As students at Harvard University, Jacob Fortinsky and Kelechi Ukah became friends because they had similar interests and experiences, like playing poker. Still, they never thought they would end up working together in gaming. They are co-founders of Novig, a young sports betting exchange that will launch in its first state (Colorado) in October and recently raised $6.4 million in a seed funding round.
Fortinsky studied philosophy, political science, and economics and worked in legal studies and investment banking. He took the LSAT to either go to law school or get a Ph.D.
Ukah, on the other hand, focused on physics and math and took a year off from school during COVID-19 to work as a fellow at CERN, the European Organization for Nuclear Research. He also interned at the well-known quantitative trading company Jane Street. He wasn’t sure if he wanted to be a trader on Wall Street or a professor and expert in physics.
Fortinsky and Ukah sensed an opportunity to impact the U.S. and global sports betting sector, so they put these ambitions on hold, possibly permanently. Fortinsky and Ukah convinced investors that sportsbooks, not needs, are the main source of legal sports betting in the U.S. by raising so much money.
Novig’s Seed Round Values Company at $33M
The seed round for Novig was led by Lux Capital. Paul Graham, Joe Montana, and Y Combinator, all well-known backers in new businesses, were involved. Fortinsky said that, on average, the company raised $33 million after the money was given.
Fortinsky said, “I think a lot of founders are desperate to start a business and have always known they wanted to do so.” “But the idea came to us by itself. We thought that if we didn’t do this, we’d be sorry for the rest of our lives.”
Fortinsky was a major sports bettor, but he disliked FanDuel and DraftKings because they charged a “vig,” or app fee. Fortinsky still made money betting on sports, but traditional sportsbooks limited his bets.
He stated, “It felt very inefficient, old-fashioned, and exploitative.” “The biggest reason people stop betting on sports is that the house always wins. The game design ensures that ordinary players lose. They use you as a piece. I saw several opportunities to make the system fairer, clearer, and more efficient.
Fortinsky and Ukah modeled Novig after a stock exchange like the Nasdaq or an online marketplace like eBay, where people can buy and sell with each other instead of relying on a third party to set the price.
In Europe, sports betting markets like Betfair are common, but in the U.S., odds-setting sportsbooks are more popular. Prophet and Sporttrade were the first sports betting markets to open in the U.S. in September of last year.
Unlike other betting exchanges, Novig will not charge most bettors any fees. However, Fortinsky says that bettors with net wins of more than $10,000 will have to pay small fees. However, the company wants high-frequency traders to use its platform and doesn’t want to cap how much they can bet.
Novig’s Exchange Promises Fast Approval Times for Live Bets
Novig’s exchange recently went through a two-week beta test with 200 users. During that time, 15,500 orders were made. The company says it can approve live bets right away, whereas it can take casinos up to 80 seconds to approve a bet.
For now, the biggest problem is getting Novig to players, which can be a slow and challenging process because the company has to get permission from each state and work with a land-based casino in each state to run. Currently, the corporation can only operate in Colorado. They will start taking bets on NFL, NBA, and MLB games in mid-October.
Novig wants to get licenses in other states, like New Jersey and Ohio, in the coming months. Fortinsky says that if everything goes well, it will spread to other countries in the next 24 to 30 months. He would also like to get into fields other than sports.
“This is really a market for making predictions about sports,” said Fortinsky. “But at their core, sports markets are the same as any other market, whether it’s gaming, chess, politics, or something else. We have to see what is possible from a regulatory standpoint, but we’re also very excited to grow into a number of different industries.