When the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), most daily fantasy sports operators saw the news as an opportunity to pivot to sports betting. Not Jason Jaramillo. He saw this as prime time to get into the DFS business, so he did. He founded and launched StatHero in 2018. Four years later, the company is not only an established DFS player, it is carving out a space in the entire sports gambling industry for customers who like the feeling of winning.
StatHero wants a customer experience defined by control
For Jaramillo, the defining character trait of StatHero is control. Both DFS and sports betting can often feel to users like endeavors where someone else is in control. You may pick the lineup, but it is the pros with the spreadsheets who are in control. You place the bet, but it is the sportsbook offering the line and you either pick one side or the other and you can never be sure what info went into creating it.
StatHero tries to offer a sense of control with an array of products, the most popular of which is its head-to-head offering. What makes it stand out from other DFS products is that users are essentially playing against the house. They choose a lineup to go up against, then they can craft whatever lineup they want to compete against it.
Jaramillo is the first to tell you that the word “house” comes with a whole host of problems and misconceptions.
“So ‘against the house’, it’s tough, because people will see our product and say that,” he said. “Now that’s something that I’m trying to stay away from because people already have it in their mind–house always wins. Right? And that’s really not what I want people to think because I don’t want them to not give the product the chance before they understand that that’s not the case with us.”
Customer win rates lead to better customer loyalty
In fact, StatHero can brag about some of the best win rates across DFS or sports betting. According to Jaramillo, the customer base is winning between 45-65% of the time, and that is by design.
“StatHero has a higher handle than all the other DFS companies out there. It’s because we have to,” he explained. “We’re losing at that clip, where in order to stay in business, we just need to offer that extra 10% just to make sure that you know, we’re covered. But players are willing to spend that extra 10% because they’re cashing out more.”
Even with a higher vig, the loyalty and lifetime value this winning environment creates is paying dividends for the company. As sports betting operators across the country curb acquisition spending because the costs are not converting into retention, StatHero is developing an extremely loyal base with a willingness to spend.
“Traditional fantasy, it’s known that the average spend for a player is $500 annually. If you give them more ability to win and their winning percentage and more control, StatHero sees $2,000 a year per player because, and this is data that nobody’s ever seen, players aren’t winning at the clip that they’re winning with us,” he revealed.
What is the role of DFS now?
Most of the discussion around DFS sites and their valuations are what kind of acquisition tool they can be for sports betting. Bally’s acquired Monkey Knife Fight for that reason. More recently, Underdog Fantasy received a valuation in excess of $485 million after its Series B. The release quoted investor Chris Grove noting that the CPA on Underdog is so much lower than traditional sportsbooks.
Jaramillo noted StatHero is taking a different approach from Underdog:
“They had a $450 million dollar valuation and now they’re looking to take that money and put it into new gameplay and innovation. We went the opposite way. We’re going to do the gameplay innovation now and then we’re about to do our Series A, within the next month, we’re gonna move forward with that marketing and with hiring more employees and that scale now that we have the product because the product is the hardest part, right?”
Jaramillo welcomes DFS regulation
Rather than viewing his company as a pure acquisition target or an entree for casual sports fans into betting at a lower CPA, Jaramillo sees a long-term place for StatHero in the marketplace. And that position is not just to service states where sports betting is still not legal.
While some DFS operators shy away from regulation, Jaramillo and the StatHero team welcome it. The company is already licensed in Tennessee, Colorado, and others.
“As it stands now, StatHero has got the most bandwidth than any other DFS company. We have more licenses than any other independent company out there,” he explained. He welcomes regulation because of the signal it sends to consumers about the business and it helps separate StatHero from other competitors who push the envelope on what kinds of contests they offer.
There is one state though where the company would love to get in but regulation limits who can operate there. That state is Michigan.
“They basically said anybody that was in the state prior to May 2018, can stay, which is bullshit,” Jaramillo said. “We were waiting for them to have a regulatory process in place where we can apply. But as of now, there’s no way to apply. So any companies like the big boys that were in there already can stay in there, and the people that are trying to dip into the marketplace can’t offer in Michigan.”
While Michigan is off the table, the company is finishing up the licensing process in states like Pennsylvania and Louisiana and readying for football season. The head-to-head product is the most popular contest on the site, but there are other games around survivor and pick’em as well.
It will be the first full football season with all products up and running. Jaramillo and his team are excited to see if the results they saw during baseball and basketball season roll over into football. As they ready for the autumn rush and the company’s Series A, they remain firm in the belief there is not only room for fantasy in post-PASPA world, there is room for it to thrive by offering a winning experience sportsbook just can’t replicate.