Report: Daily Fantasy Leader FanDuel Looking To Raise At Billion-Dollar Valuation

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FanDuel's New Funding Round

The leading operator in the nascent daily fantasy sports space is looking to make it a one-site race.

That leader: FanDuel, who, according to a report in Fortune, is “considering a new fundraising round that would value the company at $1 billion or more.”

Fortune cited “multiple sources.” FanDuel declined comment.

Raise would aim to shut the door on DraftKings

The daily fantasy industry is primarily contested by two players: DraftKings and FanDuel.

The companies differ on the finer points of market share, but a few facts are generally agreed upon:

The raise Fortune is reporting would be at or above $100m (which is more than the entire DFS industry generated in revenue last year; both leading sites are believed to be unprofitable).

I would bet that nearly every dollar of it would go toward customer acquisition – much as FanDuel apparently deployed past rounds.

FanDuel has raised just shy of $90m in publicly-known placements to date. You can review the fundraising history of major DFS companies here.

That’s going to make the path ahead for DraftKings an incredibly tough one.

DraftKings has signaled its intent to compete semi-asymmetrically with FanDuel (pushing into niche DFS markets like MMA and eyeing international markets), but neither strategy is likely to yield much in terms of short-term user growth.

That means DraftKings will need to continue to go head-to-head for users with FanDuel – a battle they were already losing when the cash gap was relatively small.

IPO impending?

The rumors of the raise (Fortune’s report appears solid and additional rounds aren’t exactly a shock in the DFS battle) lend additional fuel to talk that one – or both – of the major DFS sites will pursue an IPO this year or next.

Two high-profile names in the DFS conversation – Adam Krejcik of Eilers Research and investor Jason Ader – have raised the possibility: Krejcik in a keynote presentation at this year’s FSTA; Ader over at Forbes and more recently via Twitter:

Betting on the come

All of this, of course, is predicated on the belief that daily fantasy sports will grow to be a much bigger industry than they represent in the status quo.

The industry at large generated under $100mm in total revenue in 2014, less than the total generated by New Jersey’s regulated online gambling market, Zynga Poker, and, as Krejcik noted on Twitter, a few select nightclubs in Las Vegas:

The hook is the rapid growth of the last two years and the projections of where the industry is likely to be in a few years should such growth persist and accelerate. Per Eilers:

Chart - DFS Revenue Projections