Luck, interest and deep pockets

Dream11 has had a dream run of its own in the last couple of years. Piggybacking on the growth of the Indian Premier League (IPL), Hotstar and other enabling factors like smartphones and the internet, it has, so to speak, hit it out of the park.

Data provided by research firm Venture Intelligence shows that Dream11 has secured an undisclosed amount of funding from early-stage venture capital firm Kalaari Capital and San Francisco-based investment firm Think Investments. It has also raised $22 million from private equity firm Multiples Alternate Asset Management.

What is the next funding?

But those might pale with the scale of its next funding.

Recent news reports suggest that it might be in talks with Chinese internet firm Tencent Holdings for an investment of $100 million. This could peg Dream11 at a pre-money valuation of $400-$450 million.

On the back of the money raised, Dream11 has been doing some aggressive marketing. In FY17, the company spent Rs 10 crore (~$1.4 million) on advertisements, Rs 35 crore (~$4.9 million) in promotional credits and Rs 13 crore (~$1.8 million) in customer incentives, roughly 74% of their total expenditure. Enough to rope in Bhogle and the former captain of the Indian cricket team Mahendra Singh Dhoni as brand ambassadors.

“Getting Dhoni was a masterstroke,” says a former product manager of a fantasy cricket platform. He requested not to be quoted.

“What’s really impactful in cricket is TV marketing. Cricket happens on TV and with Dhoni on the screen, you have India’s smartest captain ever asking your target audience whether they are smart enough for this game or not. The star potential is crazy,” he adds.

Efforts behind the success

It apparently doesn’t take much for fantasy sport to take off.

“Fantasy sport is a very lucrative category globally and frankly it is not a surprise because it brings together aspects of social gaming, research and skill, luck and gambling and your deep interest in a sport together, which makes it a fun activity,” says Nitin Sharma, who is a technology investor and founder of Encrypt, a new “blockchain investment network” in Bengaluru. Sharma also plays fantasy football leagues with his friends and has been keeping an eye on the developments in the space in India.

In North America alone, there are 59.3 million fantasy sports users and in the US it is a $7.22 billion industry, as stated in the market research firm Nielsen report.

Sharma says that on the skill vs. luck spectrum, fantasy sport is arguably more about skill compared to other types of wagering games, fantasy sport is “really cool”. “Like [fantasy sports providers] FanDuel and DraftKings in the US, this is a phenomenon and a serious part of the season experience,” he adds.

Apart from the free practice matches, players have to pay an entry fee to the platform in order to play. It can range from Rs 13 ($0.18) to Rs 10,000 (~$139) and you can compete with thousands of users for the same pot. Besides, one can play within a closed circle of friends and customize the entry fee to their liking.

Additional revenue stream

Economics is pretty straightforward. You provide an opportunity for people to gamble with small amounts of money and, in turn, get to keep a rake—a term borrowed from poker which means the fee taken by the organizer of the game—of around 15-20% from various pots.

“In addition to the rake, on [fantasy sports platform] HalaPlay we have an additional revenue stream in the form of a subscription or season pass,” says Shubhankar Bhattacharya, venture partner at Kae Capital and investor in HalaPlay, Dream11’s closest competitor.

“If you want to play the entirety of IPL then you can put an additional Rs 500 (~$6.97) or Rs 1,000 (~$13.93) subscription fee which gives you a discounted entry and other perks as well throughout the whole season. This is a pure income stream and it does not go into the pot,” he adds.