US-based fantasy sports betting companies DraftKings and FanDuel, both of which are backed by several high-profile, media-oriented corporates, are considering a merger, Bloomberg reported yesterday.
The companies have entered talks over a deal, according to people familiar with the situation, in a bid to cut their significant marketing costs and join more efficiently combat regulatory issues that have sprung up over the past year.
FanDuel and DraftKings oversee near identical business models, running fantasy leagues that operate over a single day or week of a sports league, allowing users to pick new teams each time and compete with others for cash prizes.
DraftKings had raised $375m as of a $300m series D round led by broadcaster Fox Sports and backed by sports leagues Major League Baseball, National Hockey League and Major League Soccer, and conglomerate Kraft Group that closed in July 2015 and valued it at $1.2bn.
The company’s other investors include Atlas Venture, Raine Group, Redpoint Ventures, GGV Capital, BDS Ventures, Boston Seed Capital, Hub Angels and Angel Street Capital.
FanDuel on the other hand has raised $363m in venture funding, closing a $275m series E round, also in July 2015, which valued it at more than $1bn and that featured internet and technology group Alphabet’s Google Capital subsidiary, and corporate venturing units Time Warner Investments, NBC Sports Ventures and Comcast Ventures.
KKR, Shamrock Capital, Bullpen Capital, Pentech Ventures, Piton Capital and the owners of undisclosed NFL and NBA teams also participated in the series E round.
However, both companies have run into regulatory issues over the past year concerning their business models, which have been categorised as illegal gambling by New York State among others, and additional questions have been raised regarding consumer protection and false advertising.
FanDuel has agreed to suspend its service in 10 states due to legal issues and DraftKings nine, and another person familiar with the matter told Bloomberg both companies’ valuations have more or less halved since their last funding rounds.
– Photo courtesy of David Zalubowski via Wikimedia Commons