Show #126 – Founder & CEO of SharpLink Rob Phythian Joins

Rob Phythian, the founder and CEO of SharpLink, joins the show to talk about his career path leading up to where he is today. He also talks about what SharpLink is doing to move the needle forward in the fantasy sports and betting space.

Video from Rob Phythian Interview

Show notes from Rob Phythian Interview

Ryan Knuppel:

All right, welcome back to another episode of the Knup Sports Show. I’m your host Ryan Knuppel, here with you each and every time. Thanks for giving us a little bit of time of your day, taking some time, listening in. As you know we love to talk sports, sports betting, fantasy sports. As of today, national championship just ended in college basketball. What a dud this year’s national championship was. I was hoping for a good game, and we didn’t really get it. I guess if you’re a Baylor fan you got a good game, but other than that, man, it was just kind of ugly. So as you know, we like to talk to people in the industry; influencers, founders, CEOs, and today we have none other than Rob Phythian, the founder CEO of SharpLink with us. Rob, thanks for joining me.

Rob Phythian:

It’s great to be here Ryan. It’s good to see you.

Ryan Knuppel:

Really appreciate you taking some time chatting with me, and just talking about what’s going on. So how you doing? How you been going on?

Rob Phythian:

Really busy. I think anyone in the sports betting industry, no matter if it’s an affiliate industry or an adjunct service industry, the sports betting is just… The world is turning fast.

Ryan Knuppel:

Yes, I hundred percent agree with that. Sports move so fast, and then combining digital side of things with sports is just a recipe for fast moving action, and always changing and things going on, so a hundred percent agree with that. So Rob, tell me a little bit about yourself. So founder CEO of SharpLink, but tell me a little bit about your background. How did you get into sports? How’d you get into this space, and what led you to where you are today?

Rob Phythian:

Ryan, it’s probably similar to your story, where I followed a passion. I was in public accounting doing tax returns in the middle of March at two in the morning, and decided that wasn’t for me. So I met a gentleman by the name of Paul Charchian, and Paul and I said, “You know what? Fantasy sports is going to be big someday.” So this is the nineties…

Ryan Knuppel:

Yeah.

Rob Phythian:

And, “The content stinks, so let’s do a newsprint fantasy sports magazine.” And we kicked off the Fantasy Football Weekly.

Ryan Knuppel:

Yeah.

Rob Phythian:

And got on the newsstand, and in our first week on the newsstand we out sold People magazine and TV Guide. So it answers that age old entrepreneurial question, “Are you onto something, or on something?” And we were on to something. So we were kind of really excited about that. And so we kind of grew right through the internet bubble, moved Fancy Football Weekly over to Fanball and built a full service niche fantasy site that frankly outdid a lot of the bigger sites for time spent and stickiness, because we were just catering right to the fantasy crowd.

Rob Phythian:

We weren’t watered down, we were just pretty intense stuff. And sold that company in 2005 to a group out of London called Fun Technologies; London, Toronto. Stayed with that for a couple of years. We rolled up two or three more fantasy companies and then sold it to John Malone at Liberty Media, and that was very nice exit for everybody involved. And after that, I took a step back and said, “You know what? Still wanted to be in the sports space, and I think the data business is really something that is in need of competition.” At the time, it was just stats out of Chicago. And Ryan, you’re Midwestern guy, you probably heard of stats.

Ryan Knuppel:

Yep, absolutely.

Rob Phythian:

They were the bohemoth. So I flew around the country and talked to my friends at NBC and Turner, and all of the big media companies that encouraged me to spend lots of money to build an enterprise solution for real time data delivery to them. So I did. I raised, I think, $5 million and built a whole data collection system embedded, and the business of the University of St. Thomas had 120 students gathering data for 15,000 sporting events. And the kids got pizza money, so they were happy. It was 50 bucks a game. And the beauty of it was the software that was written by my friend, Dave Abbott, that was really enterprise software.

Rob Phythian:

And the delivery of the data was pretty modern and absolutely blew the socks off the marketplace. So that was about 2010, started that business in 2013. A company called Sport Radar came along and decided they wanted to buy it. So we sold it because the next step in that business was obviously to do league deals and the angels that were backing me didn’t have that kind of capital, and Radar did. So it was a good transaction. I exited that, and took another look at the space and decided that sports betting may be coming to the US. Now, this was before the big New Jersey sports game case. And that’s when the dam broke in the US, when they decided it was states’ rights for sports betting.

Ryan Knuppel:

Yeah.

Rob Phythian:

And that’s why, Ryan, you see it rolling out state by state now, which is a little cumbersome, but we’ll get there. And when the New Jersey court case broke, one of the things we thought about was, “Of course there’s going to be a lot of capital from very big companies that are going to go after the betting side of things.” So that’s not a market I think you can be really competitive in unless you’ve got real expertise in betting, and I didn’t. So then I looked at this space and said, “Well, what about conversion and affiliate?” Because in the US, I think there’s going to be… And this is heading into SharpLink now.

Ryan Knuppel:

Yeah.

Rob Phythian:

There’s going to be a real opportunity to get between the big leagues and media companies and the sports books, and deliver qualified depositers and players. And it’s not going to be done by dumb banners and buttons, it just won’t. Some of that you can muscle through. You’ve seen some of them, like BetMGM is bet one to win a hundred, and then if you click on it, it’s such a stupid bet you’re going to win. That’s a way to muscle your way to customer acquisition, and that’s going to be kind of brute force. But we’ve decided to take a different approach at SharpLink. We’re trying to build contextual offers based on the user’s behavior. For instance, Ryan, you might be a Bears fan, you might like parlays, you might bet late at night.

Rob Phythian:

And we can track all that, or we track your favorite players. And then if you want help finding your favorite site, we’ll offer those bets embedded in the site. So it’s early days, we’ve started working with the PGA Tour and NASCAR on sorting through some of the odds that they’re adjusting because the big media and the league sites really don’t have staff to do it. They’re taking some pretty big payments from the books. So we’re getting ourselves inserted there and kind of proving what our worth is, and then we’ll advance as this market advances. And I think it’s a three to five year plan. We’re raising capital to be the biggest in the affiliate space in the US.

Ryan Knuppel:

Cool.

Rob Phythian:

And we’re super excited about that opportunity.

Ryan Knuppel:

Wow, that’s a journey. So you’ve been on quite the journey, and from just standing back and listening to all of that, first of all, I want to say thank you. Because you’re more than a CEO founder, you’re kind of a pioneer in this space, if you want to consider yourself that. Some of the early days of fantasy football and kind of being ahead of the game each time, when the data space now is obviously blowing up, and you guys were ahead of that kind of before it even was a thing. Before that, all the fantasy sports stuff, before it became big. It just amazes me that you were a very forward-thinking person in everything you’re doing, so congrats on that path and being able to be a visionary there.

Rob Phythian:

Well, let’s hope I’m right again, that the conversion space is going to emerge in two to three years. And we’re using our capital to build now.

Ryan Knuppel:

Yeah.

Rob Phythian:

So I think that’s our strategy. Ryan, as you see the market expanding, I think you would agree that absolutely, very big deals are being struck, strategic deals. Think of it like a chess board. The kings and queens are being moved around, not the pawns. It’s really big stuff happening for positioning. And then the second observation is that there’s a big race to gain market share in each state that opens up.

Ryan Knuppel:

Yeah.

Rob Phythian:

So when the big players are doing that, they’re cutting very big deals with the leagues and media and high traffic sites, they’re racing to the states to open up, there’s little time for innovation. And that’s where I want to raise my shovel, and spend time innovating in the affiliate and conversion side of things. And I think we’ll be friends with the books and friends with the leagues and the media company, because we’ll help convert. So I’ve established relationships with all the books. They know about me, they know what I’m doing. We’ve talked to all the leagues and media, they love what we’re doing, but they’re not ready for it yet in some respects. Some are, some aren’t.

Ryan Knuppel:

Yeah.

Rob Phythian:

And so I really do think that our positioning will pay off. And it won’t be this year, it may be next year, and it certainly will be the year after.

Ryan Knuppel:

Yeah. So, let’s just dive into SharpLink just a little further. I know you briefly touched on what you guys do and what you’re trying to accomplish, but tell us just a little more detail about the solutions that you offer, and maybe what types of people could use it or who you’re working with, things of that nature. Just dive in a little deeper onto that side of things.

Rob Phythian:

Yeah. So right now we’re focused on the middle tier fantasy sites that are cashing them off. One of the groups of sites is one that we have an ownership in, was the Sportshub Games Network, and that has the high stakes NFC. You might know Greg Ambrosius and his stuff. So we were focusing on them, RT sports, which is one of the biggest middle tier sites. And really it’s a lot of trial and error. When I walked in the lobby to Facebook during my career, the receptionist had a big sign over her head that says “fail harder”. So I always kind of liked that because you can…

 

Rob Phythian:

Right now, we’re in the trial and error phase of conversion in the US, and our first premise is that the cash fantasy sports players are sports betters. So that’s our first premise, right? If that’s true, they’re focusing in on that market and testing things. And let me give you a use case example. Let’s say you have a fantasy roster on RT Sports, and your quarterback is Tom Brady. RT will pass us a little bit of data about you, Ryan, that you have Brady on your roster.

Rob Phythian:

And we’ll go to the books, whether RT has a relationship with BetMGM, which they do, or FanDuel or DraftKings or wherever, and we’ll grab the Brady markets, and “markets” means bets. So we’ll grab all the Tom Brady bets for that Sunday game and say, “Hey, you’ve got Brady on your roster. Here’s the over-under for passing of the week, 250 yards. Do you want to take that action? Touchdowns at one and a half.” We’ll just kind of surface all the stuff. We’ll even offer a parlay bet slip right on RT’s site, so that you can sort of have a shopping cart of the kind of bets you want to do as you’re touring RT.

Ryan Knuppel:

Cool.

Rob Phythian:

And then when you submit that bet slip, we’ll take that data through our pipes, we’ll log it, and then we’ll send it over to BetMGM and repopulate the bet slip over there so it’s super easy for you to close the bet. So that’s just one use case example of what SharpLink can do.

Ryan Knuppel:

That’s super cool. Yeah, I totally could see the need for this as well. Especially as the content driven sites continue to grow, and the amount of media in this space continues to grow, and being able to enhance your content and make it relevant, but then make it actionable as well. And it sounds like you’re kind of putting all that together so people can take action right within the content, right within the site, without having to go anywhere else. And kind of connecting all those dots is what you guys are in business doing here, that’s amazing.

Rob Phythian:

Yeah. And so we use the [inaudible 00:12:32] frictionless betting.

Ryan Knuppel:

Yeah.

Rob Phythian:

We can make it as frictionless as possible for you to make a bet that’s a win.

Ryan Knuppel:

Now, let me… Oh, sorry to interrupt, but let me ask from more of a nerdy side, let’s get into… This is more of a business show. I love talking about this stuff.

Rob Phythian:

Yeah.

Ryan Knuppel:

The affiliates, we work with a lot of affiliates and talk to a lot of affiliates on this show. They’re going to want some credit if somebody bets from their site now. Now, are they still getting paid if things happen through their site? I’m assuming you guys have relationships kind of built in where it’s a share or something with the site as well.

Rob Phythian:

Yeah, so when you think about the value prop, I guess you could think about it this way. The books are willing to pay about a third of their net gaming revenue to get a customer. And if you just look at Europe, the lifetime value of a betting customer over there is around $1,200.

Ryan Knuppel:

Yeah.

Rob Phythian:

And right now, just the straight affiliates are offering $300 or $400 on bounties, but I’d rather try to get into the net gaming revenue side of things, and that’s a third. Let’s just say it’s 20% to 30%. Of that 20% to 30% of the net gaming revenue on a user, you split that with the affiliate. There’s some percentage that goes back to them because it’s their user, and you really do want to reward them. So yes, there’s a split and then we’ll take a cut and hopefully we’ll do our job and deliver lots of depositers. And again, the whole theory is the leagues or the media or the middle tier fantasy sites, they know how to run their businesses. They don’t know how to convert betters.

Ryan Knuppel:

Yeah.

Rob Phythian:

And if we come in and offer those services and keep those resources off of their staff, it’s a win.

Ryan Knuppel:

It is a win. And I’m assuming that also relieves that side of having to go out and get all these licenses and deal with all the state licensing that has to happen, or do they still have to do that?

Rob Phythian:

So we do all the licensing at SharpLink. We’ve worked with all the regulators to get net gaming revenue licenses. It isn’t an easy job to get my board of directors to turn over their personal financial statements and three years of tax returns and, “Oh, by the way, you got to go to the police department to get fingerprinted.” And, “Hey, the FBI’s going to do a background check on you.” So, it really is an arduous process to get licensed, and we’ve done it. So sometimes we can relieve the affiliate, our client, of that burden.

Ryan Knuppel:

Sure, sure. Very cool. So what’s to come, what’s next, what’s new? I’m sure you guys are always innovating. Is there any big technology type things you’re trying? What’s the future look like, besides growing and obviously working with more companies and trying to get big partnerships in place? What’s the future look like for you guys, where are you headed?

Rob Phythian:

Raising some capital, a bunch of it. And then we’re going to put it to work maybe on some acquisitions, and definitely on R&D to build up things like a bet panel. If you’re watching the video of the game, there’s a panel overlay and you can make bets right in sync with the broadcast, in-game.

Ryan Knuppel:

Sure.

Rob Phythian:

We’re going to work on that technology, I think it’s super valuable in the future.

Ryan Knuppel:

Agreed.

Rob Phythian:

And I don’t know if you are aware, but when you’re watching a game at home, it’s about 12 seconds delayed from in-stadium. So there’s a little bit of a challenge on syncing up that in-game market in the US. And anyone that’s tried it in a legal jurisdiction, the in-game stuff, it blows. It’s not good at all.

Ryan Knuppel:

To be quite candid, yes.

Rob Phythian:

Yeah, you can’t get your bet in before it closes, or it changes on you when you try to get the bet in. It’s early days, it’s okay.

Ryan Knuppel:

Yeah.

Rob Phythian:

But if we spend some time and resources trying to solve it, I think it will be super valuable. So that’s kind of an example. I think it’s just deploying capital in a different way in the sports betting market to build the tools to be conversion and affiliate based. And if we raise the capital to do that, everyone else is going to run around and get into these states and try to get market shares while we’re building and innovating.

Ryan Knuppel:

Very cool, very cool. Rob Phythian, founder and CEO of SharpLink. Rob, it’s been great. I want to take a few more minutes of your time, and then we’ll get off here. I always like to ask… You have such a diverse business background and clearly have just been so successful in this space, and there’s a lot of new startup people and people trying to jump into this space that don’t have that type of experience. Back up now from more of a business mind, and maybe some things you’ve learned over the years. Just from a pure CEO founder perspective, what’s one just piece of advice you would give someone that’s looking to jump into this space? And maybe they’re starting up a product, they have no idea where to go. What’s just one business piece of advice you’d give someone?

Rob Phythian:

Yeah, so the passion is always there in the sports side, so that’s a check. Check the box on passion.

Ryan Knuppel:

Yeah.

Rob Phythian:

The good news is sports is an emerging market, and betting in particular, so now you’re heading as an entrepreneur into an area with opportunity. And then as a CEO, a brand new CEO, I think it’s really good to surround yourself with people that are successful. They don’t have to be successful in sports, but they’ve built businesses before and they’re a generation ahead of you on knowledge. And if you can find a mentor or a board like that, that’s key.

Rob Phythian:

And then the final point I’ll make is raising the capital to make your dreams come true. Don’t be afraid of dilution. It’s called “founder’s disease”, and a lot of people have it. They really want to own a hundred percent of a small idea. And I’m not kidding. I take maybe a hundred launches a year with trying to help people with their new ideas, and they’re really afraid of that dilution and not owning it all, because it’s their idea.

Ryan Knuppel:

Yeah.

Rob Phythian:

And one of my mentors said a long time ago to me as I was talking and trying to convince him how important I was, he just listened for a bit and then he looked at me and he said, “You know what, Rob? Ideas are worth nothing.”

Ryan Knuppel:

Yeah.

Rob Phythian:

And he kind of stopped me in my tracks, because he was the cheque writer. And so that really is the golden rule, “he who has the gold makes the rules”. And a lot of entrepreneurs don’t understand that, and it costs.

Ryan Knuppel:

Very wise words from Rob. Yes, I think you nailed some things right on the head there. So I appreciate that insight and teaching the next generation as well, so thank you for that. Very wise words there.

Rob Phythian:

Sure. I’m glad to get on the show, Ryan, with you and talk a little bit about the business. The sports betting business is super exciting. I know you’ve interviewed other people, like Laila with Playup. She’s trying to find her a spot in the ecosystem, and so they’ve got some unique value propositions. And there’s other people that you’re talking to also, that I think are a good spread and a good representation of what’s happening in the industry.

Ryan Knuppel:

Well, it’s my pleasure having you. You’re welcome back anytime, anytime that you want to come on and just talk. We could talk sports, we could talk whatever you’d like, but you’re welcome on anytime. So Rob, where can people find more information about SharpLink, or potentially if they want to work with you guys or have some questions, where should they be directed?

Rob Phythian:

Yeah, they can go to sharplink.com, or Google us. They’ll find us, they’ll find me. You’ll be able to get a hold of me through Google, if you just Google me.

Ryan Knuppel:

Cool. Awesome, Rob. Well, I won’t take any more of your time. Really appreciate you being here. Rob Phythian, the founder CEO of SharpLink. Rob, really appreciate your time once again. Thank you.

Rob Phythian:

All right, thanks Ryan.

Ryan Knuppel:

All right, everybody. Thank you for tuning in, that was a great episode. I hope you get some value out of that and really go back, rewatch that a few times because there’s some value nuggets that are tucked into this episode. So really appreciate Rob coming on, and I appreciate you guys listening. So until next time, stay safe, and we will talk to you guys all soon. Have a great one. Bye-bye.

 

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