Only 12 recent startups of IT services have achieved $1 billion or more in annual revenue. And there are advantages to using such vendors, according to Synergy Research Group.
Choosing a vendor to provide IT services for your company can be a challenging task. You may want to consider an older, established, legacy vendor that’s proved itself over the long haul. Or you may opt for a startup vendor that can offer newer and more innovative ideas and approaches.
Selecting a startup vendor can carry some risks but choosing one that’s survived and thrived to generate hefty revenue offers certain benefits, according to Synergy Research Group.
SEE: Launching and building a startup: A founder’s guide (free PDF) (TechRepublic)
In a review of enterprise IT markets over the last 10 years, Synergy Research Group found 12 startup vendors with annual revenue of $1 billion or more based on the latest 2019 quarterly results. Further, the vendors identified either started up over the past decade or had minimal revenue just 10 years ago.
Leading the group are Workday, ServiceNow, and Palo Alto Networks with a combined revenue of more than $10 billion compared with less than $100 million in 2009.
Next, Arista Networks passed the $2 billion mark in revenue during the latest quarter. The eight other companies on the list—Pure Storage, Dropbox, Shopify, Atlassian, Nutanix, Twilio, Veeva, and DocuSign—have each generated $1 billion or more. In total, all 12 vendors now have a revenue run rate of over $23 billion compared with just $200 million in 2009.
Beyond these top 12 vendors, other startups have done well over the past decade, according to Synergy. Tableau Software would have made the list had it not been acquired by Salesforce in a deal valued at almost $16 billion.
Two vendors that might have come close if they hadn’t been acquired are Nimble Storage and Ruckus Wireless. Two other vendors who started up later in the decade but have been generating healthy revenue are Zoom and Slack. Further, three vendors who are coming close to the billion-dollar revenue mark are RingCentral, Zendesk and Box.
Why have the 12 identified startups seen such a dramatic increase in revenue?
“They have used innovative new technology to successfully target specific applications and use cases that have a broad enterprise appeal,” said John Dinsdale, chief analyst & research director for Synergy Research Group. “In some cases these needs were not being adequately met by existing products and solutions; in other cases the new technology stimulated new demand.”
Another factor that distinguishes the 12 startups is their ability to survive and thrive.
“The vast majority of startups fail,” Dinsdale said. “Either they fail to get off the ground or the level of business achieved is far below what was expected. Very few achieve critical mass and gain substantial market share in key segments. That is what sets these 12 apart.”
The success of these startups can prove useful to IT professionals, business owners, and even investors searching for the right vendors. Dinsdale described the specific benefits of using such startups:
- For IT pros. Choosing to source important products and solutions from recently formed new companies always carries some level of risk, but that has to be balanced by the fact that the most innovative new technology does come from startups. It is in their DNA and they are not constrained by having to worry about cannibalizing existing legacy business. Be very open to approaches from startups but also be realistic about their likely longevity. If carefully chosen, startups can solve big problems that legacy tech vendors struggle to solve.
- For business owners and managers. It is right to be a little cautious about relying on a startup tech vendor, but being overly conservative can prevent you from having access to the innovative new solutions, many of which bring financial and operational benefits.
- Investors. Be aware that most tech startups fail and so you ought to have some tools and knowledge to help filter out likely winners. Clearly in the tech world it is possible for startups to make a big name for themselves and to drive huge growth in company value. Company value can have little direct relationship with actual revenues, but here are good examples where investors could have won big time if they invested/divested at the right time.
Sony in talks with AT&T to buy animation-streaming service startup Crunchyroll for more about $1 billion
Sony Corp is in final talks with AT&T to acquire San Francisco-based animation-streaming service Crunchyroll in a deal worth more than $957 million (100 billion yen), according to a Friday report from Reuters, citing Nikkei business daily. Crunchyroll is a San Francisco-based […]
Sony Corp is in final talks with AT&T to acquire San Francisco-based animation-streaming service Crunchyroll in a deal worth more than $957 million (100 billion yen), according to a Friday report from Reuters, citing Nikkei business daily. Crunchyroll is a San Francisco-based tech startup that provides animation-streaming service for Japanese animated productions and Asian media services. A Sony spokesman declined to comment on the report.
The acquisition is part of Sony’s effort to beefing up its gaming and entertainment businesses under Chief Executive Kenichiro Yoshida’s strategy to increase recurring revenue streams that cushion the impact of volatile hardware sales cycles.
Founded in 2008 by Brandon Ooi, James Lin, and Kun Gao, Crunchyroll has over 20,000 videos and 10,000 hours of Anime, Korean Drama, and Live-Action titles on Crunchyroll.com and Crunchyroll-powered platforms including iPhone, iPad, Android, TV set-top boxes, Playstation®3, Xbox LIVE, and other devices. Crunchyroll is funded by leading venture capital firm, Venrock, Japanese entertainment giant TV TOKYO, digital publishing leader Bitway and a group of angel investors representing some of the brightest and most successful entrepreneurs in Silicon Valley.
The acquisition would give Sony access to Crunchyroll’s 70 million members around the world, allowing the Japanese entertainment and electronics conglomerate to compete better with Netflix and other global rivals, the Nikkei said.
Sony hopes to leverage the new channel to distribute its own entertainment content, including films and music. The Japanese giant recently obtained exclusive rights to negotiate for Crunchyroll.
WHOOP bags $100 million in Series E funding with backing from SoftBank, IVP, Eli Manning; becomes the latest unicorn at $1.2 billion valuation
Whoop, the Boston-based health tech startup and the maker of a wearable device that tracks sleep among other health metrics, has raised $100 million Series E funding with back from investors including venture capital firm IVP, SoftBank Vision Fund, and athletes […]
Whoop, the Boston-based health tech startup and the maker of a wearable device that tracks sleep among other health metrics, has raised $100 million Series E funding with back from investors including venture capital firm IVP, SoftBank Vision Fund, and athletes including Eli Manning, Larry Fitzgerald, and Patrick Mahomes. Whoop has raised more than $200 million since its inception eight years ago.
Existing investors including basketball star Kevin Durant’s Thirty Five Ventures, golfers Rory McIlroy and Justin Thomas and billionaire cryptocurrency bull Mike Novogratz also participated in the funding round, as did firms including Two Sigma Ventures, Accomplice, Collaborative Fund, Thursday Ventures, NextView Ventures, Promus Ventures, Cavu Ventures and D20 Capital.
WHOOP will use the new capital infusion to accelerate product and software development, global expansion, and membership services. Whoop will also use the fund to develop technology and accelerate growth by bolstering marketing in countries to which it already ships such as Australia, France, Germany, and Spain.
Founded in 2012 by Aurelian Nicolae, John Capodilupo, and Will Ahmed, Whoop provides athletes, coaches, and trainers with a continuous understanding of strain and recovery to balance training, reduce injuries, and predict performance. It creates a product that makes individuals and teams perform at a higher level through a deeper understanding of their bodies and daily lives. Its flagship wearable device, the WHOOP Strap 3.0, collects physiological data 24/7 to provide an accurate and granular understanding of the body. WHOOP has more than 330 employees, including over 200 new hires in 2020.
Whoop charges a monthly subscription fee in exchange for providing data to users — collected from the Whoop Strap it supplies at no additional cost — that can influence how they work out, recover and sleep. After four months of use, members dedicated an additional 41 minutes to sleep each night and reduced their resting heart rates by about 4.4 beats per minute, the company touts on its website.
“We will continue to make WHOOP the best product experience for measuring and improving health,” said Will Ahmed, WHOOP Founder & CEO. “Human performance is a new category and WHOOP has emerged as both the pioneer and market leader. We’re proud to partner with IVP and other prominent investors who share our vision.”
WHOOP is a monthly subscription for 24/7 health monitoring across sleep, recovery, strain, and more. The WHOOP membership includes free hardware (WHOOP Strap 3.0) and a coaching platform designed to optimize behavior. Studies show that after a year on WHOOP, members experience longer and more consistent sleep, improved physiology, enhanced physical performance, and meaningful lifestyle changes.
“WHOOP has built best-in-class wearable technology and an aspirational brand that have propelled the company to an impressive period of hypergrowth,” said Eric Liaw, General Partner at IVP, who has joined the WHOOP Board of Directors. “We are excited to partner with a strong leadership team as WHOOP continues to revolutionize the market for human performance.”
The Boom of Online Fantasy Sports in India
Over the past few years, sports in India have observed tremendous growth in the segment, thanks to Online Fantasy Sports. However, being a cricket crazy country, it still has a long way to become a multi-sport nation. Sports like football, kabaddi, and badminton are trying to make room for themselves in the heart of sports […]
Over the past few years, sports in India have observed tremendous growth in the segment, thanks to Online Fantasy Sports. However, being a cricket crazy country, it still has a long way to become a multi-sport nation.
Sports like football, kabaddi, and badminton are trying to make room for themselves in the heart of sports fans. Nevertheless, India is yet to reach the scale of a mature sports market that offers a wide variety of sports to varying degrees.
With cheap smartphones and data, there are enormous opportunities to make sports more accessible and engaging for India’s sports fans for the first time. Today, we can choose to consume according to our needs and requirements, whenever we want, whatever we want, and wherever we want.
The rapid improvement in the digital infrastructure and multiple sports and leagues platform emergence is witnessing many sports tech innovations. Fantasy sports have developed as one such innovative vehicle for engagement, which has grown exponentially in several years.
At present, there are more than 140 online fantasy sports (OFS) operators and over 90 million Indian sports fans on these platforms. They have become so popular that Dream11, the most significant fantasy sports player of today, has become the title sponsor of IPL 2020, “Dream11 IPL.”
Such development has made us wonder how and why fantasy sports have increased in India in such a short time.
OFS Platforms to Foster a Sporting Mindset Among Millenials
Traditionally, sports fan mostly watch their favorite sports league and tournaments on TV or sometimes in a stadium. With the arrival of social media platforms, fans can also engage more with their favorite team, league, and player. However, these are passive ways of engaging with sports.
On the other hand, with fantasy sports, sports fans can actively participate in sports by creating their virtual team and competing with fellow fans, friends, and family via social media.
When people participate in fantasy sports, they also tend to watch more sports matches to track their performance of fantasy sports teams. Several hypotheses indicate that online fantasy sports engagement directly impacts sports viewership and helps foster a sporting mindset.
OFS operators in India offer fantasy sports for cricket, basketball, hockey, kabaddi, football, baseball, volleyball, rugby, and handball.
While cricket is ruling even in fantasy sports, other sports are also observing the friction in users. However, sports like handball, volleyball, and baseball
have low to zero affinity among India sports fans. Nevertheless, the users engaging with these newer sports ended up watching these sports as well.
Fantasy Sports: A Game of Skills
The Federation of Indian Fantasy Sports regulates the fantasy sports platforms in the country. It offers safe and legitimate platforms for fans to showcase their skills and knowledge of the sports they love. It also provides inclusive and entertainment at the same time.
The Supreme court of India, along with the landmark judge of Punjab and Haryana High Court in 2017 and several other high courts of India, has ruled several times that Dream11’s fantasy sports format is a skill game and not gambling or betting.
Several research studies and leading academic institutes worldwide have proven that the predominance of skill in fantasy sports. It also includes the first academic study of India, published by IIM Banglore. It mathematically demonstrates the predominance of skill in the format of Dream11 in fantasy sports.
A similar study conducted by MIT and Columbia University professors has also confirmed that fantasy sports are a “game of skill” based on skills’ predominance and not merely luck.
“In the last few years, fantasy sports has certainly become a potential sector that has performed exceptionally well and boosted the consumption of sports in India. As a legally approved sports fan engagement format, the industry is self-regulating to protect the users and operators through FIFS. There are multiple perception issues the industry has to overcome to reach its full potential as a non-addictive and skill-based platform.”
– Rameesh Kailasam (1).
Such reports would help the stakeholders of Indian fantasy sports to understand the industry a lot better.
The Torch Bearer of Fantasy Sports in India
In 2001, ESPN Super Selector created a mark with a huge fan base. Joy Bhattacharya and ESPN created the platform, which involves fantasy leagues. Users could pick a team of 11 cricket players within a limited budget.
Contents received points based on the performance of the players they have selected on-field. More than five lakh contestants joined the Super Selector during the 2003 ICC World Cup in South Africa. The platform’s immense popularity inspired other media houses like Sky Television and BBC to launch their fantasy sports franchises.
Now, after 18 years, the fan base of fantasy sports has exploded to 90 million, growing ten folds in the last two years. According to the report released by KPMG India Private Limited, there are no overlaps between sports betting and fantasy sports.
Moreover, the industry is already worth more than 43.8 billion INR and estimated to reach 118.8 billion USD by the fiscal year 2023 with a growth rate of 22.1% CAGR.
The report also suggested that fantasy sports can slow down illegal betting in the long run. Users are more drawn to these fantasy sports platforms because of the fairness, safety, and secure nature of the transactions and legality.
The Stupendous Growth of Fantasy Sports in India
At present, the Indian Fantasy Sports Industry is growing at a 32% CAGR rate and is expected to reach 3.7 billion USD by the end of 2024. The immense growth of the sector with the uptake of fantasy sports indicates its tremendous potential for India.
It includes investment, revenue, job opportunities, and contribution to sports fans in India that can turn many sports that needs attention.
At present, fantasy sport is ruling the online gaming segment in India, with millions of sports fans enthusiastically trying their hands at it.
“Online gaming in India sees increased traction due to digital infrastructure growth, with fantasy sports emerging as an important segment in this space. With the number of fantasy sports operators increasing and the number of users on fantasy sports platforms expected to cross 100 million by 2020, this segment has the potential to spawn a whole ecosystem around it. It could help deepen user engagement with their favorite sports.”
– Girish Menon (2).
From students to professionals, anyone with access to the internet and a smartphone can become a fantasy sports player and earn rewards.
Typically, these platforms ask participants to pay a nominal entry fee and build their virtual team with real players. They could be from one side or both sides, scheduled to play in a league or a standalone match. Then, they get rewards based on the real-life performance of the players they chose. The winners could get the money via account transfer or digital wallets.
And thus, India’s fantasy platforms’ userbase jumped from 20 lakhs in 2016 to nine crore in 2019. It has registered a 4,400% increase in the user base. Further, estimates suggest that the number of users in these platforms would reach ten crores by the end of the current fiscal year.
It also observed a 160% increase in revenue from 920 crore INR in 2019 to 2400 crore INR in 2020. These numbers indicate a 160% jump in the payment. It has also lead to higher GST collection from the space. Notably, India’s fantasy sports sector observed a 2.6x increase in GST collection from 166 crore INR in 2019 to 445 crore INR in 2020.
Game On for Indian Fantasy Sports Players
India has several fantasy sports platforms such as Dream11, Mobile Premier League, or MPL, Halaplay, MyTeam11, My11 Circle, 11 Wickets, among others. In 2020, Dream11, a home-grown online fantasy sports platform, has replaced Vivo, a Chinese phone maker, as the title sponsor of cash-rich IPL, Indian Premier League. It is has put fantasy sports into the spotlight.
“At the same time, fantasy sports operators have also started promoting their product intensively and making conscious efforts to maintain the credibility of their website/app by partnering with official sports leagues”
– KPMG-IFSG Report.
Dream11 has been an official partner of several sports leagues such as IPL, Vivo Pro Kabaddi League, and the Hero Indian Super League. It is also the official partner of BCCI, the Board of Control for Cricket in India.
MPL is also associated with RCB, the Royal Challengers Banglore, a franchise of IPL as an associate partner, and KKR, Kolkata Night Riders as a principal sponsor.
Raising Big Money
Among several fantasy sports platforms in India, Dream11 and MPL have secured significant funding in the last few years.
It is worth noting that Dream11 is the only gaming startup in India that has entered the unicorn club. It had secured undisclosed fundings from Steadview Capital of Hong Kong last year to reach a valuation of more than 1 billion USD. In 2018, the fantasy gaming startup had also secured 100 million USD from Tencent Holdings, a tech conglomerate of China.
Last month, Bhavit Seth and Harsh Jain, the founders of Dream11, were planning to secure 235 million USD from private equity firms. It includes Tiger Global Management, TPG Capital, and Footpath ventures.
As for the Mobile Premier League, MPL, the company last secured 35.5 million USD in its Series A funding round last year from Sequoia India, GoVentures, and Times Internet. Sai Srinivas Kiran G and Shubha Malhotra founded MPL in 2018. Since its inception, it has secured over 40.5 million USD in two funding rounds.
In India, fantasy Sports platforms offer two models to its players; free to play and pay to play. Notably, most of the contests are still on a “free to play” basis since nearly 85% of users selects the play for free model.
The revenue stream for these platforms includes advertisements, brand partnerships, content sponsorship, among others. These platforms offer the most popular sports, such as cricket, basketball, football, kabaddi, etc.
If we talk about Dream11, cricket is the most popular sports on the platforms, with over 85% of its users. However, it has reduced in the past three years since players are leaning towards other sports because of new leagues’ emergence.
As per a survey, more than 75% of the respondents play fantasy sports one to three times a week, with most players playing once a week. A significant 20% of respondents reported that they play more than five times a week. The survey further analyzed the engagement frequency with the following parameters.
The playing frequency is consistent across the age group 18 to 24 and 25 to 36, with more than 75 to 80% of respondents playing one to three times a week. However, the age group 37-50 has been observed to have a higher engagement.
Almost 50% of the respondents from the age group 37-50 reported that they play a fantasy game more than four times a week. Moreover, the income group with more than three lakh per anum income showed a 40% engagement frequency for playing more than five times per week.
Notably, the frequency of playing more than five times a week observes a progressive fall with increasing income levels. As per the survey, only 12% of the respondents earn more than 10 lakh per anum plays more than five times a week.
More than 30% of the respondents stated that the opportunity to win is the key motivator for them. Yet, nearly 46% of respondents have played the game’s paid versions in the past year.
“This could imply that fantasy sports platforms could potentially be considered as a means for earning incremental/supplementary by comparatively lower-income groups, leading to an increased engagement with the platform.”
– KPMG-IFSG Report.
The Format of Dream11
Dream11 unveiled its first version in 2008 with an FLP, free to play season-long fantasy cricket game. It had an ad-driven business model for almost four years until it realized that it is not working in India.
“We realized that Indian users have a low attention span, they don’t want to feel like – if I didn’t change my team for one week when I was traveling for work, or on holiday, or just busy with life, then I will fall behind so much that there is no chance of me winning. They want something that has instant gratification.”
– Harsh Jain (3), CEO – Dream11.
So, in 2012, the firm started with another format: daily fantasy sports. Along with the changes in its format, the company also modified its revenue model by removing ads and giving users an option to put money on their teams.
Then they would collect money from all users from a particular content and put it into a pool. After the match is over, they would give the pool the money to user/s whose team/s got the most points, after deducting the 15% service fees.
It is worth noting that before introducing the new variant, the pay to play model, Harsh had sought opinions from lawyers all across the country to check the legality of the premium fantasy sports in India.
As per the legal opinion Jain received, the fantasy games of Dream11 have a preponderance of skill. The company then introduced the freemium model, where it allowed users to play for free, but they could also put in their money on teams if they wish.
Premium Fantasy Sports Law in India
The primary law that deals with premium fantasy sports in the county are the Public Gambling Act 1867. It is a more than 150 years old act that criminalizes gambling in a public forum in India. However, it does recognize the difference between putting money on a game of skill vs. a game of chance.
For example, three card games such as flush or roulette are games of chance. On the other hand, betting on horse racing is defined as a skill-based game by India courts. Notably, the laws regarding gambling in India vary from state to state.
The games of mere skills are exempted by the anti-gambling laws of most Indian states. The meaning of mere skill, according to the Indian supreme court, means the skill preponderance. It means that the element of skills should outweigh the luck or chance.
In other words, the game of skill for the supreme court does not amount to gambling and considers it as a commercial activity.
It is worth noting that Indian authorities do not regulate the fantasy sports industry. The Indian Federation of Sports Gaming, formed in 2017, chaired by Harsh Jain self regulate it.
It is a concern since the IFSC is a private body. According to the GameChanger Law Advisor’s attorneys, it does not have any authority to regulate non-member unless the Indian Government recognizes it as a whole body to regulate fantasy sports gaming in the nation.
Until individual states develop sufficient legislation to regulate the online fantasy gaming industry in their jurisdictions, the fantasy sports industry players need to ensure that they remain a game of skills and do not become a game of chance.
According to Jaya Sayta, a corporate lawyer from Mumbai, who runs a website on Indian gambling laws, the Indian fantasy sports firms are waiting for the legalization of sports startup newsbetting.
Fantasy sports firms already have a vast user base who are willing to pay and plan. Hence, it is easy for them to switch from sports betting. However, it is a more lucrative model compared to daily fantasy.
Indian authority is unlikely to legalize sports betting anytime soon; but, the fantasy sports firms are happy as long as users are allowed to put money into the game of skill.
Out of 45 million lifetime users of Dream11, only about 15% of users have played for money. However, these 6 million premium users account for the entire revenue stream of the firm.
If we go back to Super Selector, it was always free to play game, as at the time, ESPN Start was not sure whether the Government would regard it as gambling or not. Hence, they did not introduce a feature where users could put money in the game.
At that time, people were also not very open about using their credit and debit cards online, and there were no digital wallets and other online payment options.
Consequently, ESPN Start could not sustain its Super Selector for a prolonged time, and it fell out by the time of IPL launch. It is safe to say that the loss of ESPN Star turned out to be a gain for Dream11. Harsh Jain also described it as the right product at the wrong time.
Despite the success of Dream11 and other fantasy gaming sports platforms, experts suggest that the segment still has a long way to go.
According to Harsh Jain, the company has a long way to go; they have penetrated only 15% of the online sports audience of 300 million in India; in the next coming years’ space is expected to see 5x to 6x growth in distribution.
For newer platforms, the challenge is to retain users. In an industry with rapid growth, the challenge is to going to be around marketing. They need to figure out the subset of a sports fan to understand him or her, target them, and engage them.
“How do we build loyalty in a space where it’s so easy for people to jump platforms? How can we protect our turf and make sure a new company is not able to replicate what we have done quickly?”
– Anand Ramachandran.
Moreover, the expert believes that fantasy sports can grow as big as e-commerce in the country. However, the digital maturity of the consumers in India needs to grow.
The web’s real users are in the rural areas of Tier II and III cities in India. It is a challenge for these platforms to turn their target audience mature enough to be consistent users of fantasy sports from being merely Facebook and WhatsApp users.
Whether it’s about the legalization of fantasy sports or digital maturity, with millions of Indian sports fans wanting to become virtual Dhoni, it is only the beginning of India’s fantasy sports.
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