Blow to fantasy sports games firm
FanDuel ‘may have lost unicorn status’ in legal battle
The Edinburgh and New York based firm joined the list of companies valued at $1 billion – known as unicorns – after raising $275 million last summer. It is one of two firms in Scotland to enjoy the status, alongside flight comparison website Skyscanner.
But commentators in the US say FanDuel and its big rival DraftKings have suffered from the feud with state attorneys, followed by cancelled television advertising campaigns and the refusal of some payment systems companies to handle transactions.
One Wall St observer says “unicorns” are always vulnerable to “down rounds” in which investors drop the value of private companies as they try to raise new funds.
“That almost certainly has happened to FanDuel and DraftKings, which were once valued at $1 billion each,” says Douglas A. McIntyre, writing on the 24/7 Wall Street website.
Last July FanDuel raised funds from a group of investors led by KKR and including new investors Google Capital, Time Warner Investments and Turner Sports. Existing investors Shamrock Capital, NBC Sports Ventures, Comcast Ventures, Bullpen Capital, Pentech Ventures and Piton Capital were also involved.
Fantasy sports games firms have spent millions on television advertising and Nigel Eccles (pictured), FanDuel’s chief executive, told an Edinburgh audience last year that the firm was among the top five advertisers on US television.
However, a number of stations have stopped taking adverts as lawyers battle over claims that fantasy gams breach strict US laws banning online gambling. The companies say they offer “games of skill”, giving them exemption from the legislation.
Mr McIntyre writes: “FanDuel and DraftKings were among the most promising large start-ups in recent years. If the sieges against them get worse, they may be worth very little — certainly not $1 billion.”