Daily fantasy sports giant DraftKings has closed on a $300 million Series D round of venture funding, valuing the company at more than $1 billion and extending a historic wave of investment into the space.
Fox Sports led the round, joined by MLB, the NHL, MLS, Madison Square Garden and Legends Hospitality. Existing investors including Atlas Venture, The Kraft Group and The Raine Group also participated, with Raine serving as the financial adviser on the deal. The funding for Boston-based DraftKings closely follows a $275 million Series E round earlier this month for rival FanDuel that valued it at more than $1 billion.
THE LATEST ROUND
■ Investors: Fox Sports, MLB, NHL, MLS, Madison Square Garden, Legends, Atlas Venture, DST Global, GGV Capital, The Kraft Group, The Raine Group, Wellington Management Co.
■ Investors: KKR, Google Capital, Time Warner Investment, Turner Sports, Shamrock Capital, NBC Sports Ventures, Comcast Ventures, Bullpen Capital, Pentech Ventures, Piton Capital, several undisclosed NFL and NBA team owners
Sources: DraftKings, FanDuel
The deals position the two companies to battle for market supremacy and help set up each for football season, the peak for fantasy sports. DraftKings funding is being positioned for product development and expansion efforts, including internationally.
The global component is of particular importance to DraftKings, and company officials have been in Europe recently to explore potential business opportunities, with the United Kingdom as the initial target.
“There are a ton of synergies between us and Fox,” said Jason Robins, DraftKings chief executive and co-founder. “They share our vision, their rights portfolio aligns strongly with our partnership roster, and they understand very well the impact that daily fantasy has upon viewership.”
The deal additionally includes $250 million in marketing commitments for DraftKings on Fox platforms over roughly three years.
The latest DraftKings funding replaces an investment structure that was to include ESPN and its parent company, The Walt Disney Co. After extended negotiations, the two sides last month instead settled on a multiyear, marketing-based relationship that makes DraftKings the exclusive daily fantasy company across ESPN’s many platforms but did not include an equity component.
The final investor pool predominantly includes entities with which DraftKings already holds a commercial relationships, such as the sports leagues, MSG, Legends Hospitality partners the New York Yankees and Dallas Cowboys, and Kraft Group entity the New England Patriots, which was among the first pro teams to partner formally with DraftKings. The Kraft Group was an early investor in DraftKings, but its involvement on an equity level has not been previously announced.
The MLS involvement, meanwhile, is new, and arrives with a newly struck league partnership with DraftKings.
“This is a mega roster,” Robins said. “I almost pinch myself when I think about this, particularly compared to where we were a year ago.”
The 3-year-old DraftKings said it projects to approach $150 million in revenue this year, five times the $30 million it generated in 2014, and exponentially higher than its $4 million in 2013. The company will award more than $1 billion in game prizes this year, more than triple a year ago. The exact valuation on DraftKings for the latest funding round was not disclosed, but industry sources said it was “meaningfully north” of $1 billion.
Fox Sports said that it has been talking with DraftKings for more than a year about potentially investing in the company, and that its position didn’t shift much after the Disney/ESPN decision not to invest. Fox Sports’ relationship with DraftKings is also nonexclusive, and it can still do business with FanDuel and other similar entities.
DraftKings, like FanDuel, is not yet profitable, and it is spending heavily on marketing and user acquisition efforts. But most industry estimates point to daily fantasy still capturing less than 10 percent of the overall fantasy sports audience, which despite its own aggressive growth is still a minority of the overall sports fan population. Fox Sports executives said they were particularly attuned to that expansive market opportunity, even as there remains industry debate over whether those growth targets could be blunted by “sharks” in individual daily games that feast upon less experienced players.
“We were very impressed right away with Jason and the team there,” said Eric Shanks, Fox Sports president and chief operating officer. “We don’t see this as a short-term investment. We’re not looking to get in and get out. There already has been exponential growth in this category, and we certainly believe there is a lot more to come.”
Robins said numerous other potential investors were not included in the round. But a common theme emerged in which the entities were each attracted in part to DraftKings’ strong affinity among young male consumers, among the hardest demographics to reach.
