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Sports betting VC opportunity lies in services and foreign fantasy startups, says Bullpen Capital Partner –

The slump in sports betting and fantasy sports companies, big and small, is headed in the right direction, but their stocks have burned cash over the years, according to general partner and co-founder Paul Martino. A member of venture capital firm Bullpen Capital and one of FanDuel’s early investors.

“The correction in sports betting stocks began almost a year before the correction in the broader market,” Martino said in a call. I feel like I’ve hit rock bottom in 2020. Companies have become very smart. Instead of setting money on fire.

When the US sports betting market opened in 2018, companies spent a lot of money to acquire customers, and it remained one of the most popular investment areas until 2020. As an example of an overheated market, Martino said that by the end of the year, companies would spend his $2,000 in both marketing bonuses and direct cash bonuses to get customers in Pennsylvania, where he lives. I said I was paying dollars. The state’s 35% tax rate on betting.

Wall Street picked up on this, and in March 2021, betting stocks began cracking based on customer acquisition costs, collapsing into relentless bearishness from investors. This year alone, seven stocks heavily reliant on sports betting have lost half their value, including Super Group (down 63%), DraftKings (down 71%) and Barstool Sports parent company Penn National Gaming (down 66%). Losing more than

Stock market troubles spilled over into the VC space in which Martino invests, he said, forcing U.S. startups to refine and streamline their business models. As such, Bullpen Capital has spent much of the past year looking for direct sports betting/fantasy play for him in other markets. In 2021, Martino has invested in three non-US fantasy companies. Draftea, Mexican Everyday Fantasy Products. And Beryllium is a Singapore-based platform offering a daily Indian cricket fantasy called Sixer.

“Most US companies were overvalued, so going international in 2021 makes sense,” says Martino. twenty two.”

Martino has not yet disclosed specific 2022 investments. “[They] At the heart of fantasy sports and games is something that isn’t dead.They’re on the periphery, not on this treadmill, like services and finance [direct-to-consumer],” he said.

He cites Swish Analytics, a 2018 bullpen investment, as an example of a company he sees potential right now. “Swish does real-time line setup as a web service. When major operators want to provide in-play odds, they often outsource line setup to Swish. It’s the kind of business I’d rather be in than an undifferentiated vendor,” Martino said.

Bullpen focuses on companies in the early stages of VC investment. That means he’s three to four years down the road to seeing a return on investment, as opposed to his late-stage VC firm, which needs to go public early, Martino explained. This strategy has worked for him in the past. Martino invested in FanDuel ten years ago when the company was valued at around $8 million. He said he was unable to persuade other of his VC friends to join the syndicate with him at the time. Ten years later, his 2020 stake purchase by his current parent company, Flutter, has made FanDuel valued at his $11.2 billion. That’s about 1,600 times the level Martino invested in. This is a big win that he believes can still be produced by a rapidly growing global sport. Gambling.

“Even if a year from now no one is talking about the market being a really hot new sector or talking about demographics that were not paying attention to being a hot new sector, I wouldn’t be surprised.”