Introduction to eSportsPools
eSports and daily fantasy sports have been the two hot topics in online gambling circles in 2015, and among the start-ups hoping to leverage the interest in these new outposts for the sector is eSportsPools, a Vancouver-based company launched this year by founder and chief executive Scott Burton. Previously the manager of a saw mill in Washington State, the business school graduate looked to his own personal interests in betting and gaming for his long-term career. Having previously launched the social betting business Tedbets.com, Burton hit upon the idea of providing a daily fantasy product for eSports. Since inception, the space has been filled by competitor sites Vulcan (recently the subject of a $12m funding round led by VC firm Sequoia) and AlphaDraft (bought by FanDuel in September for an undisclosed sum). Hoping to sidestep the current furore that has developed around the regulatory footprint of the wider DFS scene, Burton points out that the eSportsPools user base is very much global and that barely 10% of are from the US. He also notes that the approach of just adding eSports to an existing product offering won’t be enough for this audience. “It’s a different group of people, and (operators) need to be recognise that and be careful on how they approach it.”
Gamcrowd: Can you go over how you came to pot the opportunity in eSports?
SB: We had previously built a social peer-to-peer sports betting exchange. We were approached to look at eSports betting on a peer-to-peer level by an eSports media group. I got very interested and excited by the eSports space. We also has a daily fantasy product and we thought that would be a nice entry point to see if there was any pick-up in the eSports community, and there was immediately.
Gamcrowd: It’s an interesting area isn’t it? It’s exploded within the last year.
SB: Yeah, when we started talking to potential investors last year, there was a lot of education going on, convincing people that people watched people play video games. In the last six months, it’s gone absolutely crazy, the interest in our product and eSports has been huge.
Gamcrowd: What is your background?
SB: I have a business degree; I have an accounting designation, I previously ran a saw mill in Washington state in the US, doing internationals sales. But I was a regular sports-better, and I thought there was room for an interesting product around social, peer-to-peer betting, so I launched TedBets.
Gamcrowd: What happened with that?
SB: It still operates, it’s just a free-to-play product. We still have the platform and gaming infrastructure in place. But we had people ask us to look at eSports with the product, and when we saw what was happening with eSports we thought we would leave TedBets as free-to-play and let it go on its own for a while, and focus on eSports. We are a small team, we have to focus and we decided eSports was the way to go.
Gamcrowd: What is the regulatory angle with daily fantasy and eSports?
SB: There is becoming one. The reason why we did it is we know that regulation is coming. We know that fantasy and pools is regulated in a number of places. What we decided was that, because North America was unregulated, it was a good entry point, so we could try out this product, test it, monetise and see what the user acquisition and revenue was going to be like, before we decided whether this was a product we wanted to take into regulated markets. The US is changing fast right now on daily fantasy. We do block four states, we are saying ahead of that. Ultimately the US represents less than 10% of the user base, so we are very much focused on the global market, building a global user base and then looking to monetise later.
Gamcrowd: Have you got funding?
SB: Yes, we did a relatively small seed round in the summer, to get some very good strategic investors on board, guys from media and igaming and the main reason we are here is looking for investment now. We don’t need to educate on eSports anymore, that’s been done. We have shown the user growth from our side. The traction, the interest in the market, so now we want to raise the money to grow.
Gamcrowd: Have you got competitors?
SB: When we started the concept and did the testing, we had nobody really doing it. But there were two other sites working on a product at the same time. So we all launched around the same time earlier this year, right around the same time. Vulcan and Alphadraft were a little ahead of us, those are our two main competitors. Vulcan, after 90 days closed a $90m funding round led by Sequoia, and Alphadraft just got bought by FanDuel. So we are the third-largest eSports fantasy site, we are the only one yet to take big investment or an acquisition.
Gamcrowd: One of the interesting debates about eSports is that people say you have to understand it is very different to other sports – do you agree with that?
SB: Yes, in the talks we have been having we want to find gambling companies that want to take an approach that is much like our and is how we think eSports should be approached. We are a team of gamers and eSports enthusiasts. It’s a different group of people, and they need to be recognise that and be careful on how they approach it. My concern is that some of them will do what they are doing now and in 10 months say ‘we’ve tried eSports, there is just no market there’ whereas they are just not putting out the right product and appealing to the people they need to be appealing to. That’s the whole next generation of people coming and they need to be considering how they are going to get them.
Gamcrowd: Where are you based?
SB: Vancouver. Very much in the tech scene, Vancouver is very good. There are a lot of advantages to being there. From an investment standpoint anyone outside of Canada, we are very attractive on a dollar-sterling exchange rate. Very good tax incentives; up to 61% of your tech development cost can be recovered every year. There are a lot of good benefit. And a lot of good talent. Canada is among the top three companies for gaming developers; EA sports is the most well-known. It has spun out a lot of little companies.
Gamcrowd: What about the debate about DFS? Has that affected you?
SB: It has affected us in where we are taking money. We focus on user acquisition through free-to-play right now and waiting to monetise, and I haven’t gone back to the US in terms of financing right now, so there might be some hesitation on the VC side in the US right now. I don’t feel that from the regulated gambling operators. They have had to operate within the US for a long time, they know the world is a big place and if you do it properly you can still operate a profitable business.