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Rise of Dream 11: A startup

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Fahid Fayaz Darangay

Dream11 is a fantasy sports platform based in India. It allows its users to play fantasy cricket, football, hockey, kabaddi, volleyball, handball, baseball, and basketball. Dream11 is a Mumbai based firm that started in 2008. It has 8 crore registered users till date. In April 2019, Dream11 became the first Indian gaming company to enter the Unicorn Club. For those who don’t know, a unicorn is a term in the business world to indicate a privately held startup company valued at over $1 billion.
Dream11 was co-founded by Harsh Jain and Bhavit Sheth in the year 2008. It was initially started as a personal project as Jain and Sheth were both big fans of English football fantasy leagues. They thought of doing something similar for IPL, which too was started the same year. Twelve years after, their firm is the title sponsors of the same league.
Talking to a reporter from The Free Press Journal, Harsh had said, “I would look at the way fantasy leagues would play out in the United States while I was doing my MBA. There were fantasy baseball leagues, fantasy basketball leagues, and fantasy football leagues (NFL). Even Europe would have fantasy football leagues for the English Premier League, La Liga, Serie A, and the Bundesliga. India is a cricket-crazy country, and we didn’t have the concept of a fantasy league through which you could make money. That’s how Dream11 was born in 2008.”
Initially, Dream11 ran as an ad-based model with a season-long format, which could not find takers then. So, they decided to stop this model in 2012 and shifted their focus to daily matches and allowed users to put money on the teams. It worked for them and their journey to become the biggest fantasy sports platform started. In 2014, Dream11 found its first investor in form of Kalaari Capital and they never looked back from there. From 3 lakh users in the first three years, in 2015 to 1.67 crore users in the next three years, the number of users kept on increasing. Now, after 12 years of the beginning Dream11 boasts of 8 crore users associated with them.
“If you don’t really have a dream, you can’t really push yourself; you don’t really know what the target is.”
Dream11 has bagged the title sponsorship of the 2020 Indian Premier League. Dream11 ranked seven among India’s Mid-Sized Workplaces for the year 2020. They have been put in the top 10 Mid-Sized workplaces for the third consecutive year. There were once questions on the legality of the contests. In 2017, Dream11 was dragged in the Punjab and Haryana high court. However, the court ruled the judgments in the company’s favor stating that playing the Dream11 game involves superior knowledge, judgment, and attention.

Is this legal?
Just about 15% of the players on Dream11 have till now paid for a game; the remaining participate for free. The number of paying users used to be as low as 5% a few years ago, but referrals and the use of cricketer Mahendra Singh Dhoni as brand ambassador has helped build credibility. The company has had its share of legal wrangles. In 2017, one of its users took Dream11 to the Punjab and Haryana high court after losing money. But the courts ruled in favour of Dream11, saying that it is not gambling but a game of skill as users have to build a team based on current form and past performance of athletes.
But the court ruling does not make fantasy gaming legal in India, and there could be further challenges. Every state has its own rules on it. Jain helped set up an industry body called Indian Federation of Sports Gaming (IFSG) in 2017 to establish self-regulation standards for the industry – there are some 50-60 fantasy gaming platforms in India – before the government comes out with legislation.
This was important because even after the Supreme Court declared rummy as a game of skill in 2015, some states like Telangana banned it, impacting companies in the space. “Self-regulation is really stemming from what happened in states with rummy operators,” said Ranjana Adhikari, co-head of the media and gaming practice at law firm Nishith Desai Associates.
Dream11 has a 90% share in the fantasy gaming space right now, according to a recent KPMG and IFSG report. It will also be the first billion dollar valuation gaming company from India.

But Jain does not like Dream11 being described as a gaming company. “We are a sports company,” he says, adding that the platform will aim to help the consumer get everything they need in sports. This will include merchandise from their favourite players and teams, tickets for matches and memorabilia.
Right now, it is rebranding and scaling up the content platform SportsGuru, where users get analysis on how teams and players are expected to do in upcoming matches. This platform may start subscriptions in the future.
“We have created something like the equity market for sports in India. Now we are looking to have a platform which will have equity research,” said Jain.
Dream11’s success is attracting more players. The fantasy sports gaming market is expected to reach $5 billion in the next two years in India, said Halaplay co-founder Prateek Anand. Halaplay was founded in 2017 by four BITS Pilani alumni and has got backing from players like Nazara, maker of Chhota Bheem games, and Delta Corp, which runs casinos in Goa and Sikkim, where gambling is legal.
Anand says his strategy is to make fantasy sports gaming more social. He plans to do that by removing service fees on head-to-head, where users play against a few opponents, typically players they know. “We want to get the users playing on WhatsApp groups to come on the platform,” said Anand.
But Jain is not worried about new players. His platform hosts about 3,000 games a year or 9 games a day across cricket, football, kabaddi, basketball and hockey. If one includes Formula 1, badminton, rugby, golf, volleyball, tennis and squash, the market is even bigger.
“There are 10,000 matches a year, 30 matches a day. Brands need to target sports fans, and we can help,” said Jain.
The aggressive target is expected to be mostly achieved during the Indian Premier League (IPL), while the cricket World Cup is expected to be a cherry on the top.
“For a brand like ours focused on India, IPL is much bigger. Because in IPL, India is playing for all 60 days,” says the 33-year-old Jain. If it achieves the numbers, it will be a rare feat as few Indian internet companies have crossed the 100 million user milestone. The others are Flipkart, Paytm and Reliance’s MyJio. Overseas players like Amazon, Facebook and Whatsapp also have over 100 million users.
It will be significant for Dream11 more so as the company’s mobile application is not available on Google’s Play Store. That is because Google does not allow mobile apps offering cash contests on its platform. So the app has to be downloaded from the company website with a disclaimer that it could be unsafe to download the application.
Despite this, Dream11 has been able to attract interest from not only consumers but also top investors around the world. The company does not like to talk about fundraises. It has till now not announced any of its financing rounds, including when it raised $100 million from Chinese internet giant Tencent last year at a valuation of about $700 million, which any other internet company would have bragged about. But its numbers do the talking.
Dream11 has projected total transactions on the platform of about $650 million for the year ending March, with net revenue of $100 million, based on the approximately 15% service fees it charges, according to an investor briefed on the company.
“They have surpassed projections and will easily be over $1 billion in annual run rate now,” said this investor.
These numbers are attracting big investors. In the coming weeks, the company will be valued at $1.1 billion when Hong Kong-based hedge fund Steadview Capital completes its deal to buy part of the shares held by Dream11’s early investors like Kalaari Capital, Multiples and Think Investments for $60-80 million, according to two sources briefed on the developments. Jain declined to comment on the capital raise.
(The author is currently pursuing Masters in Financial Economics from Madras School of Economics, Chennai)


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