The $11,000,000 Round: Interview with "The Godfather" Nigel Eccles
Since its inception in 2008, daily fantasy has seemed to me like an industry on the brink of exploding in popularity. It’s peer to peer, legal, Paypal processes payments, and it’s extremely fun. By 2009 a half dozen sites had popped up to cater to the inevitable demand. We started building RotoGrinders to help form a community around these games. A company named HubDub pivoted their business strategy from a prediction game with no direct monetization stream to one with very direct monetization – FanDuel Daily Fantasy Games.
Strangely to us, daily fantasy never experienced anything you could call an “explosion” There was steady growth, but it was clear advertising was needed to help spread the word. However sites were barely making enough revenue to even cover the exorbitant costs of live stats feeds and development. Investment capital was sorely needed, and fortunately there was a man in the industry particularly skilled at securing it.
This is why I call FanDuel’s Nigel Eccles the Godfather of Daily Fantasy. While other sites were dropping out of the daily fantasy industry Nigel and his team were raising millions of dollars and keeping the dream afloat. Without his relentless fundraising efforts this industry may still be back in the shadows that completely shrouded us in the early days.
Daily fantasy is growing, but it is still entirely fueled by investment. This $11,000,000 investment is monumental for FanDuel and the daily fantasy industry. An investment this large from an organization as well-known as Comcast not only keeps the FanDuel machine chugging, but it also puts daily fantasy on the map for larger media outlets. Check out the Forbes article covering the $11,000,000 round led by Comcast Ventures, in case you missed it.
I thought the Grinders community would like to hear some more about this investment and FanDuel’s plans. Nigel was happy to oblige – here’s an interview with the man himself…
Interview with FanDuel CEO Nigel Eccles
Cal: Tell us about raising this round. This is your third time raising a seven figure round, but this one dwarfs the other rounds combined. Was it the most difficult? Any interesting stories?
Nigel: To be honest, this round was a lot more straightforward than the earlier rounds. Of the three rounds our Series B was actually our most difficult as we hadn’t broken into significant revenue numbers and didn’t have proven acquisition channels. From start to finish our Series B actually took 12 months to complete. I pitched 84 different VC funds, taking in over 100 meetings. I pretty much lost count of the different ways VCs said no without ever actually saying no (stopping replying to my emails seemed to be a favorite). At the end of that process we got one term sheet (that is a non-binding agreement to invest). Then about 3 weeks before the investment was due to complete (late July 2012) our new investors got really concerned about the lockout situation (particularly the NFL) and could have walked. I’ll never forget that tense period of constantly checking ESPN for glimmers of hope. The new CBA got hammered out and our deal was on. The only problem was I had booked to go on holiday at the end of July. So I handed the management of the deal over to my co-founder, Tom Griffiths, and he closed it 2 days into my holiday. After 12 months of work I still didn’t get to close the deal. I still tease Tom about his 1-yard touchdown though!
By our Series C we had good revenue numbers and could demonstrate strong unit economics. Also, a lot more investors are interested in the sector. We almost had the opposite problem of our Series B in that we had too much interest and could have raised much more than the $11m we finally settled on. However, we felt that was enough to hit our plans and also gave us the opportunity to choose which investors we wanted to work with.
Cal This round is headed up by Comcast Ventures. Is Comcast Ventures completely separate from the rest of Comcast/NBC? Specifically, is there any television or other advertising built into this deal?
Nigel: Yes, Comcast Ventures is best described as a venture capital fund with a single limited partner, Comcast. Comcast Ventures is assessed on its financial returns of its portfolio and its track record shows that portfolio companies aren’t tied to Comcast. That was something that was very important to us when we brought them on board.
Our deal with them is purely financial and there isn’t any advertising or television built into the deal. However one of the main reasons we wanted to bring Comcast Ventures into the deal was to access their deep media expertise, both within Comcast but also across all the major sports networks.
Cal: How will this deal create new opportunities for FanDuel? How does this deal open new doors and bring even more legitimacy to this industry?
Nigel: We firmly believe that daily fantasy sports is the future of fantasy sports, and we are building the company to deliver that. Even before this deal the industry has been gaining in legitimacy, with two daily fantasy start-ups raising VC money in 2012.
Over the next couple of years we do want to work more closely with the leagues and sports rights owners to explain daily fantasy and show how it is driving growth of the overall fantasy industry. Also, we want to work more closely with the FSTA and indeed with other daily fantasy companies to ensure daily fantasy is understood and the industry is delivering a safe and trustworthy experience to players.
Cal: What does this mean for FanDuel internally – can you discuss software plans and improvements? You have a staff of over 40 now, how much will that grow?
Nigel: I can’t really go into too much detail on future product plans, suffice to say that we will focus on continuing to scale the product and delivering an even better customer experience. I feel that neither we nor any of our competitors have yet managed to deliver a product that can be taken to the mass market. That will be a major theme of our product development over the next 2 years.
On hiring we are looking to grow head count to about 75 by the end of 2013 with product, CS and marketing hires in the New York office and engineering hires in our UK office.
Cal: Personally, I’m dying to know what this means for FFFC 2013. What is your goal for total prize pool and top prize? Venue?
Nigel: So, a year ago the marketing team told me they would shoot me if I pre-announced the FFFC prize. After that didn’t deter me they came up with a new way of stopping me…Not telling me! So the honest answer is I don’t know. All I can say is I have told them to make it bigger and better than last year. I think Lagasse’s is a great venue and we will want to stay there, however we may potentially outgrow it at some point. I can’t ever see moving the FFFC from Las Vegas though.
Cal: How big do you think this industry can be, specifically in terms of active players? Where do you see Fanduel one year from now? Five years from now?
Nigel: I think daily fantasy will become the dominant way of playing fantasy sports. It has just too many advantages over season long fantasy, particularly for baseball, basketball and hockey. My estimate is that there are 100,000 active daily fantasy players today. I believe that is currently growing at a rate of 3 to 4x per year which would mean in 5 years time there could be in the region of 5 to 6 million players.
Thank you Nigel for taking the time to answer these questions, and congrats to you and your team on another impressive accomplishment.
Let’s all hope that he’s right with those growth numbers!