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Recent changes in the way in which the lottery works have reduced odds for a win and led to increasing jackpots, with a Mega Million jackpot topping over $1.6B in a recent drawing. These larger and larger jackpots are drawing more people to play and take their shot at a life-changing prize. Enter Jackpocket, a mobile app that allows you to purchase your lottery tickets from the convenience of your phone with a few taps. The company does not work directly with lottery authorities but instead offers a service that secures your ticket from officially licensed state lottery retailers and sends you a secure scan of the ticket. The platform also alerts you of any winnings. Currently available to residents of New Hampshire and Minnesota, the company recently had its first million-dollar-plus winner from the app – a 20-year-old college student that had downloaded the app the day before winning!
AlleyWatch sat down with Founder and CEO Peter Sullivan about the company, its future plans, the regulatory environment facing an emergent technology like Jackpocket, and the company’s Series B funding round, which brings Jackpocket’s total funding to $25M since its founding in 2013.
Who were your investors and how much did you raise?
We raised $16M in a Series B round of funding. It was led by Conductive Ventures, a new venture capital firm focused on expansion-stage companies, with participation from DCM Ventures and former NBA Commissioner David Stern. Existing investors BlueRun Ventures, which led Jackpocket’s Series A funding round, Bullpen Capital, Digital Currency Group and Subversive Capital also participated in the round, bringing total funds raised to $25 million.
Tell us about the product or service that Jackpocket offers.
Jackpocket is the first third-party mobile app in the U.S. that offers players a secure way to order official state lottery tickets, such as Powerball, Mega Millions and more. We look to modernize the lottery through the use of bleeding edge technology, innovative features and beautiful design.
What inspired you to start Jackpocket?
I was inspired to start the company when I realized that my dad — an avid lottery player my entire life — was playing social games on his smartphone, and yet still could not order lottery tickets on it. It made me realize that by bringing the experience to smartphones, we could create a more convenient, fun and responsible way to play the lottery.
How is Jackpocket different?
There are a couple of unique aspects we offer. We’re the only mobile lottery service that provides players with a high-resolution scan of both sides of their physical lottery ticket, along with the ticket serial number that’s been assigned to their identity, while automatically alerting players if they’ve won. Going one step further in the fulfillment process, prizes under $600 are automatically deposited into the winner’s account. These consumer protections safeguard against theft, and eliminate the risk of misplacing tickets or forgetting to check lottery results, common occurrences that result in $2B in unclaimed winnings each year.
How do you manage the regulatory issues that inevitably face new and emerging technologies like yours?
We know that regulators have a difficult job to do. Jackpocket works closely with lottery commissions, regulators and the legislature to ensure it can operate within existing statutes, as well as create a regulated industry around courier services where it’s appropriate. As attitudes toward gaming continue to shift in a positive direction, we look forward to helping lead the charge to usher in new regulations that benefit all parties.
What market does Jackpocket target and how big is it?
Our vision is to reach lottery players anywhere, anytime by serving as the go-to destination for ordering state lottery tickets, across multiple U.S. markets. This includes traditional lottery players looking for an easier way to order tickets, as well as younger, tech-savvy professionals like millennials, both groups who are attracted to the app for its convenience and usability.
What’s your business model?
Jackpocket charges players a small service fee when they deposit funds into their account, but we don’t mark up ticket prices nor do we take any portion of a player’s winnings. As a retailer in the states where we currently operate, we also receive commissions from the state for tickets processed.
Jackpocket charges players a small service fee when they deposit funds into their account, but we don’t mark up ticket prices nor do we take any portion of a player’s winnings. As a retailer in the states where we currently operate, we also receive commissions from the state for tickets processed.
How do you manage the regulatory issues that inevitably face new and emerging technologies like yours?
We know that regulators have a difficult job to do. Jackpocket works closely with lottery commissions, regulators and the legislature to ensure it can operate within existing statutes, as well as create a regulated industry around courier services where it’s appropriate. As attitudes toward gaming continue to shift in a positive direction, we look forward to helping lead the charge to usher in new regulations that benefit all parties.
What was the funding process like?
Exciting! We’re so optimistic at all of the positive feedback and interest we’ve received during this funding round because it’s added validation that we’re doing things right. As time went on, we received increasing requests for participation, and in some cases, existing investors even upped their contributions leading to an oversubscription.
What are the biggest challenges that you faced while raising capital?
Even though Jackpocket is a service provider and not a gambling company, many venture firms have LP restrictions around anything even remotely considered “gambling.” For us, that means a no before the conversation even starts. Furthermore, igaming is an emerging category here in the United States so early-stage investors don’t have a deep knowledge of the industry yet.
What factors about your business led your investors to write the check?
They recognized the multitude of opportunities that come with growing this company, including our ability to help modernize an industry that’s outdated, the potential to engage traditional lottery players looking for a more convenient way to play, and the attraction we offer to young professionals who otherwise would not be active lottery players.
What are the milestones you plan to achieve in the next six months?
We’ve had very fruitful talks with a number of states, especially coming out of our attendance at top industry conferences NASPL 2018 and PGRI Lottery Expo, and we’re working with the appropriate parties to enter some of the country’s top lottery markets in H1 2019.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Hustle! Make connections wherever and however you can, attend networking events and put yourself out there. Do the legwork to build your company: that means doing side jobs to pay the bills, learning creative ways to market yourself on a budget, and tapping resources wherever you can find them. Also, build your team with passionate and committed people. When I started Jackpocket, we had a lot of ups and downs, as with any startup; there was even one point where I had to tell my employees our funding had fallen through and they could no longer be paid, but they stuck with me because they believed in what we were doing, and we got back on track. We’ve now closed three rounds of funding and have close to 40 employees.
Where do you see the company going now over the near term?
We’re scaling rapidly, which means we’re hiring rapidly, too! We’re moving to a bigger and better office this month to better accommodate our growing team, and we’re continuing to improve upon our app to make it the best user experience for lottery players out there.
Where is your favorite fall destination in the city?
My parents moved us from Brooklyn to northern Jersey when I was very young. Bordering my hometown of West Milford, NJ is Warwick, NY. It’s as Americana as you can get in the fall, with apple picking, pumpkin patches, haunted hayrides, and cideries. It’s only a short drive from NYC and definitely worth the trip.
