Dream Sports does not anticipate raising further primary funds but foresees more secondary transactions, as the company that owns online sports fantasy platform Dream11 looks to provide exits for its early backers, its chief executive said.
The company counts venture capital firm Kalaari Capital, Renuka Ramnath-led Multiples Alternate Asset Management and San Francisco-based Think Investments among investors. They have all been shedding portions of their shareholding in the 12-year-old company over the last two years.
“I wouldn’t expect any kind of primary raises anytime in future. You will hear of us more regularly doing secondaries, which is mainly for our very early shareholders,” Harsh Jain told ET in an interview.
Three of such shareholders — Kalaari, Multiples and Think which had come on board in 2015 — have sold shares in the latest round and will continue to sell, said the University of Pennsylvania and Columbia University alumnus.
Dream Sports, which was founded by Jain and Bhavit Sheth in 2008, announced the closure of a $225 million funding round on Monday, which was largely secondary in nature with only a small portion of the proceeds going to the company.
After the closure of the round, which saw the entry of New York-headquartered Tiger Global Management, TPG Tech Adjacencies, ChrysCap and Footpath Ventures into its cap table, Dream Sports’ valuation has swelled to $2.5 billion.
According to Jain, the funding round, which was first reported by ET in its editions dated February 19 and March 9, was to be closed by March, but the formal signing of the documents was delayed because of the Covid-19 pandemic.
“We started talking to investors about this round in January, and by March, we had closed the deal and we were literally at a signing level. Then Covid-19 happened, so we decided that as there’s no certainty on the sports calendar, so let’s just wait for certainty to come back. Then by July-August, the sports calendar came back,” Jain said.
“That’s why it stretched into a couple of weeks in September but at the same valuation, same deal terms as before. We just stretched it a little bit to include this amount to fund the Dream11 IPL bid. Even at a 50% discount, it (IPL deal) is $30 million,” he added.
In August, after Chinese smartphone company Vivo decided to pause its title sponsorship rights of the IPL, Dream11 won the rights for the 2020 edition of the league for Rs 222 crore.
The round had also seen significant interest from homegrown private equity major Kedaara Capital, which had made a late bid to invest in the company, and Lupa Systems, the private investment arm of News Corp scion James Murdoch.
The company has never disclosed the exact amount it had raised in equity financing, but, according to people in the know, it was a shade of $500 million, across rounds, till date.
It also counts India-focused, London-based investment firm Steadview Capital and Chinese Internet major Tencent Holdings as investors.
Jain said the owner and operator of WeChat and the world’s fifth-largest Internet company, did not participate in the primary or secondary portions of the latest transaction. “Tencent owns a single digit percentage in the company,” he added.
Jain did not disclose the terms of the secondary transaction.
He said the Mumbai-headquartered company would actively look at investments and possible mergers and acquisitions.
“We have a corporate development team, which is headed by Dev (Bajaj), who has five years of experience in private equity and six years as an entrepreneur. He is an ex-Kalaari partner and has joined us looking at all large investments and M&A,” Jain said.
“Then we have DreamX, which is a sports accelerator. DreamX is going and investing and incubating or accelerating a lot of these sports startups to help them get off the ground,” he added.
Dream Sports is also actively “experimenting” with different sports, aside from cricket, such as kabaddi and football.
“I think kabaddi is doing really well in India; Indian Super League (football) is also growing. Kabaddi, I really believe, could become as large as football,” Jain said.
While the Dream11 app is now available on Apple’s app store, Google’s Play Store still does not allow fantasy sports apps, limiting its reach in India, its core audience given that Android operating system commands over 95% of the market in Asia’s third-largest economy.
Despite the limitation, Dream11 claims to have more than 82 million users.
But Dream11, according to Jain, is leveraging the Federation of Indian Fantasy Sports (FIFS), an industry body set up in 2017, and which claims to be the first and only industry body formed for the purpose of self-regulation and to create standardised best practices in the fantasy sports gaming industry, to negotiate with the likes of Google.
“…Google Play Store has its own policy. So that’s why FIFS becomes very important,” Jain said.
“They (FIFS) have their own board and there’s a CEO and that industry body is doing an amazing job to reach out and to talk to Google, to talk to these gatekeepers, including Facebook. To make it much easier for startups to start advertising on Facebook,” he said, adding that the industry body “has its charter which everyone has signed to make sure that the lines between fantasy sports and sports betting are clearly defined”.