Digitizing the Lottery: How to Partner With The Government w/ Peter Sullivan, CEO of Jackpocket
On today’s episode I sit down with Peter Sullivan, the Founder and CEO of Jackpocket.
Jackpocket is digitizing the lottery — allowing everyone to play the lottery from their phone.
Peter shares his epic entrepreneurial tale that I think will one day become startup folklore. He persevered through an extremely long development cycle — during which he put it all on the line — only to emerge with a company that is going to be a unicorn.
I am an investor in Jackpocket so I’ve had the opportunity to watch this journey first hand. I think this is going to be one for the ages.
The lottery industry is GIGANTIC and states heavily rely on the revenue generated from lottery ticket sales. Roughly 30–40% of every lottery ticket sold goes to state programs, such as education, job creation, veteran care, and outdoor recreation and preservation.
As you might suspect, this means dealing with a TON of governmental red tape, which is both a challenge and a great way to create a competitive barrier.
During our chat, Peter shares mind blowing stats about the lottery, teaches us how to think about partnering with governments, details his crazy entrepreneurial journey and much more.
Listen via your preferred platform or watch/read below.
MPD: Pete. Thanks for being here today.
Peter Sullivan: [00:02:41]Thanks for having me. It’s been a while since we had a moment to chat, so I’m super excited. It’ll be great to catch up
MPD: [00:02:49] before we jump in. I want to actually start by introducing you. I find that, uh, when I do the intros, I get to say all the nice things about people.
They might not brag about themselves when they’re asked to do it. So let me, if you don’t mind, I’ll start off. Uh, Pete Sullivan, Peter Sullivan is the co-founder and CEO of Jack pocket, a mobile app that allows you to play the real lottery digitally. He’ll articulate it better than that than I will in a few minutes.
Interplay helped incubate this company and it’s becoming very, very successful. We’re really excited about being involved. Peter is a unique founder. I think you’re going to see that as we start talking, he’s a rare combination of having natural product and sales skills. Those two things don’t always go together.
He’s also definitively one of the scrappiest entrepreneurs I’ve ever known or worked with. And I think his journey through Jack pocket is going to be one for the history books. So I’m looking forward to diving in today and helping to share that story. I think it’s going to inspire a lot of entrepreneurs listening.
So with that, Pete, let’s jump in, man. Do you want to start it? I want to start with just an overview of what
Peter Sullivan: [00:03:51] Jack pocket is. Yeah. So I think you kind of hit it on the head. Jack pocket is the first and only officially licensed app in the United States that allows customers to order and play lottery games that they know and love that are official from the state lotteries.
So obviously everyone knows the mega millions and Powerball, but here in New York, we have the New York lottery, the big three, the big four. So we support all those, um, games and allow people to play from the comfort of their home or anywhere within the state. And, uh, we do all the compliance and heavy lifting as you know, it’s a heavy regulated industry.
So, um, we’ve worked really hard with both the lotteries, the regulators to ensure that, uh, we can provide the service to customers that want it to
MPD: [00:04:37] how many States does this live in now?
Peter Sullivan: [00:04:39] We’re currently live in 10 States, but, uh, this quarter we hope to launch a few more. And, uh, by the end of the year, we’re projecting to be, you know, 15 States or above.
Um, but you know, we’re going after some really big States. So we hope with the next few States, we’ll be able to say that we’re addressing 50% of the adult population in the U S market.
MPD: [00:05:01] That’s fantastic. And, uh, you know, w we had, uh, Ryan Smith from leaf link on talking about the cannabis industry a little while ago.
And it seems like there’s a little bit of a domino effect. States get nervous to be first, and then other people look at the other States and then they start to topple over. Is that picking up momentum here or there, you know, as you get 10 States and is it easy to get the next 10
Peter Sullivan: [00:05:23] for sure. It’s uh, the, the joke inside the lottery industry was that everyone wants to be there.
No one wants to be first, second, even scary, but there. There’ll be okay with, and it’s funny out of those 10 States that were alive. I think we did six States last year and then including New York this January. And so the dominoes have started, you know, toppling over inbound requests is really interesting right now.
I think we’ve shown that we can work with some really big States and show incremental revenue, but, um, I think what people. Forget about is how long it took to set up those dominoes. Right. And so, you know, we’re eight years into this. I always say, I always joke. We’re halfway to becoming an overnight success.
And now that everyone is seeing some major traction and growth, um, everyone thinks it just happened, but you know, it’s taken a long time to get there and you know, most of that story.
MPD: [00:06:20] Yeah. Blood, sweat, and tears. I actually want to recap a little bit of that story today. So how many people are using it. Do you mind sharing that some sort of usage stats to get people a sense of the scale of this?
Cause I think it’s a pretty big monster at this.
Peter Sullivan: [00:06:31] Well, in terms of scale, I can say this, we launched New York in the month of January. And in terms of mega millions and Powerball sales, we were passing 7% of all the sales of those games on particular drugs were being sold through the app. Um, in January.
MPD: [00:06:53] Distributor. Yeah.
Peter Sullivan: [00:06:56] Yeah. We’re the biggest in every state that we operate, we are by far the biggest retailer in every jurisdiction we’re live in today.
MPD: [00:07:05] How has COVID impact of this head? Imagine this is a counter COVID business where everyone’s stuck at home, not going to the places where they would normally buy their lottery tickets.
Peter Sullivan: [00:07:14] it’s interesting in two ways, um, you know, in 2020, every entrepreneur was told to have. A COVID slide in their deck. Um, we obviously are convenience play, right? So it’s easy. If you don’t have to go out to be able to order your tickets. There were a lot of industries that boomed because essentially the way that you could do something previously was totally, you know, not available.
However, you know, Places where you could buy lottery. Tickets were all deemed essential businesses. So there’s other pharmacies, grocery stores, convenience stores. Um, so typically people still had access yet. They weren’t, you know, there were times when people were told not to leave their house. So obviously we saw an increase, but I think the other side of the coin that people didn’t really understand was that States rely on the revenue that’s being generated from, from lottery tickets and about 30 some States up to 40%.
Uh, every lottery ticket sold is going to, uh, cause, um, a beneficiary within that state. And that could be state education in Oregon. It’s literally called job creation. Um, in, you know, some other States it’s veteran care in States like Colorado. It’s awesome. It’s actually outdoor recreation and preservation and you know what we’re seeing our budgets being dramatically affected this year.
And so. The state governments are looking for ways to increase revenue without having to increase taxes. So there’s been a demand and there’s also been most of the lottery, um, departments. We’re seeing it widespread across the country. We’re seeing their marketing budgets cut. So where they used to be able to do TV spend, um, or maybe those billboards they’re, they’re really doing drilling down on what they can do and, and that’s where we come in as well.
MPD: [00:09:01] So that’s driven more demand for your solution. I’d imagine.
Peter Sullivan: [00:09:05] Ton of demand from both the state side and obviously consumers, like, you know, if you can play without having to leave your house, you’re going to play, um, without leaving your house. So COVID definitely helped, but it wasn’t this, this moment where like, you know, all of a sudden, if you take away, COVID the business dead, it’s actually it’s shown, um, that convenience is King and that States have to, you know, think about how they can provide more distribution to more people.
But, um, You know, I think the key takeaway here is that we can help generate more revenue for States. And that’s, that’s due to the fact that it’s incremental revenue. You have people that are playing more that were traditional players, but we’re also getting new tech savvy, younger players that traditionally didn’t play.
MPD: [00:09:49] That’s fascinating because I think most people aren’t aware how important lotteries are to the functioning and the financial livelihood of the States. Right. It sounds like, you know, these States, we, we all hear the narrative that they’re cash strapped and. They’re in financial trouble and to, to knock out one of the legs of how a revenue other than taxes is probably super tough.
How I know, I know the answer to this next question, a little bit leading, but I think it’s fascinating. I’ve always been shocked by how big the lottery industry is when compared to other industries, would you share that for the folks listening?
Peter Sullivan: [00:10:21] Yeah. So, you know, to all the entrepreneurs out there too, it’s funny.
If you look at our series seats, seed deck all the way through our recent series seed deck, we always start with one slide, which shows a tan, right? The total addressable market and the backstory by the way, is that my dad was an everyday lottery player that we joked about. He was a guy that worked at the MTA.
I was born in Brooklyn. He moved us out to Jersey and we joked because he became an everyday. New York player in and everyday New Jersey player. And I only had this really narrow viewpoint of my dad’s a lottery player, but maybe it’s not as widespread. Well, it turns out it, it, so, so the answer to your question is American spend more on moderate tickets and this is pre COVID.
Then all concert tickets, movie tickets, sporting event, tickets, video games and books combined, uh, as of 2018, it’s an $85 billion industry in terms of ticket sales. New York sells over $10 billion a year. And of that, uh, New York basically makes a contribution of $3 billion to New York state education.
And that’s critical right now. Um, education is getting them beating and they need more revenue. And so, you know, people, I don’t think they think about it, you know, when they buy a lottery ticket as a, as a charity position, but really they are kind of giving back to their local community.
MPD: [00:11:40] So it’s interesting because, you know, look, the internet and mobile mobile has been around in kind of a meaningful way.
And it’s the, the last decade, I guess now it’s a twin it’s 21, I guess, two decades ago. That’s crazy. Um, and it’s, it’s shocking that lottery, hasn’t gone mobile a long time ago and you’re kind of bringing that to America and maybe beyond,
Peter Sullivan: [00:12:04] well, there’s a few reasons for that. So if you think about lottery, it’s one of these.
Archaic industry is that is government led. Right? And so, um, some, when we were getting into this, we saw one state, Illinois was the first state to attempt to do online. The problem is if you look at it, even through the last eight years, they’re still only doing two to 3% of all the sales online. And that’s due to the fact, there’s a several reasons for that.
One is they have to create a siloed app for that state. To the idea of build it, enable com um, as you know, you need to be doing marketing a lot of digital marketing, which means a lot of spend from the state three to create a compelling digital product. You need to have amazing engineers, designers, UI, UX, um, ex you know, designers, uh, people that understand bleeding edge technology, because everyone’s trying to get this millennial, you know, younger tech savvy demo.
But if you pick up an app within the first 20 seconds, if you don’t like the way it feels or it doesn’t feel up to date, um, people drop it. And so the state lotteries, and it’s not a fault of their own, but it’s due to the fact that they’re, they’re restricted and you know, the amount of capital that can deploy for human capital and you know, who they can hire.
It’s hard for them to build a complete tech team. Um, within the state bureaucracy program. Right? And then on top of that, what Jack pocket’s able to do is we’re able to work with a national brand. We’ve done a global partnership with circle K. Um, we’ve worked with a bunch of national partners. We’re going to roll out a whole bunch more.
And also every time we build a new feature or a new part of the product, a new enhancement for the user, um, We’re able to get kind of economies of scale in the sense of we deployed across all the state channels, right? So that tweak that fix that, you know, we’ve done an AB test and we decided to change something for onboarding.
It’s going to affect every single state. Whereas other States have to create siloed products. Now there is another big issue is that a lot of States through legislation or regulation are restricted from doing it. So California is a great example. Where everyone thinks silicone Valley is the number one place for technology, right?
And then you have California, huge state, not that big in terms of, um, per capita spend on lottery and due to the fact that it actually was a lottery that was established later established in 1985, I believe. And when they established a lottery, they introduced a rule that says you cannot have any distribution channel.
That wasn’t around when this lottery was created. So that inhibits the lottery from introducing internet channels, and we see that a lot. And so the only way they could do that is going through legislation to make that change. And then in the case of California, they tried to do that. Then you’re going to have the tribes, the card rooms, a lot of, um, people start coming into that picture and want to, you know, manipulate political very fast, very fast.
So that’s also been difficult for States is to get sometimes just the political support to be able to do so in a single state. And by the way, that’s where we come in really nicely. And, you know, rather than retailers being able to say, Hey, you’ve created a product. That’s, we’ve been your, you know, your bread and butter for so long.
We we’ve, we’ve actually created all these sales for you. Now you’re going to create a program that’s going to take away instead of a lottery start to lean in on third-party apps. They can say, Hey, listen, it’s a free market system. And if you retailers want to go and make sure that you create a highly compliant, um, application through a highly regulated market, go ahead and do so.
And so that allows them to take the onus off themselves as well.
MPD: [00:15:54] So, you know, look, we, we hear a lot about the companies that are generally disrupting the deeper rooted fabric of the system. We hear about Uber and the taxi commissions we hear about. Airbnb and conflict with hotels, you’re changing and disrupting something.
I think we’re generally better for everybody, uh, by bringing the lottery to more folks. But it’s, it’s one of the companies that I’ve been involved with where I’ve seen there’s more regulatory involvement. Typically when entrepreneurs show up, they hire a team, they raise money and they launch something.
It’s a different game because your partner is the government. What have you learned for other entrepreneurs who are waking up right now? Thinking, all right, we’ve got an idea. Man. There’s a lot of frictions, a lot of red tape because it’s a government regulated or government operated business. Yep. What do you, what do you tell them?
How do they, I mean, you had to learn this playbook. What’s the playbook for people to kind of get from zero to being in market and being successful.
Peter Sullivan: [00:16:55] So the first rule is don’t use that word disruptive because what you’re trying to do is, is not disrupt them. What you’re trying to do is teach, right.
You’re trying to. Showcase, you’re trying to, um, educate, uh, lawmakers, regulators, existing systems, that there is an alternative, and there’s a solution that you found. And what we learned was to do things right. There were no shortcuts and that’s, that’s tough as an entrepreneur. But the number one thing is persistence, you know, through this all, it’s the number one trait of any entrepreneur, I think is the idea of persistence and what our approach was, was twofold.
We needed to approach the lotteries and let them know who we were and that we wanted to be a good player in the space and that we wanted to be there for the long run and establish ourselves at the same time we needed just like you need to show an investor, some traction, we needed to show some traction.
And so we, we needed to find an in an innovative way that was legal. So I think that’s super important is doing things that are illegal. Um, but, but that could actually show some traction. And so what we did was we created a solution where Jack pocket was the intermediate party and essentially a digital courier for consumer.
So we went to the. State lottery. We answered an RFI for the state lottery and we didn’t hear anything clarifies a request for
MPD: [00:18:31] information, right?
Peter Sullivan: [00:18:32] Exactly. It’s both. Yeah. It’s before RFP, usually there’s an RFI where a government agency is collecting information about a problem that they’re looking to solve.
And then the RFP is actually when you’re actually putting in a bid as a contractor, but we knew we didn’t want to be that white label solution. We actually thought there was a better structure that was going to mimic, kind of have casinos are aware. You know, the state gives out casino licenses that generate some type of revenue potentially for the state.
And there can be, you know, third party, private companies that can apply for that. And that’s the framework that we were looking for. But with New York, when we didn’t hear anything back, we said, well, you know, there are retailers that are selling tickets right now. And I can text my friend to go pick me up a ticket.
That’s totally legal. So what if we actually scaled that concept? And, uh, it’s almost like the founder of Zappos. When, you know, he didn’t have an online, uh, or inventory store. He would actually the story that I’ve heard, at least as he would go around to shoe stores and take pictures and then post them online and then people would buy them and he’d buy them from the store.
And our approach was the same. Could we ensuring that we had age verification and geo verification, which were the necessary, um, Compliance requirements along with some others, but could we actually showcase that, you know, through this third party, we can actually get people playing a lottery. And so, um, we actually went out and purchased a retailer out in Queens.
Um, To be able to have full oversight of that retailer. Because at first we were actually purchasing tickets from the corner of a, we worked down in one 75 Varick street and we got so close to that retailer that, you know, we still have a great relationship today, but as we started to scale, and then we could go back to the ladder and say, Hey, look, we have demand for this.
People want to do it. So I think you need to make a, you know, with data showcased that this is possible and that there’s traction and there’s interest. Um, And then you don’t want to swim upstream. We learned that too. You know, these, these people are gonna be your partners and it’s a little bit different when you look at Airbnb and you look at Uber when they fought, when they won, they didn’t have to then talk to those hotel chains every day.
Right. If we were going to fight a lottery in any sense, then the next day we’d be starting that relationship off on a bad foot. Right? Uncomfortable. Yeah, definitely.
MPD: [00:20:48] Okay. Yeah. There’s an interesting parallel here. We just had John Stein on, uh, one of the founders of betterment. It was CEO of the company for more than a dozen years.
And one of his big takeaways and lessons, which is funny, it seems so trite and trivial, probably to normal business people, but to entrepreneurs it’s significant. It’s not, you know, going cutting corners when you’re operating in a heavily regulated compliance space. It’s doing it right. Everything buttoned up, I’s dotted.
T’s crossed. I know you’ve done that. Betterment did that. Uh, and I think that’s an investment that a lot of entrepreneurs are kind of told more or less not to make, uh, because you just want to candidly, fuck it, ship it, get in market and start doing business. Yeah. But, uh, I think in these spaces where the government is super involved, there’s a different strategy here.
And I think that’s a big insight for folks.
Peter Sullivan: [00:21:42] Well, the strategy is when regulation is really hairy and difficult and hard to be compliant with. If you’re able to do so. And you’re actually, you know, when we, when we provided some input and we still do to this day and on how regulations could be written or best practices that we’re seeing, or different sort of certifications and compliance and banking and all this stuff, I mean, you go from the way that we hold player funds to the way we do transactions and the way we randomize numbers.
I mean, everything has to be audited by third parties. It takes a long time. It takes an initial investment. But that also builds a barrier to entry and that becomes your moat is actually doing things the right way. And now there is, there’s a difficulty there too, because when you’re so small, it’s hard to run these processes.
So it was, it was really interesting when we were going through the regulatory process and some of the big States like New York and New Jersey, there were things that we were suggesting that ended up, um, You know, being part of the regulations and, and, you know, there’s an input period where you have public comments on the regulations that we knew we hadn’t built yet, but we could build.
And we were on that path to building and would also be at the end of the day. It’s it all has to go back to consumers. Are you protecting consumers? But we also felt, Hey, listen, if you want to be a great company and you want to show that you have controls on this, cause this actually matters to consumers like then, and.
It’s tedious and tough and hard. Well, anyone that else that wants to enter space is going to have to do it too. So let them figure it out. And we took that approach and that’s enabled us to, uh, have a major first mover advantage in these markets. And then the other part of that is then you can talk to the establishment and show and with pride, say, We hold our heads high because we care about compliance and we care about crossing the T’s and dotting the I’s.
And it’s, we’re not going to, you can trust us. We’re not going to ship something. That’s not compliant.
MPD: [00:23:52] Peter. I want to rewind a little bit and kind of go chronologically through your journey because I think it’s fascinating. And I think if we had you on the show and didn’t share this with the world, it would be a mistake.
Yeah, I think it’s one of the more aggressive, incredible journeys that I think entrepreneur, you know, I feel like it’s, it’s almost the stereotype of what people imagine. It’s really like the most people it’s not this hard for and not this impressive. So we met during your prior venture, will you start by just giving kind of a one-liner on what the company was?
You know, what you learned about that? What do you learn from that? Yeah, so
Peter Sullivan: [00:24:26] I was a college rep and I, I found, uh, that the. Country of Sweden was giving away a free education for masters programs, if you qualified. Um, and I found this out while traveling around Europe and I applied, I was living in San Francisco.
I applied, I got in and, um, first day of business school met the person that would become my founder, started a company in, in, in Sweden that was around social travel. Um, ended up getting venture capital here in the U S which was. Really tough because at this early stage had to like do this reverse stock swap thing.
And, and I had all these employees that were Swedish and then we brought them here for an accelerator program. Went through that, uh, pivoted and the company became basically showcasing where all your friends were traveling, uh, through a new perspective. At first it was around connecting travelers. Um, but then showing kind of where all your friends were traveling.
And it’s funny that the Facebook API change that happened when they, when they stopped using the graph would have killed the company anyway, but the company died. But from that, I learned how to build a team, raise venture capital ship, product, ship, a mobile product. And I was doing everything. You know, I was a designer.
I was designing, I was raising money. I was doing it all. So definitely had a chip on my shoulder and then was looking for, uh, something big and spent a lot of time seeking coffees with. Um, VCs and angel investors about some concepts. I had them. One of them was lottery idea. I’d saw that the New Jersey lottery was the third state, privatized a lottery.
And I thought, this is interesting. Like, can this go online? This would be a huge industry. If we can and make this happen, uh, ended up, um, meeting a family that was quite prolific in the lottery industry. And at the time they couldn’t invest, but they were like, we love that name. And at that time I didn’t even have the domain locked in yet.
So I had to borrow some money for my mom, locked the domain in, we started building heads down. You helped raise some of the initial angel checks that we could, I could actually hire people and we built like a prototype. And then it turns out that family left the company that they were essentially, uh, major executives at.
And so we want to invest. And then, um, went through a process where they ended up not investing. We were looking and, uh, you introduced me to Barry silver, actually from digital currency group. I actually ended up, uh, helping raise some capital. And we finally were able to raise a seed level and it was a tough time, but we finally built a product.
Got it out. And we were going to launch in New York and we, we hired. A lobbying firm here in New York who communicated with New York that, Hey, listen, these guys are going to be launching. We, we answered that RFI. So they knew who we were, but they, I don’t think they were thought how much it was going to catch fire.
And, um, I had always thought that if we were able to get this thing live, it was going to be huge. And we submit it to Apple. And I mean, we got rejected like 16 times. It was months of being rejected. Money was dwindling. Again, we didn’t know what to do
MPD: [00:27:39] any big lesson learned about how to get through the Apple.
Peter Sullivan: [00:27:42] Process. Um, what I learned
MPD: [00:27:45] was you were getting with Jack, I remember a lot of regulatory, legal language around lotteries and gambling and whatnot
Peter Sullivan: [00:27:52] seen this model before. So explaining how this model works. So it was funny. One thing I, okay. One, one thing I would tell entrepreneurs is I was a scared for a while to get a legal opinion.
Because I didn’t want it to come out. You know, I didn’t want to hear you’re building something. You don’t want to hear something that says, wow, what you’re doing is legal. And finally we had to lean in and get it and just go through it. And we, we actually learned, and there were things that we had to change in the product that said, Oh, if we just tweak this or tweak this, actually there were solutions that could be found.
And so don’t be scared of your own shadow in a sense, like, you know, you have to go out and just say, Hey, let’s, let’s get that legal opinion and make sure that we can stand on two feet and be proud of what we’re building through Apple. I think what we learned is Apple is a hard nut to crack. And I bet every entrepreneur that you bring on it’s, if I’ll tell you this, if you can get a good communication channel there, keep it, um, it’s really tough.
We’ve managed to do have some along the way, but you know, sometimes people leave and it’s, it’s hard to reestablish them, but. That was a nightmare going through that. And then, because we didn’t know, and we actually built non natively at that point, our, our Android app was native, but it was weird Android until this Marx didn’t allow for real money gaming inside the app store.
So they just did it. And we just got approved for New York and we’re live ACCE and Android, uh, and the Google play store. So we’re super excited with that where Apple actually took. Thanks. It’s huge. I mean, it’s. Uh, 50% of the addressable market, we haven’t been able to advertise to essentially, but with Apple, it was weird.
They took a more liberal approach to gambling. Um, but remember, if you get rejected from Apple and you’re a native app, you can’t distribute that app. You’re you’re done. So we actually built it using a hybrid approach. We’re now fully native and we’ve been for quite some time, but we had to make a real decision that, okay, we’re going to.
Put in a wrap app and if it gets rejected, we could at least have a mobile web version. So through, back and forth, back and forth, we finally, we are able to get it approved. So now we’re just waiting on what day and making sure that everything is compliant and we release it in the app store. And we just get a little uptick, little uptick just from like kind of organic traffic and our payment processor.
This is like days before we’re trying to set up this big press release. Shuts us down and they go, Hey, what are you guys doing? And we’d like, we were very clear what we were doing. We we’ve had multiple conversations. So we finally get them a day before. We’re about to launch that say, okay, we’re going to let you keep going.
And we see that what you’re doing is legal. And then we tell New York we’re going to be launching this date and we let them aware. And they basically say, we’re going to take a neutral position. And we ended up working with, um, a great PR team that had really great local New York ties. And it was on a Sunday.
I had to do an interview and he lined up an interview with the New York post. And I, at the time I was dating a girl and there was like a birthday brunch we needed to be to. And during the, the brunch, I have to go outside and in the streets of Manhattan, have a finger in my year and talking to this guy in the New York post.
And I think I blow the interview. I called back my PR guy. I’m like stunned. We’re not going to get it. Go to bed that night to Sunday, wake up Monday morning and we are on the front cover of the New York post it’s like new ads, amazing new app, uh, raises jackpot to, you know, 300 million or something. And we were like, Holy shit, this is crazy.
So I get to the office and we already have good morning America. Um, Good morning today or whatever the CBS show, all of the show is calling us all the local news waiting outside our office. And it just tried off like crazy, right? So we have this amazing moment that we w we were, you know, that we had, and we’re about two, three weeks into this thing.
And it’s just skyrocketing and people are so excited about it. And then all of a sudden, it’s a Saturday, and I get a call saying that our payments are cut off. And so that same payment company ended up shutting down our payments. And it turned out one of the credit card companies filed a complaint. And so we go on this basically six month endeavor where we start to then introduce ACH within three months, but we have this pent up demand.
We just showed people, all these people want to play. It was so funny. We, at that point, when people won credits, it was in their account. And I remember we were like a week or two into not being able to accept payments and we were having a drink. At a bar and with one of my co-founders, it was okay. People have credits in their account, they can play with it.
They don’t have to do another purchase. Let’s let’s just see if we turn it on how quickly people will play. And we made all these bets five minutes, 10 minutes, we turned it on within like four seconds. People were playing and had credit. So people had been trying to play, trying to play. So again, we, we, it was this other like, okay, no people want to play.
So we ended up finding, we moved and got all this, um, compliance done to get a, another payment provider. And we’re able to start growing, but now we’re running out of that seed capital. We need to do a series a and right before I went out to the way I used to do my fundraising. And, you know, in the old days to the before times, when you would actually have to do in person meetings, uh, I would line up, you know, like 15 meetings over three days on sand Hill road or something like that in San Francisco.
Right. So I would just pack them in and just hustle, hustle, hustle, go to as many as I could. And really just like, kind of. Kill myself when I was out on the West coast. Um, and I’d done that. I’d set this whole thing and I broke my ankle. I broke my ankle and the day before I had to, um, get a, one of those little dollies that you put your knee on and went out, went out to the Valley, still did the meetings.
And one of the people who led our series a still says, you know, because I came in when I was still hurting and still did it, like that was one of the reasons they invested. So we’re, we’re all excited. We get the series a investment. So now we have product, we’ve gotten through some tack, you know, some payment issues and we’ve gotten some traction.
We’ve gotten a series, a investment. We just get a close in like less than 30 days after we get it closed. New York. Um, gaming commission comes in and says, Hey, listen, we’ve taken a neutral position for as long. We either need to regulate this thing or we need to set you down and you need to pause, play right now.
So we’re like, Aw, man, we ju and thank God we had raised that series a money because we would have been done. And so we ended up hiring the lawyer that actually fought here in New York for Airbnb and Uber. And. She’s a fantastic lawyer. And, uh, we ended up working with her very expensive, but we were able to get the New York gaming commission to give us one meeting.
And so we had to go up to Schenectady New York. We went up there, got on a train and there was a very long table. There must have been 20 odd 20 some people that I presented to. And that’s the time. Um, What am I am like 26, 27 or something, and I’m presenting to everyone. And I basically say, Hey guys, we, we now have enough traction to show you that, like, we can do this.
We can help you sell these lottery tickets. And right now it’s very ambiguous. If you can do it on your own, you may need legislation, but through changing the regulations and the model that we’ve established, we think we can do this. And it took us like three months of silence and they came back and said, you know what?
We want to do this. We want to create regulations. Well, we thought that was going to be a one-year process that ended up being another three year process of helping them create the regulations. Then they have to post the regulations and they have to vote on the regulations. Then they have to have comments.
They have to take the comments and then they have to have another vote. And now the regulations are done. Well, now they have to create an application. And now you have to apply for the application that you created or how the regulations that you’ve provided input on, and then you have to apply to it.
And then they have to go through, you know, a ton of work, but we knew, and we were lucky to have investors that wanted to play the long game and knew that if we could you’ll Frank Sinatra song, right. If you could do New York and do it anywhere. Like, if you can get business done here in New York, all the other lotteries look at you and we’re like, wow, these guys were able to get through that.
And during that time we know we couldn’t stop. We couldn’t just wait for New York. So we started opening up other States, you know, all around the country and starting investing in technology and starting investing. And I think what people don’t understand about what we do is we actually take physical paper tickets and we digitize them.
And that’s through proprietary technology that we built that is both software. But also hardware. We just filed our first intellectual property on robotics machines that actually help us convert these paper tickets. And, um, if you go into one of our fulfillment centers today, it looks like an Amazon fulfillment center where there’s robots helping humans that are automating and basically going through high speed scanning process printing processes, optical character recognition, machine learning technology.
That’s letting us. And every time somebody ordered a ticket, we’re actually printing a physical ticket in and processing that ticket in real time. And, um, so like one of, one of the interesting areas that I always say is even if a competitor came in today with a hundred million dollars in marketing spend, they can’t keep up operationally.
And the only way we were able to do that, I guess, is another entrepreneur let’s use. It’s like a small iterations, right? It’s you keep on learning and you keep on discovering. You keep on. Getting these better and better and better and better. And listen, there were a hundred things we could have tried to do, but staying focused on this just core mission has led us to a position where, you know, we’re confident in what we’re doing.
MPD: [00:37:23] Peter, it’s an incredible story. And I think just to contextualize it for everyone who didn’t read between the lines and all of this, most entrepreneurs fail. When it’s easy to raise money, it’s easy to get credit card payment processing done, and you don’t need government approval. Yeah. You had all three of them saying no, from the beginning,
Peter Sullivan: [00:37:42] we had a lot more than that say no, but you broke through all
MPD: [00:37:45] those barriers.
How long since you started eight years, how long until you were in market materially from the time of starting six years?
Peter Sullivan: [00:37:53] Yeah. So we started the company. We started the company in 2012. It got incorporated in 2013. I started in 2012. We went live in New York in 25th teen, but got turned off in 2016. And we just went back, live in 2021.
MPD: [00:38:11] we’re talking years and years and years of endurance and stamina to get to where you are now. I mean, that’s a hell of a mode if I ever heard of one. Um, I think there’s more to the story, right? This was not just a hard journey as an entrepreneur. It was hard for you personally. Right. Uh, I know you went through the rollercoaster.
I mean, every, all the entrepreneurs I work with, I’m an entrepreneur, the roller coaster is real. Right. We’re all on it. There’s no way off it until the show is done. No way off it. No. And to sit in limbo for that period of time, I’m sure it was emotionally taxing, but I also know it’s financially taxing. Do you want to talk about some of the highs and lows, what you went through personally?
Peter Sullivan: [00:38:54] So. On a personal level, not being able to pay myself for many, many, many years that was just drooling. You know, it, the time when I went to raise a series, a, I actually went to take, uh, an Uber or taxi back to my hotel and I had to get my sister to send on, I think it was cash app at the time money. To cover.
My sister is 10 years younger than me. Right? I was, I was, I put out a lot of money on credit cards. It was really, and I don’t recommend that by the way. Um, it was really troublesome for me. Um, the rollercoaster, I could say this when I first started at Jack pocket, we started a rework and it’s been interesting to go through that whole thing.
Cause you knew I was part of that early. We were community and I would. At night at around 10 or 11, whoever was left. I was like, okay, these are the real guys that are really chugging along and trying to make things happen. And I would finally go to them. I’d be like, Hey man, how’s your psychology dude.
Are you feeling first? They would be brash. But then I would kind of lean into that, man. You can talk to me, I’m going through this rollercoaster riding when you could, these people would open up to you, tell you how troubling it is because everyone feels really alone during this time. Even though I, I started a company by myself.
I was a single founder. Then we, I call it our founding team, our first few family members that we brought in. But when I envisioned the company, it was just me. And so a lot of this, I had to endure myself and I always say, I’m like 90% transparent to the team, meaning I’ve tried to tell him everything, but there’s some things that I got to get beat up on that they don’t need to know.
And that still happens today. But the rollercoaster ride is really interesting because. I always see, can be in a shower. You’d be taking a shower in the morning. And within that shower, you can go through two highs and a low, Oh, this is the best idea. This is what am I. Then you’ll hit a point when you’re washing your hair.
And you’re like, what am I doing? And then by the end, you’re like, no, I’m going to go and kill this day. What I learned is a rollercoaster is never going to go away and you should not think it’s going to, but rather than it being this big, letting it ripple like this, right. Um, I think one frustrating thing and it’s.
I think what it shows is real entrepreneurs. It’s about hunger is these highs, these quote unquote hives that you’re supposed to feel that time when the money sent for a series around the time when a state goes live, the time when an offer comes in, whatever it is, a deal gets signed. Everyone has this movie montage.
Premise that like, you know, there’s a celebration and everything. I remember when we launched Texas, it was like, someone was like, Hey, Texas is live. And everyone’s like, okay, cool. And this is, that had been a state we’d been working on for such a long time when you raise a round and it just feels like it’s so anti-climatic.
And I think that’s because to be able to divide this game, you have to be hungry and already onto the next thing. So when, when those moments happen, you’re like, shit, that should have happened already. Like I’ve been waiting on that forever and you know, everything takes longer. So that’s another entrepreneur lesson, right?
It’s like it, everything takes longer than expected. Um, but I think that keeps you hungry because if you were satisfied with that financially, again, people will talk about financing. It’s like, it’s a success story. As you know, it is basically just, Hey, you now have materials to work with. Still build the house.
Like you can like build the business. You just have that runway to do so. Um, but grueling for me, you know, I, I love, I, I love talking to the founders when I do get the chance to, because it’s still, it’s still tough, man. It’s still, it’s still something that’s beats you up and it’s tough to be the person that has to always be making decisions.
Right. You have to always be there. You have to be on you. Can’t step away. It’s exhausting. So what do I say? When I said before, I think on the early part, I liked those guys have stayed till 10, 11, but as you start to mature, you need a work-life balance. It’s really hard for me to still step away for a full day or even, you know, some time.
But I think recharging the batteries is the best thing ever. And I think physical activity is the best and being in nature is the best thing for that. So I think it’s really important to maintain some type of, you know, normal lifestyle, um, alongside building something, um, It could really help recharge the batteries and in a way that I don’t think anything else can, but, uh, I, this, this is going to sound bad.
I, I don’t think a lot of people are cut out for entrepreneurship, you know? Um, and, and that may sound like an ass thing to say, but a lot of people will say, Hey, you know, especially people that I knew, you know, in high school or whatever, Hey, can you give me some advice and try it? My advice is actually don’t do it.
And I know that’s, that’s, that’s brutal, but don’t don’t even get started. Don’t it’s, you’re a great person. You’re just not, you have to be cut out for this. You have to really be cut out to get dragged through the dirt a lot and take a lot of beatings. So I dunno,
MPD: [00:44:03] you’ve got one of my favorite tenacity stories, uh, the fundraiser he did at Y Combinator.
That was a prior company, right?
Peter Sullivan: [00:44:12] Yeah. He asked. So yeah, that was, yeah. Tell that story real
MPD: [00:44:14] quick, because I think it’ll give what you’re talking about. The type of person, I think this story exemplifies why you are that person. Yeah. As much
Peter Sullivan: [00:44:23] as anything. This is a good one. So no, I bet a bunch of people listening have tried to apply to these accelerators and you get rejected a million times and super frustrating.
But at this time, Y Combinator, you know, was the hottest thing and we didn’t get in. And I knew that this time they took it, it was the first time they brought in the class. Remember they used to have really kind of intimate classes. Then they brought in the class. And I think that year, for demo day, they were making everyone have like a two or three minute pitch.
And so I wasn’t in the class, but I was like, wait a second demo days happening. And they’re having it at some venue in, I think it was mountain view or men Menlo park or Palo Alto somewhere there. And I was like, wait a second. I can’t get into the building. I’m not going to be able to present there, but guess who’s going to be outside the building.
Everyone that’s driving to this venue is a high caliber investor, venture capitalists. Um, and I said, wait a minute, I have everyone in this moment. So I created fake parking tickets for the city. I believe it was mountain view. And I went and created these parking tickets and I put them on everyone’s car and they look pretty authentic cause I’m a designer.
So I was able to, you know, modify one. And it said you are in violation of making a bad business decision based upon a two-minute pitch. If you really want to. My name is Pete and we’re triple and we’re innovating the travel space and this is how you can reach out to me. And so what happened was. I put them on all the cars.
And obviously you could really cherry pick the nice cars in this premise, right? So I do, I put them all and I take a picture. I posted it on Instagram and then I, I posted it on hacker news and it became the number one story on hacker news while Y Combinator demo day was going on and then like tech crunch and the next web and venture me, they all picked up the story.
And I remember one of the headlines is like the best. Pitch at YC demo day actually happened in the parking lot. And so it was amazing that I was able to get all this attention. And from that I got multiple venture meetings and people that just love the way that I approach it. I also got some very nasty emails from YC and they actually, I don’t know if this has ever been publicly known, but they actually undemocratically took down the post at some point because it was the number one post on hacker news.
Yeah. So that was definitely a, an interesting story.
MPD: [00:47:00] Pete, you’ve been pranking on this and I’ve had different experiences and frankly, most entrepreneurs who play in this game, what’s one thing you’ve learned, even if it’s a little bit esoteric that other entrepreneurs can learn from.
Peter Sullivan: [00:47:12] Yeah. So, you know, looking back, I think we did a lot of things the right way, and I give ourselves a lot of credit to that and it’s helped us build confidence.
I think it took a lot longer than we expected. But one thing that I definitely learned and whether it’s, you know, within a regulated space or not, there are going to be incumbents and you want to show them that you’re trying to innovate the space. You don’t want to be too cocky. And sometimes being too cocky and arrogant can maybe, um, kind of, you know, have you kick yourself and with us a little kind of story that happened was when we were launching in New York, we knew that if we got a bunch of attention, That the app wouldn’t be available in other States, but we’d probably get picked up by some national media.
Um, and it did. So we had good morning America, CBS this morning. And so what happened was all these people would be downloading in States. They couldn’t play. So we had to utilize, um, and basically try to leverage that situation cause we, they couldn’t play. So what else could they do on the app? So we uses that as an opportunity to promote ourselves and we thought it would be funny.
Cute. And we were a little arrogant that said, Hey, Jack, pocket’s not available in your state. Would you like to let your state lottery director know? And this actually caused us to have a little bit of a bad reputation when we first got started in, I wish we wouldn’t have done this because it worked really well.
Um, basically within the first 48 hours, I think over 50,000 emails were sent to state lottery directors. So many emails being sent that we actually cause a bunch of the state lottery, email servers to crash. People got really upset at us because for weeks, people were just emailing all these lottery directors and with their personal email addresses.
And so we thought it would be a way to raise attention and showed demand. It kind of backfired. So I would, you know, you don’t want to swim upstream in a, in a industry that you want to be part of. Um, so that was something that I learned that maturity, um, definitely kind of caused me to look back and be like, Hey, I would definitely do that differently.
And I think there’s probably a bunch of stories like that that can go in any industry, which is, you know, you have to be a little bit respectful of some people that came before you too. I know you want to do something that’s going unquote disruptive. Again, we don’t use that term inside a highly regulated industry, but like, you know, there there’s incumbents there and, and, um, reputation matters.
MPD: [00:49:36] And those those players you’re trying to disrupt often and buying you like it’s counterintuitive, but you want to, you know, it’s this weird dynamic where the people you’re competing with with most in life, whether it’s sports, business, anything, those are also the people you almost always have the most in common with totally this tall
Peter Sullivan: [00:49:53] conundrum.
Exactly. And especially in tech where like, Incumbents are being displaced all the time. It’s like, they, they just displaced their incumbent that’s too long ago, too. Right. So they were in your decade before. Yeah. So, so it’s just be respectful, I guess, you know, you want it, listen, it’s a game out there and you want to be, you want to be aggressive.
You want to be smart, but just be respectful. I
MPD: [00:50:19] totally agree. Hey, Pete, uh, you’ve been on this journey for a long time. And it’s been hard fought, and I think it’s very clear for anyone paying attention that this is going to be a hugely successful outcome. You’re changing the way a layer of society functions.
Um, you’re servicing a lot of people. You’re integrating a lot of States. Your modes are enormous. I assume this is going to have a very big financial outcome. I know you came from humble beginnings. Your dad worked for the MTA. I think he was an iron worker. And then on the engineering side, uh, what does this mean for you and your family?
Yeah. When you look at the path you’re on, I know it hasn’t happened yet, but you gotta be remiss. You look crazy not to have Holy shit moments as you realize where you’re at. What is this whole for you?
Peter Sullivan: [00:51:07] Totally. And, and listen, I always knock on wood because you know, we’re still pushing that they hasn’t come yet, but we’re, we’re charging towards it.
And, uh, I think anyone that also says, you know, they don’t want to have a big financial return. Is is, is lying publicly, right? It’s, it’s obviously one of the reasons why you adore for this long is to hope for that. And, and you’re right. And my, my dad, I was born in Greenpoint, Brooklyn, and, uh, my dad and my mom met my dad, uh, owned, uh, an after hours bar.
Um, but his father and my dad’s grandfather all came from the MTA. Um, And, you know, he had very humble beginnings. He never even had a bedroom. Um, growing up, he never could play organized sports. Um, and so my dad wanted to make a better life for us. Now, again, my mom being from Greenpoint, my dad being from Williamsburg, they move us out.
To New Jersey to make a better life for us not knowing what was about to happen to those neighborhoods. So now they’re kicking themselves in the ass saying, Oh man, if we only bought property or didn’t try to do the right thing for our kids, where a bunch of their friends didn’t, they didn’t put a dollar into their place and they’re selling them for millions of dollars, but my parents wanted to do something better for their children.
And my dad wanted to get involved in all this, you know, recreational sports stuff. So he couldn’t play as a kid. So we wanted to be my head coach for baseball and basketball and football and all this. And so. My dad would commute about an hour and 15 hour and a half each way into the city and back. And he did that for like 30 years.
And you know, the funny story, like I say is during that time that we became a New York player. Um, and then we became a New Jersey lottery player and people, people think about this founder story, you know, I think some people have started to fabricate some stuff around it. My family. Was so involved with the lottery.
It was, I mean, a weekly joke about my dad and my dad came from, obviously my grandmother, my grandmother was known as the lottery queen in Brooklyn and she passed away this year and it’s a little more of it, but it’s, it’s fine that it was a little sudden, but, um, add her weight in Greenpoint. Uh, people actually brought lottery tickets and put it in her casket.
I mean, this is no joke. Like this is, this was my grandma was a sort of a savant in terms of bingo. She could look at like 15 cards and memorize the cards and go play. And she was always out in the bingo hall. So, you know, obviously her kids and my dad being one of those were always players in the space.
And we joked about my dad and this all the time and little, I had no idea I would ever be in the lottery space. And lo and behold, he was the inspiration for it. All. And so when we did our first TV commercial, I actually asked, I had my dad. And so it’s me and my dad on the TV commercial. And I it’s, it’s authentic because it’s really my dad, big Pete, we call them and we brought my dad to one of the lottery conferences.
And it was the first time that he kind of saw how big this was, what we were doing. You know, it was, it was like someone that would play the lottery, but never saw behind the curtain of how the lottery industry works. And he was so proud and, you know, It’s it’s awesome that I’ve had a super supportive family throughout all this.
I mean, I couldn’t have asked for more and, you know, my mother’s always been super supportive. My dad and my brothers and sisters, and, you know, I, I hopefully can have a life-changing moment that I can help change their lives as well. And it was funny. I due to some financial circumstances, my mom always wanted a, a Louis Vuitton bag.
That was one thing she always said. If you make it, you can get a Louis Vuitton bag. And, um, due to the deal that happened, we were able to, I was able to get her that, and I gave it to her on her 60th birthday this year, she was crying and it’s just a small thing. Right. But like, for me, I’d heard that for the last seven years, eight years of my life, since starting the company one day, you’ll get me that Louis Vuitton bag.
And, um, you know, that’s what you’re in it for. And that’s actually a moment you can step back and say, wow, I’ve actually come full circle. So, you know, I’ll end with this stuff, you know, what is success? And it was funny. We had a, our auditing company and they, every year when you get your financials audit and we need to, most startups probably don’t, but since we’re regulated, we need to, and it’s a big one of the big four and they come in and then there’s a segment where they have to go through and they kind of pull you aside and they have everyone in a room and they go through some hard questions, you know?
Um, and the woman, the partner there, it goes up just curious, be though, you know, what do you think about success? How do you, how do you qualify success? I said, Well, you see that moment out there on the phone. She’s, she’s our first customer service hire. I want her, when we exit this thing to be able to buy a house in cash, that for me would be success.
And she goes, wow. And she’s like, I’ve asked this a million times that I’ve never heard someone point to somebody else for success, but really I think that’s why entrepreneurs shifted. So fun is because. Everyone should be working together in the same boat to help lift everyone else up and change everyone’s life.
So hopefully we’ll have that outcome. And hopefully that the customer service person will be able to get that house. And, um, you know, I see it on the horizon, whether it’s going to happen tomorrow or two years from now, who knows, but I think we’re moving in the right direction. And, um, I’m glad I stuck with it.
And thanks for all your support along the way to
MPD: [00:56:32] absolutely be you have a lot to be proud about. Fantastic. Beautiful story with the family. We wish you the best of luck. We’ll be obviously staying glued to all the updates. Um, thank you for being on today.
Peter Sullivan: [00:56:44] Thanks man, for having me great to talk to you.
MPD: [00:56:50] Well, as I mentioned the beginning, that’s a hell of a founder story. I hope you found it entertaining and learn something. Jack pocket is a company to keep an eye on. If you liked what you heard, please hook us up with a like, or a five star review and feel free to share with a friend. You can find me on Twitter at MPD.
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Digitizing the Lottery: How to Partner With The Government w/ Peter Sullivan, CEO of Jackpocket was originally published in @MPD on Medium, where people are continuing the conversation by highlighting and responding to this story.