NEW YORK - FanDuel, a startup that runs real-money fantasy sports leagues, said Tuesday it has raised $70 million in a funding round led by Shamrock Capital that also includes private equity firm KKR (KKR.N) and NBC Sports.
The company creates one-day tournaments for fantasy sports and expects to pay out $400 million in prizes this year. The valuation of the company after this funding round was not disclosed and neither was the amount that each investor contributed.
NBC Sports is a division of NBCUniversal, a unit of Comcast Corp (CMCSA.O).
Investors have been looking for new ways to capitalize on the rising value of live sports. FanDuel’s latest move expands its previous total funding of $18 million by a wide margin. One of FanDuel’s rivals, DraftKings raised $41 million in a funding round in late August.
FanDuel’s Chief Executive Officer Nigel Eccles said in an interview that the company turned profitable in the fourth quarter of last year. It generates revenue by keeping a cut of the entry fees fans pay to compete.
Online fantasy sports that involves real money are not viewed by regulators as gambling since fantasy sports are considered to be games of skill that involve knowledge of professional athletes and statistics.
Eccles said FanDuel will use the funds to invest more in the mobile version of the product and also increase spending on marketing.
While some sources close to the deal told Reuters that FanDuel could one day be an acquisition target for a media company, Eccles said he would like the company to remain independent and he could see FanDuel pursuing an initial public offering.
“We would look at an IPO in two or three years,” he said.
While season-long fantasy sports have been around for years they are dominated by companies such as ESPN, CBS and Yahoo Sports.
FanDuel, meanwhile, is focused on contests that last one day. These term contests have the potential to spur a fan-following for late-season games in various sports that have no playoff consequences.
“The one day fantasy market has been very fast growing. It’s right on the cusp of becoming mainstream,” said Michael Lasalle, a partner at Shamrock who will join FanDuel’s board.
Shamrock Capital, which sold the Harlem Globetrotters last year, is the private equity firm that started as the investment arm of the family of Roy E. Disney, the son of Walt Disney’s brother Roy.
Previous investors in FanDuel that also participated in the round are Comcast’s venture capital arm, Comcast Ventures, Pentech Ventures, Bullpen Capital, Scottish Enterprise and Richard Koch.
Eccles said he was pleased that he can count large private equity firm KKR as a new backer for the company he co-founded.
“Typically KKR focuses on much bigger companies but they approached us and we met them and liked the team. It’s always good to have a very deep-pocketed investor supporting the company,” he said.
(This story corrects to say that Shamrock Capital is the investment arm of Roy E. Disney’s family)
Reporting by Liana B. Baker