Austin, TX - March 18, 2024 - At SXSW this year, leading experts from the esports and fantasy betting industry shed light on the challenges, opportunities, and future prospects of this rapidly evolving sector. The panel was moderated by former eSports commentator and attorney in the emerging companies and startup space, Dean Elazab, and included executives from PrizePicks, Fantasy Elect, SweetScience Marketing, Gamble ID, and a venture banking representative from Banc of California. Elazab led the discussion to provide valuable insights for businesses and investors looking to navigate this dynamic landscape.
Adam Boothe, Esports Director at PrizePicks, highlighted the growing success of esports, noting that titles like Counter-Strike rank as the fourth biggest league on PrizePicks outside of the NFL, NBA, and MLB. He emphasized the importance of converting existing fantasy players into esports fans by showcasing the excitement and simplicity of the games.
“Valve's hands-off approach to esports for Counter-Strike and DotA has opened up exciting opportunities for companies like PrizePicks to sponsor tournaments and events in a way that wouldn't be possible with traditional sports like the NBA," said Boothe. "We recognize the untapped potential in this ecosystem and are motivated to invest in it. For example, offering Counter-Strike events for 360 days last year to combat the seasonality faced by sports betting and fantasy operators," he said.
Host of the event, founder and CEO of Fantasy Elect, Justin Schoenfelder talked about innovating fantasy sports by applying the engaging mechanics of fantasy sports to unconventional domains like politics. “I believe politics is the biggest sport in the world that everyone participates in. Marrying these two worlds is something I'm incredibly passionate about,” he said.
For startups in the gaming industry, navigating the regulatory compliance framework, securing banking and payment solutions, and building an audience are the three most significant challenges.
Shane Saum, Director of Regulatory and Government Affairs at PrizePicks, addressed the regulatory challenges faced by the daily fantasy sports industry, stressing the need to educate legislators and regulators about the distinction between daily fantasy sports and traditional sports betting.
"I fight for the rights of all daily fantasy sports operators," said Saum. "We face a unique challenge in educating legislators and regulators about the distinct differences between daily fantasy sports, which is a game of skill, and traditional sports betting. Despite the efforts of some legacy operators to blur these lines and close the door on daily fantasy sports, PrizePicks remains committed to advocating for an open, free market that benefits not just our company, but also the small startups in the industry. We encourage these companies to collaborate with us as we work to pass legislation and create rules that foster a thriving, inclusive daily fantasy sports ecosystem."
"While marketing and having a cool game are exciting, ensuring compliance and protecting players may not be glamorous, but it's definitely required. We help operators tackle these essential aspects that they often find themselves in trouble with," said JD Garner, founder and CEO of GambleID.
“Our customers often have a clear vision on the market, but face challenges navigating the varying regulatory landscapes across different states like Arizona, Massachusetts, Texas, or Nevada. This is where companies like ours come in - we help them find the right banking partners, structure their operations correctly, acquire customers, and ensure they meet the necessary regulatory compliance requirements for onboarding users and securely storing their data," he said.
The panel also discussed several trends and innovations in the industry, such as the untapped potential of publisher-owned titles and the emergence of fantasy sports across various entertainment genres.
Tom Conti, founder and CEO of SweetScience Marketing, noted that the exponential growth potential is very attractive to non-endemic brands who want to reach 18-34 age groups.
"As a marketer, I'm excited about the cautious yet experimental approach advertisers are taking as they re-enter the esports space, which is a stark contrast to the late 2010s when brands were throwing money at it without a clear strategy," said Conti. "I'm also enthused by the increasing structure around the path to pro, the rise of women in gaming, and the wealth of opportunities in streaming and co-streaming, which open up new avenues for introducing brands and driving revenue into the sport."
For startups seeking funding, Schoenfelder, founder of Fantasy Elect, advised creating a compelling product, building strategic partnerships, and demonstrating strong key metrics to attract investors.
"As a first-time founder, my approach is to fundraise creatively by focusing on building partnerships and creating an irresistible user experience," said Schoenfelder. "Our belief is that if we deliver a product people can't get enough of, the money will follow. While it's still early, this approach seems to be working, with conversations we started last year now turning into real partnerships with venture firms. My advice to other founders is to prioritize your product, partners, and key metrics – if you can prove your business is solid, investors won't pass up the opportunity."
All startups need strong banking partners, Chris De Ayala, AVP of Venture Banking at Banc of California explained what to look for based on the relationships they have with DraftKings among others.
“Our experience as the banking partner and venture debt provider for some of the most well-known online sports books and startups has made us comfortable operating in the fantasy sports space. So, we have a deep understanding of not just their capital and banking needs, but also the compliance requirements for our customers (the fantasy sports startups) to ensure we aren’t involved with any illegal or unlicensed activities,” said De Ayala. “Our compliance teams are focused on adhering to the regulatory requirements but we also focus on mitigating our reputational risk. Our institutional knowledge increases the degree to which we can help our customers and potential customers,” he said.
The takeaway is that a banking partner with expertise and experience in the intricacies of the regulated fantasy sports market as well as a devotion to reputational preservation will be a partner that not only provides services but also guidance.
As the esports and fantasy sports industry continues to evolve, businesses and investors must remain agile and adaptable. With the right approach and mindset, the future of esports and fantasy sports looks bright, with the potential for significant growth and success in the years to come.
For more information about the panel discussion or the esports and fantasy sports industry, please contact: Justin Schoenfelder: justin@fantasyelect.io; Michelle Fernandez: mfernandez@gosweetscience.com