INTERVIEW: Lesley Eccles, FanDuel
‘We were shooting for the stars from the start’
It began in 2007 with an idea that looked like a bad investment. Eight years later FanDuel has grown from an Edinburgh start-up into a billion dollar business and a major part of a phenomenon that has swept the US.
Not that it has been an easy journey. Building a fantasy games business paying out $2bn a year to its 1.1 million army of players has been fraught with obstacles.
Forfar-born Lesley Eccles is one of five Brits – including Northern Irish husband Nigel – who launched one of Scotland’s biggest company successes and recalls the setbacks in those early days.
“I was walking to work across the Meadows one day and I just plonked myself down on a bench and cried,” she says.
She recalls the low points in the company’s story after speaking to an audience of start-ups and investors during the Turing Festival at the Surgeons Hall in Edinburgh. She revealed how the company received 87 rejections from investors before finally landing the money it needed to kick-start the operation.
“They said there was no market, it was too niche, or they refused to invest in a European business,” she says.
Among those who refused to back the business was the Disney owned ESPN sports channel. “They invited us in with a view to investing but they were not interested because they could not get comfortable with the legal issues.”
There was a concern about online gambling – banned in the US – although FanDuel’s business is “a game of skill and is not gambling”, she says, explaining that this is now clearly defined in the company’s set up.
The bigger problem was that no one really understood the company. There was no demand for the product. Effectively, FanDuel was at the start of a new industry.
After landing that first $4m deal with Piton Capital and the Scottish co-investment fund, it became easier to raise money, says Eccles. “Now we can pick and choose who invests in us.”
Since those early setbacks investors, who now include Edinburgh-based Pentech Ventures, have flocked to the company, pouring $363 million into backing its expansion. Growth has been particularly speedy in the last year or two. Staffing in Scotland and the US is now 325 from just 90 last August.
Many of those have come from a series of acquisitions. In recent weeks the firm has bought Zynga in Florida, Scottish app developer Kotikan and last week added numberFire, a New York analytics firm.
It is also finding it easier to attract talent. “We previously focused on the Edinburgh area but now we get applicants from London, for instance, because they recognise how Edinburgh has become a technology hub.”
Eccles admits that the company’s rapid growth has surprised the founders. “We were shooting from the stars from the beginning but our breath is still taken away by what has happened in the last couple of years.”
The numbers are now eye-popping. Eccles spent an estimated $60m last year on marketing.
She describes how the company focused on the US because fantasy sports has quickly become established among 200 million sports fans enthused by nationwide sports. Europe was a challenge because it is more fragmented.
“Fantasy football is a way of life in the US,” she says, explaining that customers who were asked when they would stop playing most often anwered: “never”. It means there is a repeat audience which just grows and stays with it.
Five years ago there were 32 million users in North America. According to the Fantasy Sports Trade Association, that figure has risen to 56.8 million – 34 %of whom are women. Then there is daily fantasy sports (DFS), the fastest growing segment of the industry, which boils down the season-long version into a single day of instant online gratification. Age-wise, DFS still is in its infancy, but already, it has become a multi-billion-dollar industry, one that experts expect to multiply in size when US football kicks off in September.
Players who are prepared to pay up to $1,000 a day to play in the Las Vegas clubs are making mega-bucks that put the real sports stars into the penury bracket. A video shown at the TuringFest conference features FanDuel users who expect to win well into six figure sums in one daily session.
One player, Chris Prince, 37, from Detroit, boasts how he made $762,000. Bettering even that pay-out, Peter Jennings, a former Charles Schwab stockbroker, won $1 million in a single fantasy baseball tournament on DraftKings.com, FanDuel’s biggest competitor. It enabled Jennings to quit his job and become a professional daily fantasy player – with his own DraftKings sponsorship – on his way to grossing almost $20 million in winnings.
Earlier this year Major League Baseball signed an exclusive agreement with DraftKings, which already had a deal with the National Hockey League. At the end of last year FanDuel announced an exclusive four-year deal with the National Basketball Association, which included the NBA gaining an equity stake in the company. In June it unveiled a multi-year partnership with 13 NBA teams.
The industry is growing so fast that the big corporates are now casting a keen eye on them. Eccles says FanDuel received an approach by a potential buyer last year. She offers no names but it would be no surprise if the likes of Google and Yahoo! were among those taking a close look at the money to be made, even though neither FanDuel nor DraftKings, launched in 2012, is yet believed to be profitable.
FanDuel is now co-headquartered in New York and Edinburgh but Eccles goes by the very American title of Executive Vice-President and Marketing. Despite its customers being entirely in North America, Britain remains a core centre of operations with employees in Edinburgh and Glasgow. It is moving from its base at Quartermile in the capital to a neighbouring unit now under construction. It is leasing three floors of the seven-storey £50m building on the site of the former Royal Infirmary which should be ready for occupation next April and has scope for 500 employees.
“Four of the five founders still live in Britain.” says Eccles. “I still live in Edinburgh. We still consider ourselves an Edinburgh company.”
Photo: Lesley Eccles (by Terry Murden)