Is there room for more sports-betting startups?

Kevin Dowd and Becca Szkutak

Staff Writers

Last week, sports betting platform Lucra Sports raised a $10 million Series A round from backers including SeventySix Capital, Victress Capital and Raptor Group, among others. This news came just days before the Kansas Jayhawks won the 2022 NCAA Men’s basketball title—after a three-week tournament expected to drum up more than $3.1 billion in bets—and a week before baseball’s opening day.

This deal got me thinking about sports betting—beyond my 5-cent NBA bets on FanDuel, of course—because I was initially surprised to see another company trying to emerge in what seemed like an already crowded market.

DraftKings raised $719 million in venture capital before going public in 2020 at a $6.5 billion valuation (it’s risen to $8.3 billion since). FanDuel raised $416 million in venture capital before being acquired by Flutter Entertainment for $4.2 billion that same year. Many gambling stalwarts like MGM and Caesars have jumped into the space as well.

Was there room for another upstart? I turned to my colleague Will Yakowicz, who covers the vices beat and is our staff gambling guru.

“I think there is room,” he tells me. “It's a huge expanding market. Not all states have legalized, and when you look at mobile sports betting, there are only 18 states that have legalized. It’s still early innings when you look at mature betting markets like the U.K. and other EU countries. There is just a lot of money to be made."

Some startup sports-betting platforms may be able to make a name for themselves by catering to niche strategies. San Francisco-based Lucra Sports is marketed as a tool for friends to bet small sums against each other as more of a social activity, as opposed to some of its larger gambling-focused peers. San Mateo-based Sleeper focuses on fantasy sports and esports—neither of which is well accounted-for on the traditional platforms. Sleeper has raised $67.3 million and counts firms like Andreessen Horowitz and General Catalyst as backers.

Will says he expects more innovation in the space beyond betting platforms, too. Several startups have launched in the last few years that offer services fans can use alongside those platforms or that cater to the betting entities themselves.

Simplebet offers micro betting, letting users bet on every aspect of a game, down to whether a pitcher’s next pitch will be a strike. The New York-based startup has raised $77.9 million, including a $28.6 million Series C last October, and sells its tech to sports-betting companies like DraftKings. Houston-based nVenue raised a $3.5 million seed round last month for its data platform, which produces real-time predictive odds for stats fans and sports bettors.

With legal sports betting appearing headed for more states soon—including possibly populous California—there will be a growing opportunity for more startups to enter the market. —B.S.

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Tweeting through it

Elon Musk is now Twitter’s largest shareholder, revealing in a regulatory filing on Monday that he’s acquired a 9.2% stake in the social media giant.

Musk does not have a history of activist investing. But he does have a history of really loving to tweet. In 2018, Musk famously ran afoul of the SEC by tweeting that he planned to take Tesla private for $420 per share, a move that ultimately led to limits on his ability to tweet about the electric car maker. And in March, Musk tweeted a poll asking his roughly 80 million followers whether they think Twitter “rigorously adheres” to the principle of free speech. When 70% of the 2 million respondents answered in the negative, Musk then tweeted, “Is a new platform needed?"

One of Twitter's most famous users is now also its largest shareholder. AFP via Getty Images

Perhaps a new platform won’t be required if Musk can get a little more control over this one. There’s reason to think, though, that Musk won’t openly agitate for changes: He reported his new investment to the SEC through a Form 13G, which is typically used for passive stakes, rather than the Form 13D used by activists.

Then again, Musk has never been shy about deviating from orthodoxy. And Twitter has some experience with activists—although CEO Parag Agrawal, who succeeded Jack Dorsey in November, is still settling into the job. In 2020, Twitter fended off a push for major changes from Elliott Management, ultimately striking a deal that saw both Elliott and private equity firm Silver Lake take seats on Twitter’s board. But Dorsey did eventually step down last year to focus on his job as the CEO of Block (formerly known as Square), which had been one of Elliott’s original demands.

Musk’s investment in Twitter poses more questions than it provides answers. What are his plans? How will Twitter respond? What does Dorsey think? Musk has a history of working together with Silver Lake co-CEO and Twitter board member Egon Durban—might an attempt at a take-private buyout be in the cards?

If it is, Musk’s presence has already made a potential deal more expensive. But the world’s richest man can afford to pay up. Twitter stock shot up 28% Monday following his announcement, taking its market cap north of $40 billion. —K.D.

A venture dream goes bust

Last year, Stacy Chang left her job as chief of staff at Founders Fund for something new: She planned to help start a new venture fund with Carlos Cashman, the CEO of Thrasio, a $5 billion e-commerce startup known for rolling up smaller brands that sell their wares on Amazon.

But by December, it had all fallen apart. And now, things are getting litigious.

Chang sued last week, lodging an array of accusations against Cashman, including that she had gone uncompensated for six months of work and had been forced to pay for a Zoom subscription out of her own pocket. Most significantly, Chang says she was misled into walking away from what could have been more than $10 million in unvested carried interest at Founders Fund.

It’s a fascinating saga involving broken promises, lost millions and one of Silicon Valley’s most famous firms. Our colleague Alex Konrad has the story in full. —K.D.

They Said It

“Almost no one under the age of 70 has lived through a real inflationary investing period. Therefore, you have to reach deep back into history to really understand what's going on in the current environment."

—David Sambur, co-head of global private equity at Apollo Global Management, speaking to Bloomberg

Just The Facts

— Emerging fast-fashion powerhouse Shein is in talks to raise about $1 billion from General Atlantic at a whopping $100 billion valuation, per Bloomberg, a deal that would make Shein one of the most valuable startups in the world. Shein was previously valued at $30 billion last summer and may log as much as $20 billion in revenue in 2022, according to Morgan Stanley.

— Cross River has raised $620 million in funding to provide end-to-end infrastructure for services including banking and lending to companies and consumers, it said Friday. The Fort Lee, New Jersey-based company’s funding was led by Eldridge and Andreessen Horowitz with participation from Hanaco Venture Capital, T. Rowe Price and Whale Rock Capital Management.

— There’s no rest for the dealmaking team at Advanced Micro Devices: Two months after closing a $35 billion purchase of chip maker Xilinx, the semiconductor company has struck a deal to buy Pensando Systems for $1.9 billion. Pensando makes chips and other networking software designed to speed up operations and lower costs at data centers.

— Hadrian raised $90 million in a round led by Andreessen Horowitz and Lux Capital for its for its aerospace and defense parts factories.

— SPAC deals have grown less common in recent months, but they certainly haven’t vanished. Arkansas-based Westrock Coffee struck a deal today to merge with a SPAC, landing a planned $250 million PIPE investment and a roughly $1.1 billion valuation. Westrock provides coffee and tea for retailers, restaurants and other clients.

— In another SPAC deal, youth-culture juggernaut Hypebeast agreed to merge with a blank-check company called Iron Spark and go public at a $534 million valuation. Hypebeast, which operates a media arm, a production agency and an e-commerce platform, has raised prior backing from Tom Brady, Naomi Osaka, Kevin Durant, Jonah Hill, Adam Levine and other celebrities.

— The former cofounder and CEO of meal-kit startup Plated is back and raising capital for his new endeavor, Season, a diet-plan and meal subscription service. The startup just raised a $34 million Series A round led by Andreessen Horowitz with participation from LRV Health and Company Ventures.

— The private equity arm of Ariel Investments acquired a 52.5% stake in Sorenson, a provider of video communications technology for people who are deaf or hard of hearing, valuing the Utah-based company at $1.3 billion. This is the first acquisition for the Ariel Alternatives unit, which launched last year with a focus on buying and building minority-owned companies. Founded in 1983 by John Rogers, who brought on Mellody Hobson as co-CEO in 2019, Ariel is the oldest mutual-fund manager in the U.S. owned and led by Black executives.

— Morningstar is building out its private-market data offerings with a deal to buy Leveraged Commentary & Data from S&P Global for as much as $650 million in cash. The investment research giant will merge LCD with PitchBook, adding LCD’s leveraged loan data and analysis to PitchBook’s existing platform for the private markets.

— Apollo Global Management closed its second hybrid value fund with $4.6 billion in commitments. The fund series follows a very flexible strategy, melding equity and debt to provide bespoke investments for special situations. Apollo closed its first hybrid value fund on $3.3 billion in 2019.

Charted

There are still few women in the boardroom, but they have been gaining ground. A new study by Him For Her and Crunchbase of 500 private, venture-backed companies with more than $100 million in funding found that women held 14% of available board seats last year, for 484 positions out of 3,427. That percentage of seats is up from 11% in 2020 and 7% in 2019.

Slow progress is being made on other fronts, too. While more than 40% of the companies studied had zero women on their boards in 2021, that’s still an improvement over 2020, when half of the boards of the companies studied were all-male, and also over 2019, when 60% were. And while 78% of the companies had zero women of color on their boards last year, that was still an improvement from 2020’s 81%.

What We're Reading

Donald Trump wants to use a startup and a SPAC deal to build a new social-media empire. But getting Truth Social up and running has been easier said than done. (Reuters)

The hits to scandal-embroiled video game company Activision Blizzard keep coming. The latest: Its CEO is now being investigated for a possible link to insider trading. (Wall Street Journal)

Astronomers have now discovered more than 5,000 planets outside of Earth’s solar system. Which ones are their favorites? (New York Times)

Forbes editor Steve Bertoni has a deep profile of Ryan Breslow—the 27-year-old billionaire behind one-click checkout startup Bolt—who went from working as a cashier at his family’s driving range to founding the nearly $11 billion startup. (Forbes)

Speaking of one-click checkout startups, Fast is looking to raise additional capital at a lower valuation than its previous round and plans to cut potentially more than half its workforce in the process. (The Information)

Inside the lucrative, secretive and booming world of private concerts, where one-percenters can book a private show from the likes of Beyoncé or John Mayer—as long as the price is right. (Rolling Stone)

Venture capital heavyweight Sequoia has a new global leader, according to our own Alex Konrad. Roelof Botha will succeed Doug Leone in the role. (Forbes)

Chris Paul is getting ready for a playoff run with the NBA’s Phoenix Suns. Like so many other pro athletes, he’s also getting ready for a second career in business. (Bloomberg)

What To Watch For

It now seems likelier than ever that the future of Ted Baker will be shaped by M&A. The British apparel brand launched a formal sale process on Monday, not long after it had rejected a pair of takeover bids from retail-focused buyout firm Sycamore Partners. The larger of those offers valued Ted Baker at £254 million ($333 million), but the company thought it could fetch a better price. And for now, at least, public investors agree: Monday’s announcement caused Ted Baker shares to shoot up 14%, taking the company’s market cap to £270 million.

Kevin Dowd

Staff Writer

I am a staff writer at Forbes. I previously wrote for PitchBook, where I created The Weekend Pitch, a weekly newsletter about the private markets. Before that, I covered high school sports in the Pacific Northwest, and I graduated from the University of Washington with a degree in journalism and creative writing. I live in Seattle, where I read a lot of books and play a lot of golf.

Follow me on Twitter.

Becca Szkutak

Staff Writer

I'm a New York-based reporter covering venture capital, startups and investors. I was previously a reporter at the Venture Capital Journal and Private Debt Investor. I graduated from Emerson College in 2017 with a degree in journalism.

Follow me on Twitter at @rebecca_szkutak or send me an email at rszkutak@forbes.com.

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Is there room for more sports-betting startups?

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