DraftKings has introduced the formation of DRIVE, a new venture studio and athlete network. General Catalyst, Accomplice and Boston SEED are backing the actual investment fund. The pre-seed and seed stage companies that the fund invests in will go through the studio’s 12-month program. DraftKings intends on leveraging its brand, internal resources (think: engineering, product development) and wide network of influential contacts across the sporting landscape to give those companies the best chance of success. The fund has not yet made its first investment.
Howie Long-Short: There are at least 25 team-backed investment operations, in addition to the 40+ sports-specific funds (several of which are backed by team owners), so there is a lot of VC money being poured into a relatively small sports-tech market. Many of the team backed funds lack deal flow because the people sourcing them are business or marketing executives without a venture background. That shouldn’t be a problem here. Co-founder Rashaun Williams has spent the last 8 years in VC (he was an investment banker at Goldman & DB prior) and has invested in over 120 startups. DRIVE also has three other full-time investment professionals (Janet Holian, Kiki Mills Johnston and Julian Fialkow) on staff.
The DraftKings brand and venture studio will prove to be beneficial, but it is the athlete network that provides the DRIVE fund with a real differentiator. Athlete investors are attractive because in addition to their capital, senior investment associate Julian Fialkow says, “they’re almost like free marketing and they have the channels – whether it’s on television or social media – to promote products and services.”
Members of the athlete network will go through “an immersive five-week internship program.” Fialkow explained that participants will learn about everything from “building a robust portfolio, to investing in companies at varying stages and buying real estate.” While the goal is most certainly to educate, the hope is that “participants invest in the portfolio companies or join in a board member or advisory capacity.”
The DRIVE athlete network isn’t starting from scratch. Williams serves as a financial advisor to more than 150 professional athletes – so there is an existing network to tap into – and Grant Williams (Celtics), Thaddeus Young (Bulls), Matt Light (Patriots) are all already on board. The program is open to both current and retired players.
DraftKings is the majority shareholder in DRIVE, but they are two independent entities; each company has their own board, committee and CEO. In fact, DRIVE does not exist to serve DraftKings interests and the goals of the industry agnostic fund are not aligned with the gaming operator’s business plan. That said, most of the opportunities that the fund is likely to look at will be sports technology related. Fialkow believes that there are opportunities for advancements in “content, where people watch, how people engage, how people learn sports and how people cluster data. The rise of wearable devices has created a big opportunity at the intersection of sports and knowledge.”
Fan Marino: Fialkow said that a venture studio backed by the likes of DraftKings and General Catalyst will be attractive to athletes that struggle to identify if investment opportunities are “authentic or real.” There are countless stories of athletes that have been lured by conmen into nefarious schemes, perhaps none are as wild as the one orchestrated by financial advisor Peggy Ann Fulford. It might just the best piece of journalism that you’ll read this week. Sports Illustrated: ‘The Peggy Show’.
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