Fantasy Sports Titan Secures Massive $275 Investment
Over the past couple of years, Daily Fantasy Sports has exploded in popularity. The prize pools have expanded to a level that many people did not believe to be remotely possible. This is mostly in thanks to the numerous ads that FX’s The League and ESPN have showcased. That being said, the real sign of their massive growth is that FanDuel announced a $275 million funding round this week. This amount will increase all known investments two-fold across every daily fantasy sports operator.
A Look at the FanDuel Deal
This influx of investment money will put FanDuel at a value of more than a billion dollars. It will go towards helping the daily fantasy sports leader increase its customer base and expand into the global market. It is no coincidence that the timing of the round comes as legal sports betting is exponentially growing in popularity. Before the deal, investor money across the Daily Fantasy Sports board was $233 million, and now the total amount invested is more than half a billion dollars. The CEO of FanDuel, Nigel Eccles, has stated that there is no initial public offering insight even after the substantial investment.
Incorporated into the investment pool are Google Capital, Time Warner, Kohlberg Kravis Roberts, Shamrock Holdings, NBC Sports Ventures, and Comcast Ventures. It is of particular interest that Google Capital has decided to invest, as it is out of the pocket of Google funds, which is a major competitor of Yahoo and interestingly enough, Yahoo just started advertising their own daily fantasy service.
Utilization of FanDuel Investment
A portion of the money will likely go towards a new location in Glasgow, Scotland, as it is there that FanDuel houses 200 software developers. Additionally, in the past year, FanDuel has done deals with close to half of the NBA and NFL teams. With its newly massive capital, it is more than likely that there will be some extensive new marketing strategies in the works. This will be much larger than simple team partnerships, and will likely expand to include entire stadiums and arenas. In an interview with the New York Times, Eccles stated that the investment funds would go towards “additional spending on marketing and new features.” Upon being interviewed by the Wall Street Journal he expanded by saying that the money will go towards commercialization, advertising, product development, hiring, and the exciting prospect of new fan experiences. These experiences will increase offline activity between fans through the use of stadiums and other such venues. The question remains as to whether or not a deal with the NFL will be feasible with the new influx of money.
DraftKings Not Far Behind
Monday reports showed that DraftKings is not far behind in closing a deal with their next funding round. The startup competitor to FanDuel is raising a Series D funding round valued at more than $1 billion. This will reportedly include Fox Sports among other large investors. DraftKings is also known to spend a considerable amount of capital on marketing. For instance, it now comprises Staples Center as part of its sponsorship portfolio.
The Significance for the Industry
The funding that is being poured into both DraftKings and FanDuel is obviously not good news for other Daily Fantasy Sports companies, as the two companies are both aggressively battling to acquire the market share of customers. The massive investments in the two operations come close behind Yahoo’s appearance in the Daily Fantasy Sports world, as well as a recent launch for Amaya, which would be another competitor in sports and fantasy. As of now, the fantasy sports industry is a duopoly, and entering the market will only become harder for new companies. The best bet for start-ups seeking to enter into the field will be to keep their customer acquisition costs down. We will also likely see a contest between the two companies as football season starts. However, it is probable that both will be able to secure $10 million in the first week of the NFL games come September. Whatever happens, this is the single most critical time in the fantasy sports industry's history. Only time will tell whom the winner of the two Daily Fantasy Sports giants will be.