US-based FanDuel became the first fantasy sports platform to reach a billion-dollar valuation last week when it raised $275m in a series E round backed by a host of corporates that definitively showed the increasing importance of the sector.
Founded in 2009, FanDuel runs a platform through which users pay to compete against each other in fantasy sports games with cash prizes. There are over 20,000 leagues open at any one time and the company claims that more than $10m in prizes is paid out each week.
Crucially, FanDuel operates differently to traditional fantasy games, which run for the course of a season. Instead, FanDuel’s are played over the course of a single round of matches, allowing for a greater frequency of games and potentially a steady stream of income.
The company raised its series E funding from Google Capital, the growth equity arm of internet company Google; Time Warner Investments, NBC Sports Ventures and Comcast Ventures, which act as the respective investment arms of media companies Time Warner, NBC and Comcast; broadcaster Turner Sports, KKR, Shamrock Capital, Bullpen Capital, Pentech Ventures, Piton Capital and the owners of undisclosed NFL and NBA teams.
FanDuel, which was valued at “well north” of $1bn in the round, according to Re/code, has now raised $363m in total, having previously secured $70m in a September 2014 series D round featuring Comcast Ventures and NBC Sports Ventures, and $11m in a Comcast Ventures-led round a year earlier.
The round was closed three months after FanDuel’s biggest rival, DraftKings, reportedly agreed a $250m investment from media and entertainment conglomerate The Walt Disney Company at a $900m valuation. Although the deal was said last month to have fallen through, sources told Re/Code the company was nevertheless in advanced talks with other strategic investors over a “large round.”
FanDuel and DraftKings, which had accumulated $75m in capital as of August 2014, are essentially in a head-to-head battle over the sector, having raised far more funding than any prospective rivals.
Part of that battle consists of securing strategic partners that can help each company nail down a place in the market.
DraftKings made a significant statement earlier this year by agreeing a $500m sponsorship deal with sports network ESPN that will involve it being advertised prominently on ESPN’s broadcasting and online platforms.
FanDuel is taking a slightly different path by tying up an exclusive sponsorship deal with the NBA in addition to separate deals with 16 of the NFL’s 32 teams and 13 of the 30 teams in the NBA, some of which are sure to have been owned by participants in the series E round.
What is perhaps more interesting are the details concerning FanDuel’s investment plans. It recently hired 40 developers – almost all of which were part of mobile gaming company Zynga’s now defunct fantasy sports studio – in a bid to expand its focus on sports and mobile gaming.
The move suggests FanDuel’s long term plans may well involve it concentrating less on the relatively niche fantasy sports space and more on becoming a substantial player in the wider mobile gaming sphere. It could even herald a move into the burgeoning eSports industry, which allows users to view and bet on the outcome of online video and computer games.
Two startups, Vulcun and Unikrn, have raised cash in corporate-backed series A rounds in the past three months and although the fan bases of live sports and gaming may appear to be very different, the business models of FanDuel and Unikrn are not a million miles away from each other.
Any prospective entry into the sector would likely be facilitated by a partnership with an existing player, such as video game streaming site Twitch, which already broadcasts eSports tournaments, but the industry is still relatively open. In any case, FanDuel clearly harbours ambitions to become a larger presence in the mobile space and it will be interesting to see the precise path it chooses in order to make its way there.