Today popular daily fantasy sports site DraftKings boasts nearly 10 million users, says its co-founder and CEO, Jason Robins, 37, and the company has raised a total of $715 million in funding, according to CrunchBase, earning it the reputation of a so-called “unicorn” start-up thanks to a valuation north of $1 billion as of March 2017. What’s more, after dealing with large operating losses and regulatory uncertainty in recent years, DraftKings could now see that valuation soar even higher after this month’s extremely beneficial U.S. Supreme Court ruling allowing states to legalize sports gambling.
But when DraftKings launched, six years ago, it was just a side-hustle. Robins and his two co-founders, Paul Liberman and Matthew Kalish, were all still working their full-time day jobs in the hopes of scraping together enough money to fund their website’s early development.
“We were using the money we were making working to fund the business,” Robins told CNBC Make It in 2017. “And we were working 100-hour weeks, any minute we got outside of our day jobs to do this.”
At the time, Robins was working as a marketing executive and analyst at digital marketing startup Vistaprint, where he worked with both Kalish and Liberman. Robins was an obsessive fantasy sports player, joining up to 200 leagues per year, he told Boston magazine in April. In 2011, Kalish suggested that they create a website where fantasy sports fans could make daily bets on player statistic, giving them the chance to win money every day rather than waiting until the end of an entire sport’s season.
As the three co-founders developed the idea into an actual website, they needed seed money to hire programmers and pay for initial startup costs and early marketing campaigns to get DraftKings on fantasy players’ radar. They also needed enough money to award jackpot prizes to winners.
The obvious solution was to raise outside funding, but Robins said that solution was actually something of a Catch-22. Some early prospective investors were turned off by the fact that the DraftKings co-founders were still working their full-time jobs instead of committing fully to the fledgling website.
“We heard a lot [of] ‘Hey, we like your idea, we like you, but you’re at your day jobs. How can I fund you?'” Robins told CNBC Make It in 2017.
The DraftKings CEO said that he and his co-founders never had any doubt that they would leave their day jobs as soon as their own start-up had the backing of serious investors. Robins added that they knew from the start that “this was a full-time thing if we raise money.” But, the fact that they were waiting for funding was actually a turn-off for some, he said.
“‘If you think this is a good enough idea that I should put a big chunk of money in, then why isn’t it enough to quit your day job?'” Robins said was of some investors’ thinking at the time.
In fact, when DraftKings did eventually secure funding, it “was contingent on us quitting, but we hadn’t quit already,” Robins said. The company’s first outside funding was a $1.4 million investment round led by Cambridge-based venture capital firm Accomplice. DraftKings announced the investment in July 2012, just a couple of months after the site’s first fantasy sports product, a fantasy baseball game, launched at the start of that year’s Major League Baseball season.
That summer, the three co-founders also finally quit their day jobs after nearly a year spent developing DraftKings.
“In retrospect, maybe we should’ve [said] ‘Let’s just go for it,'” Robins said in 2017 about his and his co-founders’ decision to hang onto their full-time jobs while developing DraftKings.
“[F]or most people my advice would be: If you know what you’re doing is the right thing and you have the means to go after it, go after it,” said Robins.
By the end of 2013, DraftKings had closed both its Series A and Series B funding rounds, raising a total of over $35 million, with even the MLB investing an undisclosed amount in the site. In 2015, DraftKings passed $1 billion in total prize payouts to its users for the year.
Now, the U.S. Supreme Court’s May 14 decision to allow individual states to legalize sports gambling already looks like a landmark moment for the country’s gaming industry. And the ruling should come as a relief for daily fantasy sports sites, after spending recent years mired in a fog of uncertainty as lawmakers debated whether services like DraftKings and rival FanDuel constitute sports gambling or “games of skill.”
Robins told CNBC after the Supreme Court ruling that DraftKings stands to capitalize as a growing number of states introduce bills to legalize sports gambling (the practice is currently only legal in select parts of the U.S., such as Nevada), creating “a huge industry.” DraftKings had already been preparing a new online sports gambling business — including wagering on game outcomes and point totals — in the hope that the ruling would favor the gaming industry.
It could also put DraftKings in a position to benefit from a transaction, including either raising money through an IPO or even a potential merger. (DraftKings dropped a potential merger with FanDuel after federal regulators sought to block the deal in 2017.)
DraftKings has certainly experienced its share of ups-and-downs, but at the very least, Robins said he still would not have changed the way things started.
“Looking back it’s hard to question that because it worked,” Robins said in 2017 about holding onto his day job what seems like a little too long for some.
But it’s important for entrepreneurs to “take the leap,” said Robins, when they have faith in an idea. “If you believe in what you’re doing and you have the means to figure out a way to live your daily life without the income that you have coming in, then what are you waiting for? Go for it,” he said.
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Disclosure: Comcast, which owns CNBC parent NBCUniversal, is an investor in FanDuel.
