Underdog appears to be at least one company immune to tumbling valuations across the US sports betting sector.
The paid fantasy operator announced Tuesday it raised a $35 million Series B funding round, valuing it at $485 million.
The round was led by BlackRock and Acies Investments.
Is Underdog worth half a billion?
The valuation itself might raise some eyebrows given the general pain in US sports betting stocks.
However, comparable deals for paid fantasy companies are few and far between. The best comparison might be Monkey Knife Fight, which sold to Bally’s for $90 million in January 2021.
How will Underdog spend new funds?
Underdog will use the new cash to hire 100 new staff members.
The company plans to build out its sports betting and fantasy offerings.
“This funding round gives us the fire power to continue to build, and build we will,” said Underdog chairman Jeremy Levine.
Investors back Underdog product
Acies partner Chris Grove said typical US sportsbooks are paying as much as $500 to acquire a customer but Underdog was paying a “fraction” of that.
“Underdog’s success is driven by the company’s focus on building new, innovative games and delivering amazing customer experiences,” Grove said. “As the company moves into licensed sports betting, I believe that the unique focus on product and experience will reshape the industry.”
Strong management team
Underdog investor Mark Cuban told LSR the company understood its customers and what they wanted.
“Great management, great approach, great customer understanding and great agility,” Cuban said.
The company recently brought on former FanDuel government affairs head Stacie Stern to its executive team. Underdog is targeting Ohio and Colorado for its initial sports betting launches.
Grand plans for sports betting
Underdog first announced its plans for sports betting in September last year. The company acquired technology firm Goat Gaming to form the foundation of its betting tech stack.
While sports betting is still limited to around 50% of the US population, paid fantasy is widely available. As a result, fantasy firms have a head-start in acquiring future sports betting customers.
As Levine told LSR in 2020:
“When sports betting opens in California, we’ll have 30,000 users. And every other sportsbook except FanDuel and DraftKings will have zero.”