You don't need to be an AI startup to raise. Lucra has $20M to prove it. | Equity Podcast

Introduction to Lucra Sports and Its Investment

• Lucra Sports, a company founded by Dylan Robbins, has raised $20 million from Cathie Wood's Ark Invest Venture Fund, making it a unique case as it is not an AI startup, and Ark Invest has never led a startup investment before 10s.
• Lucra Sports turns friendly competition between people into loyalty programs for brands, sometimes for cash prizes, by digitizing offline competitions and selling software to brands where competition exists 2m6s.
• The company's founder and CEO, Dylan Robbins, has a background in investment banking and entrepreneurship, having started his first company in the e-commerce space, a wine business, before attending Stanford Business School to get his MBA, where he started Lucra in 2021 4m37s.
• Lucra is a white label gamification business that modernizes loyalty programs by providing immediate gratification, such as playing for a burger or a chance to go to the Masters tournament, rather than traditional points or punch cards 6m15s.

Lucra's Business Model and Platform Functionality

• The platform allows users to bet with each other, with the option to play for something, not necessarily money, such as discounted food or a chance to attend an event, and companies can also offer prizes for tournaments 8m30s.
• Dylan Robbins had to overcome the fear of Ark Invest, which had previously been burned by an investment in a similar company, to secure the $20 million investment, and he will discuss the particulars of how he got through the investment process 1m30s.
• The goal of the loyalty platform is to keep the money within the ecosystem, allowing users to spend their winnings at the bar or on more game play, which drives revenue for the brands 10s.

The Investment Process with Ark Invest

• The investment from Arc was a Series B round of $20 million, and the investors had previously invested in an earlier round, with the company's founder meeting one of the lead investors through a game of darts at a bar in New York City 2m6s.
• The connection made through the darts game led to an introduction to the right team at Arc, including Chase and Nicholas, who eventually introduced the founder to Cathy, and this connection ultimately resulted in the investment 2m6s.
• Arc had previously invested in gaming companies such as DraftKings, Discord, and Epic Games, and they were excited about the loyalty platform's world, but were tentative due to being burned by a previous deal 4m30s.
• The founder had promised to give Arc a heads-up when it was time to raise more money, and when the time came, Arc kept their word and leaned in to learn more about the company, running a tight and organized process 6m10s.
• After Arc's initial investment, the founder kept in touch with them through quarterly investor updates and included them in all investor correspondence, building relationships with the people at Arc 8m40s.

Navigating the Series B Funding Landscape

• Investing time in getting to know key individuals, such as Nicholas and Chase, and having early visibility to Cathy, was beneficial, even if it was just them following along until the company was mature enough for real conversations 10s.
• When raising Series B funding, existing investors were already familiar with the company's story and were supportive, but the market was focused on AI, with some potential investors only interested in AI and not willing to listen to pitches 42s.
• The company's pitch was strong, with a dual-pronged approach, suggesting that investors be contrarian and invest in the company, and that if AI works, it would actually be beneficial for the business, as people would have more time for community activities 2m6s.
• The company had to address the AI trend, even though it's not core to their business, and included slides in their deck about using AI to appease those conversations 2m6s.
• The company was able to land new investors in their Series B, with Cathie's involvement being a significant factor, as her stamp of approval and explanation of why she was investing in a non-AI company helped to attract other investors 4m30s.

Investor Ecosystem and AI Considerations

• The investor ecosystem is often follow-along, with investors looking to see who else is backing a company, and Cathie's brand and involvement helped to move people over the line and invest in the company 5m20s.
• The company's business is considered AI-protected, as AI is not likely to disrupt their business line, and this was seen as a positive factor by investors looking to diversify their investments 6m40s.
• A key takeaway is that even if AI is not a company's core business, they still need to address it when raising funding, and may need to lead with it in their pitch 7m30s.

Company Growth and Investor Appeal

• The company's pitch to investors involved acknowledging that they are not an AI startup, but rather a different type of business, and highlighting the benefits of their unique approach, such as consistent year-over-year growth 10s.
• The growth that impressed investors included consistent year-over-year growth, with the company showing 1,000% growth 3 years ago, followed by 200% and 300% growth in subsequent years, as well as the B2B nature of their business, which has a longer sales cycle, stickier and longer-term customers, and recurring revenue 2m6s.
• Investors also liked that the company was able to show a large Total Addressable Market (TAM), with almost every American between 18 and 70 being a potential customer, and that they were able to penetrate a smaller TAM in a more meaningful way 4m30s.
• The company's founder believes that TAM is overrated as a pitch mechanism, but acknowledges that venture capital firms still look for big, sexy TAM numbers in pitch decks, and shared a story about a VC firm that rejected their pitch because their TAM was too small 6m20s.

Differentiation from Competitors

• The founder had to defend their company against comparisons to another company called Skills, which had burned the investors in the past, and had to convince them that their company was different, which was made possible by the investors' openness about their past experiences and concerns 10m30s.
• The company Lucra operates in a space that is similar to Skillz, a successful and big market consumer company, but Lucra's approach is different as it focuses on B2B rather than consumer play 10s.
• Skillz is considered a pioneer in the industry and its success has helped create the market that Lucra is now a part of, with Lucra's founder acknowledging that they may not be where they are today without Skillz 1m42s.

Business Model Pivot from D2C to B2B

• Lucra started as a direct-to-consumer (D2C) company with an app, but it wasn't until they pivoted to a B2B model that the company really started to grow, with the same technology being used to sell to other brands 4m6s.
• The pivot to B2B was inspired by a conversation with Steve Kuhn, the founder of Major League Pickleball, who pointed out that people were using the Lucra app to challenge each other in Pickleball, and suggested that they should be doing it in his app instead 6m6s.
• This conversation led to a realization that Lucra could sell its technology to other brands, such as Topgolf and Peloton, rather than trying to convince consumers to use the Lucra app, and this approach was key in convincing investors to support the company 8m6s.
• The company's open-mindedness and willingness to adapt and learn from mistakes were important factors in its ability to pivot and find a new path to success, with the founder acknowledging that they made a lot of mistakes along the way 10m6s.

Pivoting and Strategic Decisions

• The company made a pivot in 45 days after receiving an offer from Steve that would pay them more than their revenue from the previous year, and the board did not push back on the decision to change direction 10s.
• Being nimble and trusting one's gut is important for businesses, as stubbornness can be detrimental, and very few successful companies are the same as when they first started 42s.
• Founders are often told to both pivot and stick to their ideas, making it a hard decision to know when to change or stay the course, and having good people around, such as investors, can provide valuable guidance 1m6s.

Founder's Leadership and Investor Relationships

• The company's investors, including Kathy, Nick, and Chad from 76 Capital, are on speed dial and provide real advice that helps drive decision-making, and being honest about not knowing something is okay 2m6s.
• The founder believes in having confidence without ego, being humble, and acknowledging that investors have more experience and knowledge in many areas, but also recognizing that no one knows more about the company than they do 3m10s.
• The founder was honest with investors about areas where the company was not doing well, such as implementations, and framed these challenges as solvable problems with the funds being raised 4m20s.

Fundraising Strategy and Transparency

• The company's approach to fundraising and selling deals involves being upfront about strengths and weaknesses, and ensuring that challenges are solvable with the funds being raised, such as hiring engineers to address implementation issues 5m30s.
• Lucra was able to amplify training for existing staff and hire more solutions engineering, which made the problem seem solvable, and the company is now expanding into new areas with the newly raised $20M 10s.

New Initiatives and Strategic Investments

• One of the big new initiatives is the mini games vertical, which aims to digitize real-life competition and drive people into venues by offering chances to win discounts on activities like golf 2m6s.
• The mini games feature is designed to be easy to implement, with just a button to add to an app or website, and does not require staff training or operationalization, making it a simple and effective marketing tool 2m6s.
• To support the mini games initiative, Lucra made a strategic investment in a company called Crown, which specializes in building fun games, allowing Lucra to partner with experts in the field rather than trying to develop games in-house 4m30s.
• The decision to invest in Crown was supported by Lucra's investors and board, who trust the company to make the best decisions for the business and see the synergies between Lucra and Crown, and the investment is expected to help drive revisitation and revenue for Lucra's partners 6m40s.

Founder's Background and Entrepreneurial Journey

• The individual's background is in finance, having worked at Goldman Sachs as a quant hedge fund, but a pivotal moment in their life was when they walked into a neighborhood wine bar, met the owner Paul Greco, and discovered a passion for wine, which led them to leave finance and start a wine business 10s.
• The experience of starting and selling the wine business gave the individual a taste of autonomy, freedom, and responsibility, and they decided to build another business in an area they were passionate about, which was competition and sports, particularly esports 2m6s.
• The individual's love of competition and friendly wagers led them to identify a gap in the market, as they believed everyone would focus on sports betting, leaving an opportunity for a business focused on friendly competition, and this idea eventually evolved into a business 2m6s.
• The importance of being passionate about the business they were building was emphasized, as it requires a significant commitment of time and energy, and the individual couldn't imagine working on a product they weren't passionate about, which is why they believe in the ethos of doing something you love 4m30s.

From Idea to Business Execution

• After having the idea of friendly wagers, the individual's next step was to turn it into a business, and although they couldn't have known at the time that their instincts were right, they were able to evolve the idea into a business, which eventually led to the creation of prediction markets 8m30s.
• The individual's journey from finance to wine to esports was driven by their passions and interests, and they believe that being out in the world, talking to people, and being open to new experiences can lead to great ideas and opportunities 6m40s.
• The importance of taking action and executing an idea is crucial in entrepreneurship, as spending too much time planning can lead to missed opportunities, and it is better to start small and build on small wins 10s.

Entrepreneurial Mindset and Execution

• The concept of prediction markets was considered before it became popular, but the timing was not right, and it serves as a reminder that sometimes it is necessary to find a different lane and adapt to changing circumstances 10s.
• Bias to action is key, and just going out and trying to make something work is often more effective than spending a lot of time planning, as it allows for feedback and iteration 2m6s.
• A startup is only 10% about the idea and 90% about the execution, and having a good idea is not enough if it is not executed well, as some successful companies have been able to execute better than their competitors 2m6s.

Leveraging Technology for Idea Validation

• With the help of AI, it is now possible to validate an idea much faster than before, and tools like Claude can be used to mock up a design and test an idea without having to hire a designer or engineer 2m6s.

Company and Founder Contact Information

• The company Lucra has a website at www.playlucra.com, and can also be found on LinkedIn and other social media platforms, where people can learn more about the company and its deal announcements and partnerships 10m0s.
• Dylan Robbins, the founder of Lucra, is active on LinkedIn and can be followed for updates on the company and its progress 10m0s.