In the world of sports betting, fast payouts and secure protection are key to the user experience. HotStreak, a Web3 platform for daily fantasy sports (DFS) competitions, is fighting to make the decentralized nature of blockchain an ideal solution for DFS platforms.
The sports betting market in the US has grown rapidly as states have begun loosening regulations around the industry. That number will double by 2021, with total revenue of more than $52.7 billion a year, according to Morning Consult.
There are two main issues with big sports betting platforms like FanDuel today, HotStreak CEO Greg Dean told TechCrunch in an interview. “It’s very painful to put your money in and out,” the former said as a player. A platform to distribute money to them.
As users struggle with slow-moving, centralized payment systems, operators bear the burden of building on platforms to facilitate payments and maintaining their own proprietary currencies, Dean said.
The team behind HotStreak’s web3 sports betting protocol. Image Credits: HotStreak
“When you talk to someone and explain that [for] When billion-dollar companies like FanDuel open up their technology stacks and look inside, they see on-ramp, proprietary wallets, proprietary digital currencies, and proprietary ledgers, all under this centralized, trusted authority. I think we look back on that and laugh at the industry,” Dean said.
From the operator’s point of view, creating these payment systems will create high costs, he said.
“It’s a huge inefficiency in terms of running the business. “What they really want to do is build great products that users want to use, not go out and destroy fiat, or become a proprietary digital currency,” he said.
HotStreak’s decentralized SHARP protocol aims to address both sides of the problem from a payment and security perspective by facilitating faster payments and handling asset management based on a pre-defined set of rules in the protocol rather than relying on peers to initiate payments to other players. According to the company’s website, the settlement time for payments on its platform is 10 seconds.
HotStreak raised ~$1.5 million for its seed round in May of last year, mostly from angel investors who Dean says are “huge crypto fans.” Today, the company announced that it has secured an additional $9 million in Series A funding led by crypto-native VC firm Polychain Capital, a new investor in HotStreak.
The product has improved significantly since the seed round, Dean said. The HotStreak team plans to use the new funding to further develop its own platform and the underlying protocol it runs on, he continued.
“When we raise our first round, it’s based on the technology we’re building for the DFs product, which is basically a set of neural networks that do short bursts of sports events,” Dean said.
The company saw $3 million to $5 million in monthly transactions this summer and is profitable today, Dean said, though he did not share specific numbers on revenue or profitability.
FanDuel founder and CEO Nigel Eccles, who invests in and advises a number of sports betting businesses, is joining the startup as part of its Series A as chairman of the board, which could help the company pursue opportunities to partner with other companies in the Space.
HotStreak itself makes money both from the entry fee it charges players to use, which is listed on the app at the start of each game, and plans to generate revenue by selling the software to other sports betting platforms, Dean said. .
Dean and his team aren’t the only founders who have identified a place for blockchain-based innovation in the sports betting space. Last month, BetDEX, a startup co-founded by former FanDuel execs including Eccles, launched its own Solana-based sports betting protocol armed with $21 million in funding from Paradigm and FTX last year. BetDEX is more focused on reducing payouts in the space, while HotStreak is working hard to improve payouts and security processes.
“There’s an opportunity here to build something that can really change the industry and change the way people interact with sports games in general, because it doesn’t make sense to have your money go to a centralized person. If you want to bet or enter a DFS tournament,” said Dean.
While Dean admits that the overall market for DFS providers may shrink as more US states bring legalized sports betting online, he believes the overall sports betting market is still growing significantly. Focusing on DFS to begin with gives HotStreak a regulatory advantage, he says, even as the platform expands to offer more traditional sports betting products, which typically require more expensive legal disclosures.
HotStreak doesn’t spend much on marketing, an activity that “burns” Dean like cash. Instead, the company focuses on constantly iterating on the user experience.
“If you’ve been in crypto long enough, you’ve felt that there are many solutions to a problem. This is probably one of the more concrete examples of a systemic problem in industry, and the Web3 protocol can change that and improve things dramatically,” said Dean.
