
FanDuel Raises $275M - prostoalex
http://recode.net/2015/07/13/fanduel-raises-275-million-snags-billion-dollar-valuation/
======
drsim
First Scottish unicorn? Perhaps Skyscanner is up there too after a $800m
valuation in 2013.

...and a rare success story for public funding from Scottish Enterprise. I
worked at a spectacularly bad startup funded to the tune of $1m by Scottish
Enterprise.

~~~
thomasrossi
spectacularly bad startups are a must have in anyone resumee:) more on topic:
what is wrong with people? Fantasy-daily-esports? Is it for real?

~~~
irishcoffee
Don't knock it 'till you try it.

If you're a moderate or greater sports enthusiast, with ~20 bucks to spare,
you can make turn it into a few hundred pretty quickly, like within a week or
two.

I legitimately use it to supplement my income, started with 20 bucks.

------
gojomo
_" FanDuel, which still isn’t profitable, has now raised $363 million since
2009. The company has a fast-growing revenue stream, though, and made nearly
twice as much as rival DraftKings in 2014."_

Danger ahead. If payouts are even a little subsidized by investment/marketing
dollars, into slightly-positive-expectation territory, this sort of business
can achieve almost arbitrary revenue growth. (Plenty of smart money, or even
just intuitive-do-whatever-works-until-it-stops-working money, will be happy
to buy $10 bills for $9.50, over-and-over. Lazy susan revenues.)

But when the promo subsidies end, or the happy-to-lose-for-a-while fish who
are attracted by mass advertising reach 'extinction', the bulk revenue can
disappear just as quickly.

Will this remain a favored form of negative-expectation gambling afterwards?
Maybe, but probably at a size way below its novelty/subsidy-goosed peak....
which might already be behind us.

------
downandout
I would like to see the term sheet for this. My guess is that these investors
are going to be extracting returns from revenue as it comes in. Here's why...

UIGEA, [1] the legislation that was used to take down the online poker sites,
contained an exemption for fantasy sports. However, that exemption is only
valid if the business is operating in compliance with individual state laws.
There is an increasing sentiment that DFS is sports gambling under a number of
state laws, and many people are just waiting to find out which state will
prosecute first. At the time the UIGEA exemption was created, legislators
hadn't even contemplated the concept of DFS, and the very legislators that
wrote the exemption have expressed concern over it.

Since investors with this kind of money have done their due diligence, my
guess is that they just want to ride the revenue train until the inevitable
state-by-state crackdown occurs. It's no coincidence that this investment is
occurring just before football season, which is their biggest revenue driver
by orders of magnitude.

[1]
[https://en.m.wikipedia.org/wiki/Unlawful_Internet_Gambling_E...](https://en.m.wikipedia.org/wiki/Unlawful_Internet_Gambling_Enforcement_Act_of_2006)

~~~
jegutman
I am definitely not a lawyer, if you listen to me for legal advice you're an
idiot, however:

I don't know details, but I think Fan Duels model has had some court tests and
it was ruled a game of skill (in a way that poker was not somehow) somehow
because you a) picked your lineup and b) there were no random number
generators.

Here's a few articles:
[http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-s...](http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-
secures-an-important-victory-in-daily-fantasy-sports-lawsuit-however-
plaintiff-plans-to-appeal/)

[http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-
leg...](http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-legal-to-
play-fantasy-football-for-money/)

That second one seems to specifically mention this clause of UIGEA: "1\. In
many cases, playing fantasy football for money is entirely legal under federal
law. The Unlawful Internet Gambling Enforcement Act of 2006 includes an
explicit carve-out for fantasy sports games that meet three criteria: (1) the
value of the prizes is not determined by the number of participants or the
amount of fees paid; (2) all winning outcomes reflect the relative knowledge
and skill of the participants; and (3) the fantasy game’s result is not based
on the final scores of any real-world games."

So it seems as long as the individual tournaments run have fixed prize pools
they satisfy (1), (2) seems to be met because there's still sports knowledge
of the sport that can improve performance, and (3) is met simply by their
scoring system not having to do with final scores (and includes lots of other
stats to help) although this one would probably need a text check to say what
"based on the real-world scores" means exactly.

~~~
downandout
The problem is that each state had its on set of laws and definition of what
is and is not a game of skill. DFS is legal under federal law; however it may
not be under each of 50 different sets of state laws. Additionally, if the
state determines that it is illegal, then it becomes illegal under federal
law, since that is how UIGEA works. It essentially just puts federal
enforcement behind state gaming laws.

~~~
jegutman
Sometimes the 50 different sets of laws is a feature sometime it's a bug. The
spec is pretty terrible.

------
doctorpangloss
In case anyone is puzzled about what FanDuel and Draft Kings do, Recode is
definitely being very pedantic with its description "daily fantasy sports."

These are a form of real-money-payout online gambling. They're legal. How
quickly they evolve into pure casinos, as opposed to just 95% casinos, I don't
know. They can't do something as clinically addictive as virtual slot machines
and give payouts, but I bet they can come pretty close.

~~~
NhanH
Since I don't know much about the topic, how much gambling is involved in
fantasy sports? In other words, how much skill would be involved in all the
drafting and picking etc, as opposed to just pure luck?

~~~
ericdykstra
There's a lot of skill involved, but Fanduel (and DraftKings, the other major
DFS site) take ~10% of every entry fee, which makes it very hard to be a
consistent winning player.

It's not _that_ hard to be break-even given you know the players across the
league well and have a real understanding of the underlying mechanics of the
sport.

As far as the business goes... At some point they'll run out of new players,
and the sharks will have a big enough bankroll to basically suck all the dead
money out of the game leaving almost nothing for good, but not fantastic
players.

When that happens, either people will keep playing because it's fun and
Fanduel has a great business on their hands (precedent: sports betting) or
people who are not making money will get out, and new players will be
discouraged from joining an established scene (precedent: online poker). I'm
leaning more towards it going to the fate of online poker eventually, but it
might not happen until sports betting is legalized in the US.

~~~
waterlesscloud
I don't think the 10% fee will be sustainable in the long run. Price
competition will be inevitable once the manic growth phase is over.

~~~
acconrad
Except there are a ton of competitors and it's already become an oligopoly.
FanDuel and DraftKings alone have accounted for 95% of the DFS revenue as of
2015, and just acquired the two other biggest competitors in the space
(DraftStreet and StarStreet). Big prize pools drive harder than lower fees.

------
theklub
Anyone else hate the phrase "Unicorn"?

------
skaplun
Online poker 2.0, and I will bet that they follow the same route. Enter
regulation, margins go down and casino comes into place

~~~
waylandsmithers
Their saving grace might be the sports leagues themselves, which have varying
degrees of tacit approval for betting, since it drives up interest in their
products. They are much more likely to use their clout (billions in revenue
and political favor that allows inexplicable tax exempt statuses like the NFL)
to keep Congress from outlawing daily fantasy. Although it does feel like one
wrong move could result in the rug being pulled out from them tomorrow.

------
prawn
I suspect we'll see another class of fantasy comp develop soon for less-
interested and more time-poor players where you don't even pick your team, but
are given a random team.

If fantasy or daily fantasy is sports betting, then this underclass of fantasy
sports would be something akin to a lottery ticket or "scratchie" rather then
these head-to-head games. If you ask me to play daily fantasy, I'll say "No
time, sorry" and ignore it. But if you give me an app/page with a pre-picked
team and moderate financial interest in it doing well, I may watch the game
and track stats.

You could send out random teams ("Your team for tonight is x, y and z!") with
an adjusted under/over (for stats, totals, etc) and then give people the
option to double-or-nothing with a bet, or whatever. "Win a $5 Amazon voucher,
or bet 10 tokens now to have a chance at a $50 voucher!"

The sports leagues are actively interested in gambling as something that gives
people another incentive to watch games. If you have no-name in your fantasy
team, you suddenly care about every time they touch the ball.

~~~
gojomo
Such a random-team option might run afoul of the "game of skill" loopholes
that have so far allowed these businesses to operate.

~~~
prawn
Might be able to make it less about betting and more about a virtual currency
that is used with some sort of promotion. Eyeballs still have value to
sponsors or the leagues involved.

I can imagine they might set it so that you have to be viewing the
stats/screen within x minutes of a result, to prevent people from just
checking in the next day.

------
fmsf
They have been very active across the UK sponsoring conferences (.e.:
ScottlandJS) and attending events (i.e.: Silicon Milk Roundabout).

~~~
Grue3
When I go to their home page it says "Fanduel is only available to users in
the US and Canada". So it's not even available in their home country?

