IT is not always calm in the eye of the storm.
FanDuel, the fast-rising star of the Scottish tech scene, has blown like a hurricane through the business world this year, taking
on heavyweight finance in
a precursor to a spate of acquisitions.
From the outside, events at the “unicorn” – a term adopted for tech start-ups worth $1 billion or more – appear to have been carefully choreographed.
But Nigel Eccles, the Northern Irishman who co-founded the fantasy sports gaming provider with wife Lesley Eccles, Tom Griffiths, Rob Jones and Chris Stafford in 2009, admits there’s been no shortage of turbulence on the inside.
“I’d love to say at the centre of the tornado it is all calm and that’s what it’s like there – but that wouldn’t be true!” quipped Mr Eccles. “The company is growing
x 3 year on year. At the end of last year we had 120 staff – we are now up to about 360.”
By any measure it’s shaping up to be a transformational year for the Edinburgh-based company, which is projected to rake in $2bn in entry fees from its daily fantasy sports games this year, up from $600m the year before.
In July it secured $275m of finance in a second round of investment, led by private equity giant KKR, Google Capital and Time Warner Investments alongside Turner Sports.
The round, which brought in investment from NFL and NBA teams, took to $363m the amount it had raised in Series E financing, with previous investors such as Shamrock Capital, NBC Sports Ventures, Comcast Ventures, Bullpen Capital, Pentech Ventures and Piton Capital coming back in for more.
And no sooner had the ink dried on the deal than FanDuel embarked on an acquisition spree.
Kotikan, the Edinburgh-based mobile app developer with which FanDuel already had a fruitful working relationship, was taken over in July.
Then around a month later a deal to acquire US sports analytics firm numberFire was announced. That was followed last week by the acquisition of AlphaDraft, also US-based, which gave FanDuel
a presence in the fast-growing eSports niche for the first time.
The latest deals, which took place after our interview, lifted the company’s headcount to a total of 480 across offices on both sides of the Atlantic.
That includes 40 developers from California-based gaming company Zynga, creator of the hugely popular Farmville game in Facebook, which FanDuel hired for its Orlando office in May.
Speaking shortly before the numberFire and AlphaDraft deals were announced, Mr Eccles hinted that others would follow. “The acquisitions we make either bring technical talent or they
bring technology that would be hard for us to develop ourselves,” he explained.
“The two we have done – Zynga Sports and Kotikan – both have been phenomenal integrations for us. That has certainly been a good way to grow and if we saw something similar we would definitely engaged on it.”
Of course, it could be said that attracting investment from such major players as KKR and Google brings with it an expectation of
a return. Mr Eccles, who was involved with other start-ups before FanDuel, said there is more than one reason why companies like these have become involved.
“Some of them are financial investors, like KKR, and fundamentally they are looking for financial returns,” he said. “Some of them are strategic investors, like Google or Turner, and yes they want a good financial return,
but they are also looking for
what can drive benefit to their core business.
“They kind of looked at us and said, ‘You know, we have the opportunity to be rapidly disruptive in sports, in that we can change the way people watch sports and engage with sports’.
We now have a direct engagement with sports fans and we have a way to monetise that.
“That’s really what excites them over the long term.”
The initial impetus for FanDuel stemmed from the belief held by its founders that there had been little innovation in the fantasy sport market in the preceding decade.
Mr Eccles noted the founders felt it was “unusual that, in a product people clearly loved, people hadn’t really developed
a really good mobile experience, and they hadn’t really innovated”.
“We just felt we could do it better,” he went on. “We felt it was a very large market and therefore we could build a big business from it.”
Equally, the reason for
focusing on US sports seems simple enough, in retrospect.
Not only do baseball, American football and basketball command 40 per cent of the global sports viewing market, they also provide 350 days of action per year. And that means that there is really no off-season for sport across the Atlantic. “That is really critical as well,” Mr Eccles said.
Now, having raked in $57m in revenue (game commission) last year, and with the company expecting to increase the prize money it hands out to $1.5bn this year from $560m, international expansion is finally on the agenda.
Mr Eccles revealed the company, which has some 1.1m players, expects to launch products into the US and European markets at some stage next year. He noted that a team has been assembled within the business to focus on the project, but said it is not a move the company is taking lightly.
“The US is a very large and homogenous market, which is
why we focused on it in the first instance,” Mr Eccles explained. “But international, outside the
US, is 60 per cent of the global sporting market, and so we have always kind of had an eye on international.
“We are looking at the UK and Europe, but are being very deliberate about having a product that is right for the UK and European market. You can’t just take the current product, put it in pounds, put Premiership on it and invite people to play it.
“The way people play fantasy here is very different, so we are very aware of that.”
Mr Eccles is circumspect about the stakes he and his fellow founders retain in the business, beyond stating they have all
“done okay”. And the same would appear to go for the FanDuel rank and file.
“The other thing that I would note is that employees are all shareholders as well, so everyone who works for the company is
a shareholder in the company,”
Mr Eccles said.
“That’s been very valuable. Anybody who joined early on has seen a huge appreciation in their stake in the business. We hope to deliver the same to people who have joined more recently.”
Those include its staff at its headquarters in Edinburgh and its recently-opened office in Glasgow, where it has ambitions to hire up to 200 software engineers, as well as its bases in New York, Orlando and LA.
Despite being so focused on the US market, Mr Eccles said the reasons why FanDuel continues
to handle so much of its back office work in Scotland remain compelling.
Aside from the stream of software development and engineering talent emerging from Scottish universities, the time difference between the UK and the US has its own benefits. For example, websites can be taken down and updated while
players sleep on the other side
of the Atlantic.
After such a frenetic year, it would be difficult to imagine the pace being maintained at such an unremitting rate at FanDuel in the months ahead. But Mr Eccles does not envisage any respite.
“This football (NFL) season is going to see very dramatic growth,” Mr Eccles said. “Last year, two-thirds of our revenue came in the fourth quarter, so
you can see we really grow dramatically in that period. We, as a company, our mission is about making sports more exciting.
“What we are keen to actually do is to grow beyond the core product we have today and I think you’ll see later this year some examples of how we are doing that.”
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