's where, by far the biggest piece of the black market is, is on these offshore operators that are, you know, running sites from like the Caribbean or, you know, other parts of the world.
Got it. And do you think by providing that kind of legitimacy you can onboard like a different type of customer, someone who's really not interested in sports, whether it's like my mom, for example.
I think there's a few things at play here. One is the the illegal bookmakers. While maybe we all feel like it should or shouldn't be a certain way, they're breaking the law. And by using them, you're breaking the law. So some people are okay with that. Others aren't. You know, when I was growing up, there were people in the neighborhood who had the descramblers and people who just weren't comfortable with it on the cable boxes. So I think sort of similar here.
The second factor is because they're not here and they're not regulated and payments are difficult and things like that, I think people are legitimately and should be concerned about being able to get their money and you had multiple instances in online gaming in the early 2000s where people lost their money because accounts were frozen or things shut down, you know, and there's no recourse given. They're not regulated in the US and they're not located here.
So I think that'll make a big difference for people too. And then the third thing is, I think a lot of people aren't even as aware that they, how prevalent these offshore online mobile and online sites are. They can't advertise through traditional channels. They still do through some places, but not through a lot of traditional channels. And they're just not out there as much as I think we can be an illegal and regulated market. So I think for those three reasons, yeah, you'll see a lot of people who previously had not partaken in the industry, at least, maybe not. Maybe when they went to like Nevada, they would place it back. But not in the legal industry. That'll that'll be more comfortable playing place like DraftKings.
And then like from the product side. Do you think you can kind of iterate on the process of just like placing a yes or no bet? Like in sports betting, be social. What do you guys have planned?
That's the most exciting part about this is the way we're looking at this is we had very strict rules on what type of product we can create, which are still the rules in most states. And now the handcuffs have been taken off. And we can we can truly innovate. There's a lot we can do that we couldn't do before and there, yeah, you're going to want to have the traditional products that people are used to. But people forget things like stuff like March Madness, brackets fall under this. Super Bowl squares. That is really yeah, there's no real place that you can do that. Now, most people do it off of like a spreadsheet on their co workers, desktop or something.
And we think those are markets that are going to be more mainstream and will draw more people in, there's like a viral social component to those types of things. And that's just like the existing stuff. So obviously, you go after the existing stuff first, but then over the years, there's so many cool things or to be able to create.
And the other interesting thing that's happening now is there's been any significant improvement, it's going to get even better in the data and the lack of latency in getting that data and the types of stats that can be tracked through some of like the advanced stats that NFL and baseball and others are collecting, all of that is going to create a platform that never existed before to be able to develop products that can engage fans in ways you can never imagined before.
Like imagine being able to bet you know which receivers going to have the fastest time running a route down the field or which player's going to reach the the top speed at any point in the game and just cool stuff like that, that I think and then you can create social games out of it too. And it's gonna be endless possibilities if this is all done correctly.
Cool. I want to talk about eSports for a bit. It's kind of like the darling of Silicon Valley now a bit, you know, every, investors have already poured money into it and now the teams are all getting involved. Essentially every major team has some kind of eSports arm. Do you see eSports as being like a lasting trend that could eventually, like, reach the size of regular sports? And then how do you guys plan to interact with that?
I mean, I think eSports is already, maybe not every traditional sport, but it's already as big or bigger than most traditional sports, at least globally. It's, it's big already. And it's just starting to become, I think mainstream in the sense not of number of people into it, but more like media attention and attention from traditional sports team owners and Silicon Valley and all those types of things that you mentioned.
But this has been a big thing for a while. I'm a huge fan of, of eSports personally. I think that if eSports you know, it's spectator sports. There's no reason why, just like any other spectator sport that DraftKings is creative products from, there's no reason why fantasy games and betting and other sorts of things shouldn't appeal to that audience. I think there's two things that are going to make it take time though.
First is there's going to be at least on the betting side, some regulatory hurdles. So New Jersey for example, as part of their legalization of sports betting explicitly did not allow for eSports betting.
In any form.
In any form. Fantasy is okay though. So we continue to do daily fantasy eSports contests. But we can't launch eSports betting in New Jersey. So that's number one. And the reason case people are curious is the, you know, the party line is that it would appeal to children. So, I mean, the reality is, or do you think it would give I don't know, I mean, I I don't know enough about it to know. But there's protections for that, I believe in free markets. So I was very disappointed.
I also think that there's there's a little bit of like a political element here where there's no eSports interest lobbying in New Jersey. So it's an easy sacrificial lamb if somebody needs to kind of say, oh well, here's something we're doing to make sure that we're protecting consumers. So you know, I think there's a little bit of that too.
The second thing is in fantasy and betting, it's still new for that market. There's not like a built in the way the NFL has been pushing fantasy for, you know, decade and a half. There's not that built in audience as much. There hasn't been platforms, at least not big ones for eSports betting eSports betting wasn't a big thing in casinos.
So it's still like a very nascent market and what's really interesting to me there is because a lot of the people who are into watching it are also players they don't just want to bet, they want to actually win things that are of utility in the games like skins and virtual items and stuff. There's some kind of thing there I think that if done correctly, could really work.
Interesting. I want to we only have a few minutes left I want to talk about kind of like biz dev you and Fanduel had a pretty similar path you started around the same time, raised a lot of money over a short period of time, took on a ton of investors and Fanduel kind of had a weird outcome in the last I guess few months. They were sold at a price lower than their most recent valuation and early investors and founders kind of came away with nothing. Considering you guys had a similar trajectory and are in a similar industry, like how do you prevent that from happening to you and, you know, remain a sustainable company for the long term?
You know, I think Fanduel made it, I don't want to speak for them. That's that's the hard thing here. I'm not there, and I'm not
I guess in a better question like are you guys a sustainable business for the long term?
We'll certainly in our, so so I think if you look at it from two angles, one is from can we be a profitable business long term? The the answer is yes. And I don't ever think that was the issue with them either. I think how interesting is this for investors and how big this can be, that's really where I think these types of outcomes sometimes occur if investors decide that there's not much more upside, and the best move is to sell, and if they feel like for whatever reason they don't want to continue to capitalize or the company can't raise capital elsewhere. That's how these types of things I think, happen.
Fortunately for us, we have none of those issues. We have investors that have continued to re up every time we've given them an opportunity, we've had no trouble raising outside capital. And right now, I think everyone's projecting the business to grow three, four or five times over over the next couple of years. So I think at this point in time, it it's pretty exciting.
And I don't think there's really any any chance barring some kind of negative setback that that sentiment would change, but as a founder and as a leader of the company, you're always trying to make sure that you're not counting on that so you know, we've also been careful on how we've structured our deals and how we've managed our debt and our financials.
We've also been very careful to make sure that will if something does change, because we've certainly been through something where unexpectedly there was a lot of negative blowback, we want to feel pretty good that we still control our own destiny. And I can't say that was the case in 2015, 2016, because it wasn't, but I can say that's the case now. If we needed to, we could be profitable tomorrow. We're choosing not to be, so you know, for whatever reason, investor interest dried up, and we felt like we couldn't, you know, continue to fund growth at this point in time, it would not be an issue for us other than we, we feel like we'd be leaving opportunity on the table.
Got it. Excited to see what's to come. Thank you.