DraftKings backs new VC firm amid rise in sports startups

Meredith McPherron, chief executive officer and managing partner of Drive by DraftKings.Courtesy of Drive by DraftKings.

DraftKings wants to place a few wagers on fledgling sports businesses.

The Boston-based sports-betting company announced Wednesday that it has helped put together a pool of $60 million to invest in startups. That money includes not just capital from DraftKings, which went public last year, but from the owners of the New England Patriots, Dallas Cowboys, and the Los Angeles Dodgers, among others.

The new venture capital firm, called Drive by DraftKings, has a network of advisors who will offer advice and connections to companies once Drive has made an investment. That group includes former Boston Red Sox general manager Theo Epstein, Olympic hockey gold medalist Hilary Knight, former Arizona Cardinals receiver Larry Fitzgerald, and YouTube gamer Elliott Watkins, among others. Drive says that most of those advisors put money into the new fund.

Also supporting Drive are Boston Seed Capital, Accomplice, and General Catalyst, three local VC firms.

When first launched in 2019, the Drive initiative had a different focus; it aimed to provide entrepreneurship training for current and former pro athletes, and also accelerate the progress of entrepreneurs who’d already started sports-related companies, by helping make introductions.

Meredith McPherron, hired in mid-2020 as Drive’s CEO, says the entity explored several different ideas before deciding to focus on investing. While some of the money in the Drive fund comes from DraftKings, McPherron says that Drive has been set up to be independent. It will invest in startups from the earliest “seed” stage through the point when they have created a product and are generating revenue. Her investing partner is Kiki Mills Johnston, a former managing director of the MassChallenge startup program in Boston.

McPherron, a Harvard-trained startup advisor and investor, says the new firm will back companies building businesses in “sports and gaming, media and fan engagement, human performance, and data analytics and monetization.” It has already invested in 13 startups, including Whoop, a Boston company that makes a wearable fitness monitor, and Just Women’s Sports, a media site headquartered in Los Angeles.

Drive joins at least two other local venture capital firms that largely focus on investing in sports: Causeway Media Partners, co-founded by Boston Celtics owner Wyc Grousbeck, and Will Ventures, co-founded by Isaiah Kacyvenski, a former linebacker for Harvard College and the NFL’s Seattle Seahawks.

Kacyvenski says the creation of Drive is “a very good additional signal,” showing that sports startups are no longer perceived to be chasing a glamourous, but niche, market. He mentions companies like Peloton, Barstool Sports, FanDuel, and DraftKings as examples of businesses that have attracted mainstream customers. He adds that more players, coaches, and team owners are getting active in startup investing; as an example, his firm, which raised a $55 million fund last September, collected money from the owners of nine professional sports franchises.

Peter Blacklow, a partner at Boston Seed Capital, was among the earliest investors in DraftKings. He says he doesn’t think the world of sports startups is overheated or over-funded.

“New data and wagering opportunities have created seismic changes in the sports business world,” Blacklow says, “and we are just seeing the beginning [of changes] in how fans interact with sports, teams, and players.”

Other recent developments, like the ability for college athletes to profit from their name and image, legalized sports betting, at-home fitness technology, and the rise of streaming video providers have also cracked open new opportunities for startups, according to Jordan Fliegel, managing director of the Techstars Sports Accelerator, a startup investing initiative that has backing from the Indianapolis Colts and Pacers.

One of the co-founders of Causeway Media Partners, Bob Higgins, got his start in venture capital in 1982. He says the opportunities he sees in sports and fitness right now are “almost like 1980s venture capital. There are a lot of interesting things going on, but it’s not overwhelmed with capital.”

When DraftKings was getting started, in early 2012, there were no VC firms in town that specialized in sports startups. In less than a decade, that has changed — and now there are several doors for entrepreneurs to knock on.