Lecture on Venture Capital in Sports Betting by Lloyd Dantig

Introduction

• Speaker: Lloyd Dantig, Managing Partner at Sharp Alpha Advisors.
• Specializes in sports betting and real money online gaming.
• Background in finance and engineering; investment professional on Wall Street and data scientist.
• Personal passion for casino gaming, sports betting, and fantasy sports.
• Experience in fantasy sports, March Madness brackets, Master's pools, betting on sports and video games.
• Repeal of PASPA allowed the overlap of his skills and passions in sports betting industry.

Sharp Alpha Advisors

• Mission: Specializes in sports betting and real money online gaming.
• Focus on 'Competitive Entertainment' (sports, betting, video games, etc.).
• Investments include collectibles, merchandise, ticketing.
• Invests in early-stage companies bridging innovation gaps for interoperability of adjacent sectors.
• Examples: DraftKings (NFTs, tokenized experiences), Fanatics (betting, ticketing, merchandise).

Esports Betting

• Esports betting is more popular overseas than in the US; slower adoption in the US.
• Strong belief in the future rise of esports betting including betting on recreational gaming.
• Comparison with traditional sports betting; likely to rival but not completely overtake.

Investment Criteria

• Focuses on the founding team more than the idea alone.
• Characteristics of billion-dollar founders: compelling solutions, uniquely qualified, right timing.
• Looks for parallel vision congruent with Sharp Alpha’s macro thesis.
• Selectivity in deals where Sharp Alpha can add significant value.
• Importance of good working relationships with founders.

Successes and Case Studies

• Betcha: Acquired by Vivid Seats; validation of convergence thesis.
• Players Lounge: Peer-to-peer esports betting, significant traction.
• Brand positioning attracts top entrepreneurs and companies.

Macro Trends in Sports Betting

• Valuations pulled back, revenue multiples compressed due to sentiment, interest rates, profitability concerns.
• Market share concentration among a few major operators (DraftKings, FanDuel, etc.).
• Key trends: disparity between top operators and smaller companies, possible niche operators.

Special Purpose Acquisition Companies (SPACs)

• Suitable for high-growth companies with future potential rather than past traction.
• Recent pullbacks in public markets make fundraising harder for new SPACs.
• Potential for non-traditional deals, roll-up strategies combining multiple smaller assets.

Industry Future

• New opportunities in B2B side: esports odds providers, risk and trading teams, etc.
• Challenges for new B2C entrants to compete with established brands.
• Potential for specialty B2C operators focusing on niche markets (motorsports, MMA, etc.).

US Sports Betting Consumer Needs

• US consumers prioritize entertainment and social value over ROI (return on investment).
• DraftKings' customers see betting as entertainment, not capital investment.
• Need for more intuitive, socially oriented, and frictionless betting experiences.
• Examples: Las Vegas sportsbooks focus on socialization, unlike UK transactional models.

Future Plans for Sharp Alpha Advisors

• Aim for portfolio companies to grow and raise future financing at higher valuations.
• Plan to launch another fund due to demand from limited partners.
• Goal for current companies to succeed and new fund vehicle to be operational within 18 months.

Conclusion

• Lloyd Dantig sheds light on venture capital strategies within the sports betting industry.
• Emphasis on innovation, the convergence of competitive entertainment, and the importance of strong founding teams.
• The dynamic nature of the industry with unique consumer preferences and emerging trends.