- Insight: Innovative companies disrupt industries which can lead to extreme success
Sunday, June 25th, 2023
Megan Lanham is a former basketball star and collegiate basketball coach. She entered the startup world as a self-proclaimed “joiner” for a successful life science recruiting firm. That experience and a brilliant idea in Business School eventually led her to co-found Rithmm with Brian Beachkofski and Kelsey Allan. After reading about Megan’s $2M raise How She Started spent time talking to Megan to learn more about Rithmm. As of June 23, 2023, Rithmm has raised over $3.7M. Check out our case study to see how she did it!
"My advice to female founders is that we want more of you."
"Women stay on the sidelines longer, wanting more experience, and I am telling you to go for it."
How She Started: What was your first entrepreneurial endeavor?
Megan Lanham: I joined a startup following my exit from coaching collegiate basketball. I wasn't the founder of the company. I was a joiner. It was a life science recruiting firm. Six of us in a basement, bringing a new idea to an industry that was a bit archaic, innovation in this world seemed daunting at first. Every recruiting firm did it one way, and client systems were designed to accommodate that. However, we broke through. We scaled the company; we sold it to a private equity firm with a high multiplier in the 10s of millions. We scaled it again and ended up with another exit that was a 9 figure deal. So it was quite a successful journey and learned a great deal and worked with amazing people.
For this endeavor, how did you end up choosing sports betting?
ML: Well, the idea for Rithmm came to me in a class at MIT. I was in Business School taking a class called Data Models and Decisions. We were learning predictive modeling techniques to apply to our businesses. During one class I started thinking about how this applied to sports betting and began researching who was using predictive analytics to make their betting decisions. For me, it was a natural progression to choose sports betting. As a former collegiate basketball coach, I'd spent over 10 years analyzing basketball films, working with statistics trying to make decisions, and developing game plans and I believed my skills could transition into sports betting. I was fascinated with this industry and that fascination led me to see that there was a huge gap.
Everyday sports bettors didn't have access to the predictive models that professional sports bettors were using. I wanted to find a solution to that problem and bring a way for the everyday bettor to participate. On the back end, our system operates with sophisticated predictive models, while on the front end, accessing those intricate mathematical models doesn't require specialized skills. The front-end interface is designed to be highly intuitive and personalized for every user. Meanwhile, the back end has a team of quantitative analysts and data engineers who continuously run predictive models, akin to a professional sports bettor.
Many people struggle with raising money and how much equity to give during a raise. Why did you raise money, and how did you determine how much equity to give away?
ML: We raised money for three reasons. Number one, it was to fuel growth and scale the operations. We needed to hire talented engineers and we needed to increase our marketing spend. Number two is expertise. Our cap table is incredibly valuable. They have experience in the sports betting industry and their strategic advice is phenomenal. Number 3 is speed and agility. The capital allows us to operate in a very fast-paced competitive environment. So those were the top three reasons why I decided we do need VC money. As for determining how much equity to give away? It's a complex decision you have to kind of strike a balance between how much capital is required to reach your business objectives and the need to maintain a reasonable bond of ownership.
Can you walk me through how you were able to raise the money?
ML: The key is finding the right investors that understand your market. You need to be very targeted with your outreach. Also, use your network for warm introductions. During my time at MIT, numerous classmates recognized the potential of my idea and their introductions to VC firms they were connected to proved invaluable. The power of the network effect was evident.
My advice to people is to be very targeted with who you talk to, and make sure they understand the industry you're in, especially at a pre-revenue stage. Be confident enough to ask those investors questions on the call at the beginning of the conversation because it's a two-way street. Also, use rejections to fuel your fire as you'll get rejected. It might have nothing to do with your idea, other factors could be in play that prevent them from saying Yes. The key is you don't need to take it personally. You just need to use it and move on and if you can get real feedback, that is gold.
How did you acquire your first beta users?
ML: Friends and family and then word of mouth. We wanted 500 beta users to test our first product while we were in stealth mode. We would also message bettors on different social media platforms and ask them to test our product. The faster you can get outside of friends and family, in my opinion, the better because you need unbiased user interviews.
What's your growth strategy?
We have several key components: continuous innovation, a very customer-centric approach, strategic B2B partnerships, market expansion, and then customer acquisition and retention.
What does customer service look like?
Our goal is to establish an exceptionally inclusive environment within the betting community. To my surprise, many of the social sites, such as Gambling Twitter, Reddit, and Discord channels dedicated to the sports betting community are plagued with toxicity. However, we are taking the opposite approach. We intend to create a space where individuals feel comfortable asking questions, and we will meet them at their current stage in their betting journey. We are here to provide encouragement and empower people to make informed decisions based on data. We aim to redefine the existing landscape of the betting community, rather than merely conforming to its current state.
Was there a time when you felt this was not worth pursuing?
No. We have a great product in a rapidly expanding industry boasting a large TAM (total addressable market). Are there days where, as a startup founder you have low moments? Absolutely, but that comes with the territory. You ride it out and you keep moving forward. Your attitude determines a lot. Startups are not for everyone. It comes without a safety net, so you need to be comfortable with that framework. But I would say certainly you need a huge support system that can make you laugh and remind you the world is bigger than your strength.
Where do you see it growing after beta?
We are poised for significant growth after beta testing. With the launch of subscription tiers for NFL (National Football League) and NCAAF (National Collegiate Athletics Association- Football) in August, we expect strong traction. As we move forward, we will expand our offerings to include NBA (National Basketball Association), WNBA (Women’s National Basketball Association), NCAAM (Men’s Basketball), and NCAAW (Women’s Basketball), broadening our appeal to basketball enthusiasts. Additionally, we plan to introduce new features and cover sports such as NHL (National Hockey League), MLB (Major League Baseball), golf, and soccer in the coming year. International expansion is also on our roadmap. We're just aiming to tap into the global market and cater to this incredible growing interest in the sports betting space.
What are your lessons learned so far?
Personally, I would never be a solo founder. Having two other co-founders is the smartest decision that I've made. Finding two brilliant people that have talents outside of mine has been very key for many reasons, and then also the support system is critical. Plus, it's just more fun to do this with others.
Do you have any additional advice for female-founded businesses? Where was it an advantage for you? And then where was it a disadvantage?
My advice to female founders is that we want more of you. You don't need to be perfect or have experience in every single facet of business. Before becoming a founder or a leader. I think a lot of women do this. They don't think they are ready. Whereas males jump right into the fire without much experience and simply don't look back. Women stay on the sidelines longer, wanting more experience. I am telling you to go for it.
In terms of the disadvantages of being a female. The disadvantage is raising money. The data speaks, an all-female founding team raised last year only 1.9% of VC funds, whereas a mixed-gender team is at 17.2%, so having a male in the room has a massive advantage. It’s disappointing, but I’ve experienced it firsthand. In terms of advantages, you have a diverse perspective. This really helps you with hiring and retaining talent, the design of the product, having a broader range of ideas and building an inclusive environment. I think when you've been the only one in the room, you tend to have a different perspective and that has its advantages for sure.
- Insight: Innovative companies disrupt industries which can lead to extreme success.
- Insight: Research your market and use your prior experience to inform your business decisions.
- Insight: Increasing accessibility is a great strategy to exploit a gap in the market.
- Insight: Know why you want to raise money and have a plan on how you want to spend the money.
- Insight: Not all money is smart money. Ensure your investors have the expertise you're looking for.
- Insight: Leverage your network when raising money.
- Insight: Don't take rejections personally; use them to fuel your motivation.
- Insight: When acquiring beta users, set a goal for the number of users you want and strive for unbiased feedback.
- Insight: Have a growth strategy that includes continuous innovation, a customer-centric approach, strategic partnerships, market expansion, and customer acquisition and retention.
- Insight: Establish strong customer service values and create an inclusive environment within your industry.
- Insight: Confidence, a positive outlook, and a strong support system are key to a successful startup.
- Insight: Be intentional about how you want to grow and use your resources most effectively.
- Insight: Knowing your strengths and weaknesses helps you build a strong team.
- Insight: Female founders should go for it and not wait for perfection or excessive experience.
- Insight: Female founders bring a diverse perspective that can be advantageous in hiring, product design, generating ideas, and building an inclusive environment.
I messaged Megan and we set up a call over email.