Harsh’s interview with ET Tech
Mumbai: Dream Sports, which is currently executing a secondary sale of shares that will value the online fantasy sports platform at $4 billion, won’t raise any fresh capital from Chinese investors in the future, its founder and Chief Executive Officer Harsh Jain told ET.
Tencent Holdings Ltd., a Chinese multinational that owns the hugely popular messaging app WeChat, owns less than 10% of Dream Sports, Jain said in an exclusIve chat, and has been diluting its stake in the firm amid a larger anti-China sentiment in India owing to geopolitical tensions between the two nations.
However, Jain did not offer any details on whether Tencent would further dilute its stake in the company. “We are not looking to raise money ever again from Chinese investors. We are in a unique position of being a product that’s made in India, only by Indians and for Indians,” he said.
Other consumer internet startups, big and small—including Zomato, Policybazaar and BigBasket—have taken similar steps to cut down exposure to Chinese funding in their companies. This comes in the backdrop of a larger nationalistic approach by Indian entrepreneurs, who are pushing the government’s Atmanirbhar Bharat campaign, which urges businesses to be self-reliant.
“We have no plans to IPO…we want to go public as a sports tech company. For that we need to have a substantial portion of our business coming from non-fantasy sports.”
As for the company’s financing round, ET reported on Feb 22 that Dream Sports, which owns Dream 11, is closing a $300 million secondary sale of shares by existing investors, which would almost double the company’s valuation to $4 billion in six months. Abu Dhabi’s Alpha Wave Incubation, managed by Falcon Edge, and a few more investors will enter the company’s cap table and provide an exit to early backers, we reported.
“It is our responsibility to give all early investors like Kalaari Capital, Multiples Alternate Asset Management and Think Investments enormous exits, which pay back their funds and which shows that venture capital firms can do well in India and provide real returns,” he said. “This allows them to invest in the next generation of entrepreneurs and keep the ecosystem going. So it’s much more important to provide secondary fundraise than primary fundraise today. And this will keep happening regularly.”
Turned profitable, but no IPO for now
Jain said Dream11, unlike a crush of new-age tech startups, won’t be tapping the public markets yet. “We have no plans to IPO…we want to go public as a sports tech company. For that we need to have a substantial portion of our business coming from non-fantasy sports.” Instead, he said, the company will look to diversify its offerings even as it has turned profitable. Jain, however, did not offer details of the company’s financials.
“Our focus now is on diversification. We have one good core business which has market leadership in its area. Now, we want to go and build the YouTube, Gmail and Google Maps of sports. Want to build an Alphabet-like entity, not just Google Search.” Alphabet Inc. is Google’s parent company.
“Now, we want to go and build the YouTube, Gmail and Google Maps of sports. Want to build an Alphabet-like entity, not just Google Search.”
To support its product diversification strategy, Dream Sports wants to cover the ambit of sports technology products and services in India. It entered experiential sports travel with DreamSetGo and is also backing early- and late-stage sports startups with its DreamX and Dream Sports funds.
Jain said they are in the process of closing an investment in an esports startup. Besides that, they have invested in a sports aggregator platform and are looking to make investments in the Internet of Things, and virtual and augmented reality.
Covid slump and IPL bump
During the three months following the lockdown in 2020, when sporting events were suspended, fantasy sports companies saw their businesses come to a standstill. “When all other gaming was booming, fantasy sports was dead. So we experimented and started covering tier-three and tier-four matches worldwide,” he said. To survive, the firm covered football leagues in Nicaragua and Belarus, basketball in Kazakhstan, and baseball in Taiwan.
Things changed during the Indian Premier League (IPL) season, especially as the company bought the rights to sponsor the truncated tournament for a steep Rs 222 crore. The Indian cricket board brought in Dream11 for a year after Chinese smartphone maker Vivo had to drop out due to the anti-China wave. Seeing the bump up IPL gave the platform, Jain said they will consider bidding for the title sponsorship again.
“If and when they (BCCI) decide to discontinue this (Vivo-IPL) deal, they will call for bids and we will be happy to participate.”
“It was amazing for us to be in a place where an Indian sports company could sponsor the IPL for the first time,” he said, adding, “We would absolutely consider doing this sponsorship again, if the numbers make sense.” Currently, Vivo has a contractual right with BCCI for the next three years. “If and when they decide to discontinue this deal, they will call for bids and we will be happy to participate.”
Dream11 added 25 million registered users and reached the 100 million mark thanks to the IPL. During the tournament its active monthly users jumped to around 20 million.
“Our engagement numbers are back to around 80-90% of what they were pre-covid. We have not fully regained our old numbers because even today some matches get postponed because of covid.”
Regulatory hurdles and next steps
The broader fantasy sports industry would benefit from a clear regulatory framework, Jain said, as it grapples with growing uncertainty. The number of players in the space has grown 20-fold since 2016 to 200 companies, he added. The company had set up a self-regulatory organisation, the Federation of Indian Fantasy Sports, in 2017 with 34 Indian fantasy league operators. It is led by former chief information commissioner of India Bimal Jhulka. “This has been very important because we’ve set out a regulatory charter which everyone should follow,” Jain said.
In January, Niti Aayog, the government’s think tank, proposed uniform guidelines for the industry. Jain said this idea received “overwhelmingly positive feedback”.
“We would welcome regulations to help to stabilise the industry and to take it forward to its next phase of growth,” he said. “Hopefully they can get over the line and publish those self-regulatory guidelines, which have been in draft form until now.”