DraftKings (NASDAQ: DKNG) has established itself as a leader in online gambling and gambling, but the company did not achieve overnight success.
On this clip of Motley Fool Live, recorded May 19 , Says Jason Robins, co-founder and CEO of DraftKings Focus on industry animate Nick Sciple the story of the birth of DraftKings and how he used marketing to build the brand.
Nick Sciple: DraftKings, I think it’s a fascinating story. Many people think of this brand as a leading company in sports betting and fantasy sports on a daily basis. But many people may not realize that the company started in 2012 and hasn’t always been the leader in its industry. Can you talk about starting the business, what drove you to start the business, and how did you get it from an idea to one of the leaders in the industry?
Jason Robins: I had worked for almost a decade in American companies, middle management jobs, my two co-founders alike. We worked together, Capital One, [DraftKings co-founder] Mast [Kalish] and I worked at. Then the three of us worked together at a company called Vistaprint, now called Cimpress. We’ve always had this entrepreneurial pull, but we never had the right timing. I graduated from college shortly after the bubble burst. When I was thinking of leaving Capital One, Matt and I discussed starting a startup and it was around mid-2008 at that time. You can understand how it happened. Finally, the next time was in the early 2010s. We started getting the bug and talking about it again. This time the time had come. The only thing is we had no idea. We spent about six, 12 months going out for drinks and dinner, brainstorming around ideas. One day Matt sat me down and said, “Hey, I think I got that,” and he told me the basic idea for DraftKings. It took me about two, three minutes to process, and I was like, it looked really good. I went home and thought about it and was just excited all night. The next day I walked in and said the three of us had to meet up after work, so we did. That night we decided this was the one we were going to choose. From there it was just a lot of really worked nights and weekends. We go after work around seven o’clock to [DraftKings co-founder] Paul [Liberman]. He had a spare room in his home in Watertown, Massachusetts. We go there and work until around 1:00 a.m., 2:00 a.m. On weekends we would wake up around 5:30 p.m., 6:00 p.m. and do the same, work all day.
Finally, we had enough of a prototype, and we didn’t have any clients or anything yet, but we had a general plan, an idea of what we were doing that we said, listen, it might be. -being time to put some money in, so we decided to put some money in ourselves and we said, well, we might as well have a lawyer. We said, “Alright,” so we got a lawyer, mainly just to start the company, and he started pushing us, you have to go and get some venture capital. At the time, there were others who pursued a similar idea. We weren’t the only ones, so we realized we probably had to go out and find venture capital. We decided to do it and were told probably over 50 times before a guy named Ryan Moore from Accomplice Ventures put in any money, followed by Peter Blacklow from Boston Seed a few others, and we put on foot a funding round of $ 1.4 million. . Now, this is the start of the business.
Much has obviously happened since then. It was in February 2012 when we closed the first money. It was really about trying to build the market and figure out what it would take to lead, and ultimately what we found was the product and the customer experience was critically important. It was something that people went to have fun with. They were looking to have fun. If you could create a great product, a great user experience, and give people the fun and entertainment they were looking for, then that was the secret. We have also seen in Daily Fantastic Sports that user liquidity is a huge thing. It was basically a market as well as a game. We were meeting people who wanted to play, so having a lot of users actively playing was really important and it created huge network effects along the way.
Sciple: That was one of the things I wanted to talk about, it’s in that period of growth in 2016, and in particular, there was that period where we couldn’t help but see DraftKings and FanDuel ads all over the place. . You mentioned user liquidity. Customer acquisition, which is part of this activity, how important is customer acquisition and marketing strategy? How important is this to success?
Blackbirds: It really is a CAC [customer acquisition cost] at LTV [lifetime value] business, so very important. Much of our investment in products and technology is in infrastructure, including great data science, great analytics, automated auctions that help us optimize our CACs that we think in a way greater than some of our competitors. LTV side we started with Daily Fantasy but as you know in 2018 we launched sports betting, really for 2019 I guess it was end of December 2018 we launched iGaming. As we expand our product portfolio, we have seen a dramatic increase in LTVs. It is obviously in the states that allow them that we have launched these products. Some states have not yet legislated. But as we see more and more states doing this, we’ve seen our clients’ overall LTV increase. We really always focus on both sides of this. How do you find the most effective ways to get customers to the platform, and then once they’re on the platform, how to get them to engage as much as possible with both the product they’re on have arrived, but also, get into other products and spend as much time with us as possible.
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