A sports tech startup lost millions — then made it big. Here’s how its millennial founders staged a comeback

Losing millions of dollars when they were 24 years old was a defining moment for entrepreneurs Harsh Jain and Bhavit Sheth.

It felt “pretty terrible,” said Jain. “There’s no other way to put it.”

“Every founder, when you start something, you truly believe that this is going to explode, you’re going to change the world … and ours crashed and burned.”

But the duo from India also know all about bouncing back from failure.

More than a decade after its launch, their company Dream Sports says it’s now valued at $8 billion dollars, with 160 million users to boot.

Dream Sports is a sports tech firm from India that owns Dream11, the biggest fantasy gaming platform in the country.

Fantasy sports are online games where participants can create a virtual team of proxies tracking real sports players. Game participants then earn points and win cash prizes based on the real-world performances of these players.

“Everyone who is a sports fan has an opinion of how sports should be played, or what player should be selected, whether the strategy for that game was right or wrong,” said Sheth.

“What fantasy sports tries to do is get that opinion into a more structured format.”

Jain added: “I keep comparing fantasy sports to popcorn for your movie. You have popcorn because it makes your movie better. Fantasy sports does that for sports. It deepens your engagement and makes that sports event 100 times more interesting.”

The two men, now 36, spoke to CNBC Make It about how they became the pioneers of an industry worth billions in India — and turned their fantasy into reality.

How it started
Jain was first introduced to fantasy sports when he was studying in the U.K. in 2001, specifically Fantasy Premier League.

“I got to know about this thing called fantasy football … and got all my friends back home hooked onto it as well. Bhavit was one of them,” he said.

When Jain returned home in 2007, he set out to look for fantasy cricket platforms — given cricket’s popularity in India — but the search was fruitless.

He decided to take matters into his own hands.

“I told my friends that we have to solve this problem … there’s a billion Indian cricket fans, and they don’t have fantasy cricket.”

Jain partnered with his childhood friend Sheth to launch Dream11 in 2008 — providing fantasy cricket that was free-to-play, relying on advertisements for revenue.

It also enabled players to create one fantasy team for the entire season.

They received “a couple of million dollars” from family and friends as starting capital, but after two years, they found themselves strapped for cash.

“The ad revenue wasn’t coming in because … product[s] in India didn’t understand fantasy sports. They needed to be educated,” Sheth, who is also the company’s chief operations officer.

“At that point in time, we were wondering, what should we do now? We knew that fantasy sports as a model should work … there has to be some format in which it should work in India, we just didn’t know what it was.”

From ad-driven to ‘freemium’
Jain and Sheth decided to start a digital agency called Red Digital, through which they could “make some money.”

“That was a challenging period, to get something to help us survive that crunch where we didn’t have the funding,” said Sheth.

According to him, Red Digital eventually became one of the largest digital agencies in India — which in turn, helped fuel Dream11′s growth.

In the process, the co-founders decided to pivot the fantasy gaming platform from being reliant on ads to a so-called “freemium” model.

“On the monetization side, what we did was built-in contests where you need to pay to enter … and we built a prize pool,” Sheth explained.

“If you win, you win prize money. Inherently, every time someone joins a contest, we keep a certain percentage of the entry amount that the user pays.”

Dream Sports said the average ticket price is 40 rupees, or half a dollar, and the top player can win up to almost $250,000.

They also changed Dream11 from a per-season to a per-match format, which helped bring down commitment levels of users from multiple months to a single day, said Sheth.

Jain added: “That’s how we scale so far, we don’t have any ads on Dream11, we haven’t had them … since we’ve pivoted to this model”

That strategy paid off.

In 2013, when Dream11 began to see strong retention, Jain and Sheth decided to sell their digital agency, Red Digital, so they could focus on building up Dream11 instead.

“If we have to double down on one business, which one do we choose? Both of us enjoyed building products — we are product guys and we didn’t like doing the servicing business as much,” said Sheth.

“It was more out of necessity.”

The digital agency was sold for $800,000, which the pair pumped back into their fantasy sports platform.

‘Money isn’t free’
Over the next seven years, Jain and Sheth began to see the fruits of their labor.

In 2019, the Mumbai-based startup finally joined the ranks of India’s unicorn club — the first sports tech company to do so.

According to news tracking site Entrackr, Dream Sports is now one of the rare unicorns in India making a profit. In fact, Jain and Sheth say their company has been in the green since 2020.

“Most entrepreneurs forget that funding cannot be taken for granted. Every funding round that we’ve ever had, has always had us projecting a 12 to 18 month runway, and then flipping to a breakeven and profitability,” said Jain.

“If your unit economics don’t lead to that, then your valuation is wrong, or the amount of money you’re raising is wrong, your fundamentals of your business are wrong.”

That is something they learned from losing a large sum of money in the early days of their company, Jain added.

“Unfortunately, that’s a very hard lesson to learn, which a lot of founders need to learn — that money isn’t free.”

This razor-sharp vision has supercharged Dream Sports’ growth. Dream Sports’ investors include Chinese tech giant Tencent, as well as American hedge funds Tiger Global and D1 Capital.

In 2021, Dream Sports said it raised $840 million, valuing the company at $8 billion. In the same year, the company said it raked in revenues of $332 million, and a net profit of more than $40 million.

Overseas expansion?
Jain and Sheth have come a long way.

Looking back, they said it was “sheer persistence” that brought them through the twists and turns.

“It was seeing a problem … And being extremely passionate about it yourself. I think that’s all most founders need,” said Jain.

Sheth chimed in: “Maybe the rest of it, you learn along the way.”

Dream11 now offers a total of 11 fantasy sports, including cricket, basketball, football and baseball.

It also counts more than 10 million monthly active users and in 2019, reportedly held “almost 90% market share” in the Indian fantasy sports industry.

While the future of Dream Sports appears to be positive for now, Jain and Sheth are not looking to international expansion just yet.

“We still want to focus on India, we have 150 million users on Dream11 In India, [but] there are 800 million online sports fans in India,” Jain added.

“Maybe … in the next couple of years, when we start hitting 300 million users in India, that’s a day we might look at growing internationally.”