congratulations taylor and dd staff.

Very happy for you guys, I bet it is a relief to finally be able to talk about it. Thanks for sharing your experiences.

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Taylor:

I think we talked about this briefly, but are there any insights that you have gotten from Eric/Brad/Paul that have been particularly helpful? (that you are able to share of course)

In which area(s) do you expect Lightbank to have the most positive impact for DD?

Taylor/Ezra:

At SXSW, the biggest challenge for the start-up community in Chicago seemed to be finding technical talent. Any insight on this?

Other than the obvious answers (cost of living/space/lower salaries/etc) do you feel Chicago has any advantages over the traditional start-up meccas? Where do you see the start-up community in Chicago heading in the next few years?

Do you mind if I ask what the other 4 would be (Chicago or elsewhere)? To give a bit more background, I am looking to get into VC in an analyst role so always curious to learn about which firms have good reputations in their support of entrepreneurs.

OCA Ventures is in Chicago.

Congrats boys, thanks for the Q&A.

Congrats man

I know this thread is about Draft Day but it's interesting to note that Fanduel is essentially creating rakeback for daily fantasy sites with their NRR system.

It's not really rakeback in that affiliates aren't allowed to give rakeback. if you refer real money friend players, you don't get access to exactly what your friend is raking which makes rakeback impossible. You do get a cut of their rake for life, it starts at 20% and goes up to 35% if your friends are raking a TON and if you have referred many friends (you can't just refer yourself to get 35% rakeback).

Other sites are definitely willing to cut their margins in order to attract high volume players. I think it's pretty silly at this point as there are only a few real options to play DFS and fighting over the first few thousand active customers on price is questionable to me. That being said I do see some sort of rewards / cashback system essential if the industry does take off.

I'm not too worried about this. Two points:

1. The NFL lobby is actually one of the main reason fantasy games are legal. Our games follow the same laws set forth in the laws that were changed. I don't think the NFL wants to re-open fantasy games legal discussion and would rather push forward into making fantasy football as mainstream as possible.

2. We talked with a Chicago sports team about doing some advertising with them. They had to run it by their management and the sports league. They came back to us and said the league denied it, but that it was because our product was competitive with something they were doing, not because they had any issue with the gambling component. I think this is a great sign. (BTW, this was for one specific advertising option, they didn't categorically deny us from working with the team)

Oh damn, I didn't realized I copy/paste the link in the twitter box instead of the site URL. Mods, please delete it.

Also, the scenario you explained is how rakeback works right? I get % of a friend's rake for referring him. I give him % and keep X% for myself.

I'm just curious if fanduel know they're opening a big can of worms and that their referral system will force many sites to adopt the same rewards system and essentially, the niche creates rakeback when it doesn't have to yet.

The difference is that Fanduel doesn't tell you what each of your friends earn. You could estimate what they have raked, but it could never be exact and would create a pretty big issue if you tried to scale it.

Plus, you can't simply "refer yourself" and get 35% rakeback because you have to have a certain amount of active players referred under you to qualify for more than the lowest tiers.

1. I mean finding technical talent anywhere is tough. A B+ programmer in the valley starts at low six figures. It's somewhat less in Chicago, but still high. I really think that's going to change over the next 24-36 months as more people start training in programming and the supply starts to increase.

Programs like CodeAcademy (here in Chicago - not Codeacademy.com) are churning out an additional 50-100 capable programmers every 3 months which immediately hit the Chicago ecosystem. Those guys aren't A+ but they'll be fast learners and definitely could be part of a team.

Also, UIUC is kind of a dark horse in Chicago. It's easily one of the top5 engineering programs in the country and there is a lot of great tech talent coming out of the school (besides Taylor and Andrew!). Just this week in my VC job, I've looked at a couple of companies which count UIUC EE professors among their staff or advisors, etc.

Overall, I think Chicago (given that it's smaller = less demand, + really good engineering funnels) will have less of an issue on the technical side than the Valley where things are really crazy.

2. I didn't mean exactly 4 firms, but I really think the best fit for Taylor and DraftDay would've been some combination of: Battery, Bessemer, True, Accel, First Round...there are more, but you get the idea. Lightbank is basically the Chicago answer to these firms so it's a perfect fit.

Ezra

I just don't think it's going to work long term to allow players to enter as many daily leagues as they want. The best players are well bankrolled and will enter every single league from $20 on up. The fish get beat and the remaining players lose to the rake. It's no fun to lose and even less fun to lose to the same few players every game.

I know it's in the operators best interest to offer as many tournaments as possible. But perhaps longer term you may be sucking the blood out of the ecosystem.

My suggestion: Some type of tier system. Players with a worse record (ranked by ROI or Avg Points/Game or whatever) are put into a lower tier and pitted against similarly skilled players. Better players are graduated to a higher tier. But in order to encourage the better players to continue to play, drop the rake for those games to compensate for the increased skill level of the competition. Raking $5 from each player in a $100+$5 heads-up tournament is equivalent to -105 pricing on sports betting. That carries a break-even win percentage of ~51.2% which seems reasonable for two decent player pitted against each other. Market it as minor leagues/major leagues or whatever.

Maybe it's a dumb idea and even if it works there probably are not enough players right now for something like this to happen. I hope I'm wrong and the industry has a several years of huge growth ahead of it. But this seems like this is the "elephant in the room" that must eventually be dealt with.

agree with this 100%. with some fairly simple scripts the grinders will be able to enter all the smaller buyin leagues too with no real additional cost. it's only a matter of time until that happens. it won't be fun.

i don't think this is the solution unless multiaccounting can somehow be made unprofitable. this sort of system just benefits the dishonest players. with that said, i'm not sure there is a good solution...

If supply didn't increase enough in the tech bubble to bring salaries down, I don't think it will here either. Until the US lowers immigration requirements, it's going to be difficult to find quality people.

Plus, having mediocre and bad programmers are a massive hidden cost to businesses, however having one rock star who doesn't have a personality disorder and is willing to do active code reviews can really rise the tide and turn mediocre programmers into great ones. I say this as a former mediocre programmer.