Every founder, when you start something,
you truly believe that this is going to explode, you're going to change the world.
And ours crashed and burned.
Harsh Jain and Bhavit Sheth know all about bouncing back from failure.
We started off with a traditional fantasy sports format.
We wanted to get revenue through ads on the platform.
That was the model, which was popular at that point in time across the globe.
Over two to three years, we actually ran out of
all the initial funding that was put in by my family and friends.
That was 2008, when the duo were just 22 years
old. But they would eventually pioneer an industry in India worth $4 billion.
Today, their company, Dream Sports, counts 10 million monthly active users.
Harsh and Bhavit are co-founders of Dream Sports, a sports tech firm from India
that owns one of the biggest fantasy gaming platforms in the country: Dream11.
Fantasy sports are online games where participants can create a virtual team
of proxies, tracking real sports players.
Game participants then earn points and win cash prizes
based on the real-world performances of these players.
I started following football as a Manchester United fan, and went to high school in 2001, to the U.K.
Got to know about this thing called fantasy football.
And I got all my friends back home hooked onto it as well. Bhavit was one of them.
What is the appeal of fantasy sports?
Everyone who is a sports fan has an opinion of how sports should be played,
or what player should be selected, whether the strategy for that game was right or wrong.
What fantasy sports tries to do is get that opinion into a more structured format.
I keep comparing fantasy sports to popcorn for your movie.
You have popcorn because it makes your movie better.
Fantasy sports does that for sports.
It deepens your engagement and makes that sports event 100 times more interesting.
Harsh returned to India in 2007, and shortly after, India's own cricket league was launched.
Cricket is hugely popular in India and the Indian Premier League, or IPL, is proof of that.
The 2021 IPL season saw 660 million fans watching on television and streaming online.
A five-year contract for broadcasting rights fetched $6.2 billion in 2022,
making the IPL one of the richest sports leagues in the world.
An avid cricket fan himself, Harsh set out to look for fantasy cricket platforms in India,
but the search was fruitless.
He decided to take matters into his own hands.
I told my friends that we have to solve this problem.
There's a billion Indian cricket fans, and they don't have fantasy cricket.
Harsh’s hunch was right. Besides being home to hundreds of millions of sports fans,
India is also one of the fastest-growing digital economies in the world.
The country is already the largest market for mobile app downloads,
with an estimated 1 billion smartphone users by 2026.
Sensing an opportunity, Harsh partnered with his childhood friend Bhavit to launch Dream 11,
providing fantasy cricket that was free to play, relying on advertisements for revenue.
It also enabled players to create one fantasy team for the entire season.
The duo said they received a couple of million dollars from family and friends as starting capital,
but in less than two years, they were strapped for cash.
The ad revenue wasn't coming in because these product people in India didn't
understand fantasy sports, so they needed to be educated.
At that point in time, we were wondering, what should we do now.
We knew that fantasy sports as a model should work, right?
It works globally, there has to be some format in which it should work in India,
we just didn't know what it was.
So at that point in time, we decided to start a
digital agency through which we could earn some revenue.
Red Digital, eventually became one of the largest digital agencies in India which,
in turn, helped to fuel Dream11's growth.
By diverting revenue from Red Digital into research and development for Dream11,
Harsh and Bhavit decided to pivot the fantasy gaming platform from
being reliant on ads to a “freemium” model.
On the monetization side, what we did is the built in contests
where you need to pay to enter the contest, and we build a prize pool.
And then if you win, you win prize money.
Inherently, every time someone joins a contest,
we keep a certain percentage of the entry amount that the user pays.
They also changed Dream11 from a per-season to a per-match format in 2012.
That actually brought down the commitment that person
had to make from multiple months to a single day.
Some of the times, people are interested only in certain teams in a tournament.
That strategy paid off. In 2013, when Dream11 was taking off again,
the duo decided to sell their digital agency, pumping the proceeds
back into building their fantasy sports platform.
Harsh and Bhavit began to see the fruits of their labor.
In 2019, the Mumbai-based startup joined the ranks of India's unicorn club.
Dream11 now offers over 10 fantasy sports,
including cricket, basketball, football and baseball.
There have been rival platforms in India. What makes you guys stand out?
It's an open secret that I talk about. I still don't play fantasy football on Dream 11.
I still am committed to fantasy football on fantasy Premier League,
the reason we created Dream 11.
The reason I'm saying this is because of the network effects of fantasy sports.
Once you and your friends are playing or are connected over one network in fantasy sports,
for a rival to get you to play there, you have to move all your friends with you.
The company’s revenue model meant that it was one of the rare unicorns in India making a profit.
In fact, Harsh and Bhavit say that their company has been in the green since 2020.
Most entrepreneurs forget that funding cannot be taken for granted.
Every funding round that we've ever had, has always had us
projecting 12 to 18 month runway, and then flipping to
a breakeven and profitability.
If your unit economics don't lead to that, then your valuation is wrong,
or the amount of money you're raising is wrong,
your fundamentals of your business are wrong.
We ran out of money in 2010. I think unfortunately, that's a very hard
lesson to learn, which a lot of founders need to learn that money isn't free.
This razor-sharp vision has supercharged Dream Sports’ growth.
Dream Sports's investors include Chinese tech giant Tencent,
American investment firms Tiger Global and D1 Capital.
In 2021, it raised $840 million, valuing the company at $8 billion.
But is fantasy sports a game of skill or luck?
There is growing concern among regulators in India and other countries
about fantasy sports fueling addiction, especially among its youth.
This will shape the future of the mobile gaming industry, including how it is taxed.
The company has been embroiled in multiple lawsuits over that question.
In 2021, the Supreme Court of India ruled that online fantasy sports are ‘games of skill.’
Despite the ruling, Dream11’s paid games are unavailable
or banned in 6 states in India at the end of 2022.
A government report even noted there were reported cases of youth
taking their lives over online gambling debts.
I will relate fantasy sports to the stock market very much so, because based on past
performance of a stock and expected future performance of a company, you're buying a stock.
Now, does that guarantee you that that company or the stock will go up or down? No it doesn't.
Are there things that are out of your control? Yes, all the time.
So I would say, fantasy sports is like picking a stock portfolio,
where each player is like a stock.
The company claims only 20% of its users are playing with money
and there are safeguards in place to ensure responsible play.
There are some contests with 10 million people playing against each other.
We always try to make sure more than 50% of them at least win their money back to keep it engaging.
But the first prize can win two crores which is about $250,000 for half of $1.
99% of our users have never won or lost more than 10,000 rupees $120 in the entire lifetime.
We have responsible play that makes sure you can set limits, when you lose X amount to 2X amount,
3X amount, you get a warning, you're suggested to take a break.
Because we're not here for making you win or lose large amounts of money.
And that's how we scale so far, we don't have any ads on Dream 11, we haven't had
them for the last seven years, since we’ve pivoted to this model.
Despite the regulatory hurdles, Harsh and Bhavit plan to continue their expansion in India.
The country has the largest fantasy sports user base in the world,
and the industry is projected to be worth an estimated $20 billion by 2025.
We still want to focus on India, we see we have 150 million users on dream 11 in India,
there are 800 million online sports fans in India.
Maybe when the day comes in our next couple of years,
when we start hitting 300 million users in India,
that's a day we might look at growing internationally.
We started when we were 22 years old, so
we pretty much had nothing but an engineering degree.
I think it was purely seeing a problem.
And being extremely passionate about it yourself.
I think that's all most founders need.
Maybe the rest of it you learn along the way.