FanDuel is going to announce a $275 million funding round on Tuesday, the New York Times reported, an amount that would double the known investments across all daily fantasy sports operators.
The FanDuel deal, at a glance
The new round will officially value FanDuel at more than a billion dollars.
The total amount raised across the entire DFS space, before the NYT report, had been $233 million, according to Legal Sports Report’s investment tracker. With the new investment, the total invested in DFS sites now surpasses half a billion dollars.
Across five separate funding rounds, FanDuel had raised $87.5mm in known investments before Tuesday. The last round had coming September of last year, an investment of $70mm in the site.
The New York Times report also noted that Nigel Eccles, FanDuel’s CEO, said an initial public offering “was not likely soon” after the massive investment.
Who are the investors?
According to the NYT, the investors included (among others):
- Google Capital (new investor)
- Time Warner (new investor)
- Kohlberg Kravis Roberts (previous investor)
- Shamrock Holdings (previous investor)
- NBC Sports Ventures (previous investor)
- Comcast Ventures (previous investor)
The investment by Google Capital is particularly interesting as the capital fund financed by Google funds a competitor of Yahoo just days after the fellow internet giant launched its own daily fantasy product.
What will the FanDuel investment money be used for?
Some of the money is likely earmarked for a new office in Glasgow, Scotland, where FanDuel plans to house 200 software developers.
In recent months, FanDuel has chosen to do deals with about half the teams in both the NFL and the NBA. With that much capital behind it, one would have to imagine FanDuel has some big marketing moves in mind. Those moves probably go beyond just team partnerships, and could include more partnerships with arenas or stadiums.
Eccles told the NYT that the investment funding would be used for “additional spending on marketing and new features.” He expanded on that in the WSJ story, saying that the money would be used for “funding for marketing and advertising, hiring, product development and to create new ‘fan experiences’ in stadiums and other venues that bring FanDuel game winners and power users together offline.”
The billion-dollar question for both newly minted unicorn FanDuel and presumptive unicorn DraftKings: Will either try to parlay the massive intake of money into a deal with the NFL, and would the NFL be willing to listen to such a pitch?
On deck for investment funding: DraftKings
Reports on Monday also indicated that DraftKings was close to closing its next round of funding.
According to the Wall Street Journal: “The startup is now raising a Series D round of funding with a post-money valuation of more than $1 billion, according to people familiar with the matter.” Earlier, a separate story from the NYT reported that the round would include Fox Sports and other investors.
DraftKings has continued to aggressively spend in marketing, adding Staples Center to its sponsorship portfolio on Monday.
What does it mean for the rest of the industry and players?
All the money coming into FanDuel and DraftKings is obviously not terribly good news for other DFS operators, as both will continue to spend whatever it takes to acquire customers.
The funding for those sites comes on the heels of Yahoo’s entrance into DFS, a planned launch for Amaya (PokerStars), and a possible entry by yet another major player in fantasy and sports.
Cutting into the marketshare of the DFS duopoly will likely become increasingly difficult, and models that keep customer acquisition costs low may be the best bet for the tier of sites below the “big two.”
It also likely means we will be seeing huge contests during the football season. At this point, it’s hard to imagine that both FanDuel and DraftKings won’t guarantee $10 million in the opening week of NFL games in September.
No matter what, it continues to be the most critical quarter in the short history of the daily fantasy sports industry, with no clear winner in sight between the two DFS behemoths.
Photo by Michael Marcovici used under license CC BY 3.0.
