An inside look at FanDuel’s New York comeback
Daily fantasy sports sites FanDuel and DraftKings announced their merger this month.
FanDuel, a New York unicorn, and DraftKings, a Boston-based darling, essentially offer the same product — an online platform for one-day fantasy sports for money with immediate cash payouts. According to a blog post on DraftKing’s website, the companies are coming together to “create a stronger entity that can focus on growing the fantasy sports market by developing new products and features, delivering enhanced user experiences and creating an overall stronger fantasy sports community, all aimed at creating a more diverse, exciting and appealing experience for fantasy sports players and sports fans generally.”
Ultimately, the merger will mitigate the long-term competition the two companies have held with each other, following the tumultuous rides both organizations have faced in their respective cities.
Though FanDuel’s headquarters in New York City seat about 160 people to date, the company got its start back in 2009 in Edinburgh, Scotland. The company was founded by Nigel Eccles, Lesley Eccles, Tom Griffiths and Rob Jones, who originally created Hubdub, a web-based prediction market game company. From there, the team launched FanDuel, a premium fantasy sports game.
In 2011, the company decided to expand its Edinburgh operation and set up shop in New York City.
“We had no network in Scotland, and this was in the early days of companies like Airbnb and Uber, so there wasn’t even a lot of tech in New York,” Fanduel co-founder Lesley Eccles told Built In. “But when you’re building a business like this, you learn in the very early days that you need to do a lot of networking. Once you get your network, you need to go heads down, with your nose to the ground, and get that product out.”
And that is exactly what FanDuel did. To date, the company has raised north of $416 million and reached its unicorn status in July 2015 when it raised $275 million from big names like Google Capital and Time Warner. Soon after, the company made its first acquisition, app development firm Kotikan. The company then hit turbulence.
In October of 2015, New York’s attorney general began investigatingFanDuel and DraftKings after reports surfaced that an employee may have used inside information to win $350,000 in a football contest. While the employee in question was quickly cleared, FanDuel’s legal battle with New York persisted.
The following month, the attorney general’s office ordered the company to stop accepting ‘bets,’ claiming the site was a form of gambling. A month later, a New York judge ruled that FanDuel and DraftKings cease operations, and FanDuel temporarily suspended all paid contests on its site.
“Once the New York ruling hit last November, that was stressful,” said Eccles. “But at the same time I felt we’re going to be okay. It was a massive challenge, but for me, I didn’t consider that failure was an option. We just had to keep going.”
According to a blog post published by FanDuel CEO and co-founder Nigel Eccles, more than 110,000 letters and nearly 3,000 calls were made directly to lawmakers from New York sports fans throughout the legal battle, telling state legislators they love fantasy sports. In August of this year, New York passed a law making daily fantasy sports legal in the state, and FanDuel once again started up operations in its home state.
In October, FanDuel and DraftKings settled with New York’s attorney general, each required to pay $6 million and explicitly disclose the odds and winnings in contests
Today, FanDuel counts more than 6 million registered users and counts 350 employees. The merger is reported to close in 2017, pending approval by the Federal Trade Commission. Going forward, DraftKings CEO Jason Robins will remain CEO of the combined, and still unnamed, company, and FanDuel CEO Nigel Eccles will become chairman of the board. The company will be co-headquartered in New York City and Boston.
FanDuel and DraftKings project the partnership will allow the organizations to deliver more products to consumers and provide more contests, as well as offer more social connectivity and a better overall user experience. For the foreseeable future, FanDuel and DraftKings will continue to operate under their respective brand names and further organizational details will be announced at closing.
For now, FanDuel is currently focused on assimilating back into New York.
“We’re shifting our priorities this year away from maximizing the ad spend that we had last year to a larger focus on product,” said Eccles. “The legal situation was just clarified last August, where we got permission to be regulated in New York. We’re taking each day one by one and working our way through it.”
Read more on FanDuel here.
