Meet The Man Disrupting eSports

By: Nick Donato for Benzinga

Meet Unikrn CEO Rahul Sood. He founded VoodooPC in the early nineties and sold the business to Hewlett-Packard (HPQ) over a decade later. Sood then moved to Microsoft (MSFT), founded the Bing Fund and Microsoft Ventures before starting Unikrn in 2014 with Karl Flores. Located in Seattle, the company has gained financial backing from Mark Cuban, Binary Capital, Rubicon Venture Capital and others.

In a new rare interview, Sood breaks down global eSports growth, online gambling and Microsoft’s future in the budding industry.

Tell us about your relationship with Mark Cuban.

Rahul Sood: I’ve had sort of a on and off conversations with him over the years. They’re email exchanges and they’re sort of like back when I started VoodooPC. Many years into it I was about to sell to HP, but before I did, Mark used to mentor me.

I would send him emails back and forth and just sort of asked him for advice. I even asked him at one point about our growth strategy and he just...he gave me advice to keep doing what we were doing. And he took no equity. He didn’t ask for an “in.”

When HP announced it was acquiring Voodoo [in 2006], they did this big event in New York and I emailed Mark and said, “Hey Mark, if you happen to be in New York, we’d love to have you here as a guest.” And then the guy came out to the event. He was so nice. Again, he didn’t take anything, he didn’t ask for anything. He was just really nice. Over the years every now and then I’ll drop him an email about random entrepreneurial stuff.

Then I kind of lost touch with him and I was on CNBC like two months ago for Unikrn. Two minutes after I got off the set I got an email from Mark Cuban. It said, “Hey man, eSports is really hot. Congratulations.” Then I wrote back, and I shared with him a couple of details about what we’re doing. Then he writes back asking me a couple of questions, then I write back and he writes back and cc’s the people on the team and said, “I’m in.” He points us to one of his guys and he goes, “he’ll take care of it.”

It was just a quick email exchange and he’s in. He’s awesome. He’ll add value as we go forward.

You’re a gamer. You’re into the market. Now you’re essentially leading the eSports industry. Does it give you and the industry a sense of validation?

Sood: Yeah, you know, I grew up playing games and many people my age probably didn’t. I’m in my early forties and nowadays, even early kids are playing games. So, when I sold Voodoo to HP, I was at the cutting edge of eSports. And eSports was very massive, there was really nothing going outside of Korea, but it was still pretty exciting.

[After some time] I realize, “Oh my God,” there’s this massive thing happening...so then I quit Microsoft and started Unikrn.

You’re head of Microsoft Ventures at that point. That’s quite a move to take on that kind of risk.

Sood: Yeah...my income was like five times higher than what I’m making now. Microsoft makes it really hard to leave, right? They pay people well and they invest your stock over the years.

I just had to. I’d been at Microsoft for three and a half years, which is enough for me. Being in anything, you know, four years is a long time. I thought I might be there for five years, but the space is just too hot and gaming is where my passion’s at, so I had to get back into it.

Let’s dive into the industry. How does online betting help the growth of eSports and Unikrn?

Sood: So, let’s talk about the growth and then let’s talk about why it’s good. Our intention at Unikrn is to heighten the experience of our spectating and engaging in eSports. And so, what we want is to increase the level of engagement and the level of interest on eSports. We want to bring more mainstream people into eSports.

Right now eSports is quite popular. If you look at the number of fans in eSports, it’s about the same size as the NHL globally. There’s obviously a ton of room to grow because it’s a global spectacle really. You’ve got people from all over the world who watch and play this stuff, and it’s much more accessible, than say, hockey or football because you don’t have to buy equipment. You just have to go to your PC and you can play games.

And so, our goal is to bring more mainstream people into eSports. We feel the best way to do that is through betting, so we went out and partnered with one of the largest publicly-traded and most respected betting companies in the world. They’re called Tabcorp, a multi-billion dollar company [based in Australia]. They only operate in “white markets,” meaning legal markets...and they’ve given us global betting licenses, so we can start to open up at different regions.

They’ve got hundreds of thousands of customers that are in horse racing. Even though horse racing is interesting, for younger generations, that kind of stuff is boring so we want to sort of show them what eSports is. By bringing more mainstream people into eSports, it is better for all of eSports in general.

Going off that, is Unikrn looking to develop a prop-betting system in the future? Like the Super Bowl, where people can bet on the opening coin flip and other in-game events.

Sood: Yeah. You’ll see a new version of our site come up this month, and we got a bunch of really good stuff coming, and in fact we have a U.S. version coming as well. So we’ll have a product for the U.S. late in July.

I can’t tell you what it is, but it’s going to be sweet.

That’s awesome. What’s the timeline for eSports betting integration in America?

Sood: Man look, betting on sports in general will come when it comes. There’s enough advocacy out there for it. If you go to any developed market -- like Australia, Europe or the U.K. -- where betting is a part of the culture, they don’t even know what fantasy is. They think fantasy is a joke. When we talk to people, they’re like “What?”

Basically, fantasy is a convoluted way to get to gambling, right?

Fantasy is a result of the government getting involved in something they probably shouldn’t get involved in...my guess is that more and more people are going to advocate for it and it will come at some point. I can’t say when, but I can tell you that Unikrn will have a really cool product out, a legal product for markets like the U.S.

How are you guys monetizing betting right now?

Sood: We have a couple of ways that we monetize our business. The gaming communities, they reach over 9 million gamers in a hundred countries worldwide, so we have that part of our business. And then the other part is the betting business...effectively we set odds on games. Our odds are the best in the world. We built an odds-making engine that is on the cloud, and it has automated our odds.

Essentially people just bet, and you know, they bet against the house. So you know if we lose, we lose. If we win, we win. It’s not an easy business to sort of make money on, but in terms of our overall business, it’s a great way to increase and engage with eSports. And that’s what our real business is. Our real business is about increasing you know, more and more people and increasing the engagement and heightening the experience of watching eSports. So we’ll figure out how to monetize that down the road.

What area of the world has the biggest potential for eSports growth? Where will user engagement come from in the future?

Sood: Great question. As I said before, I think it’s global...we have a ton of traffic across the world. I think South America’s huge. I don’t know if there’s sort of any breakout area because it is really global -- it’s people from all over the world watch this stuff. There’s teams from all over the world that get into it. Even in the Middle East now it’s popular. Back in the day it was South Korea and [now] it’s everywhere.

This is mind blowing. It’s the one game that isn’t divisive in different areas and regions. You don’t have to travel, you can just go online.

Sood: Yeah. And you can pick your team. There’s a national pride thing associated with it. You get people from China who want to root for the Chinese team and even though they live in the U.K., they may want to bet. Even though betting in China is illegal, they’ll still bet if they are living in the U.K.

Let’s switch it up a bit. I’m going to give you four companies right now: Google (GOOG), Amazon (AMZN), Activision (ATVI), Disney (DIS). Which one of these companies is best set to capitalize on eSports growth?

Sood: Man, that’s a hard one. That’s a really hard question because when I think about the companies that are capitalizing like Riot Games and that sort of thing, there’s one call and it goes back to my days at Microsoft. Putting my Microsoft hat on for a second, I would anticipate last year when I quit the company to start Unikrn, I would anticipate that nobody knew what eSports was at Microsoft. I think very few people probably did, and yet the majority of games are being played on Windows.

So, they’ve got the biggest platform in the world for gaming, that’s Windows. And then they have one of the biggest consoles in the world with Xbox. If they’re smart, which I know they are, I think Microsoft could potentially be the one to capitalize on eSports if they figure out how to do it, and it’s because of their reach.

Microsoft’s reach is massive and I think everyone ignores them. Back in the day, Microsoft was amazing at PC games. They had Age of Empires, Flight Simulator. They had some of best franchises. Wouldn’t it be amazing to see a new version of Age of Empires come out for MOBA [meaning multiplayer online battle arena, a format typical in eSports]?

Out of the companies you mentioned, I’d have to say Microsoft has the potential to do it based on Windows and console. I don’t know that they will, but...I think now, a lot of people are paying attention. I think the industry realizes, “Holy s--t, you know we missed this, we got to get on top of this as soon as possible.”

Put your Microsoft hat back on for this one. You have an open forum with Vulcun, a fantasy eSports company. What’s your view on partnerships?

Sood: Yeah, you know what? We’re open to partnering with anybody and we don’t look at fantasy as competition to us -- they’re different. Fantasy is really designed for the hardcore user. We like it. It’s great that Vulcun and AlphaDraft [a weekly fantasy eSports provider] are both into space because it expands the market generally. And it creates more awareness for eSports.

Professional gamers and people involved with eSports should be proud of the fact that there’s companies like us, like Volken, like AlphaDraft. They’re able to get funding from major investors to build industries around this business.

I’m a big believer in partnering...like the fantasy space, it’s very competitive and the cost of these acquisitions is extremely high and they burn a lot of cash. There might be some consolidation in the space where someone buys someone else to grow their business in a particular vehicle.

Readers interested in Unikrn can check out live competition on Twitch, here. The author has no positions in the companies mentioned above.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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