Late last week, it was announced that Revolution Growth decided to invest in DraftKings, with $150 million going towards the daily fantasy sports site. The investment was made just days before the NFL season is set to begin. Revolution announced the investment on their site, stating that the money came from the Revolution Growth III fund which consists of $525 million.
Steve Murray is a partner of Revolution who stated that online fantasy sports are just one of the many ways that technology has disrupted the sports industry within the recent years. Murray stated that building a business is never easy, especially when you consider one that is leading the creation of a new marketplace. Revolution has the expertise needed to help entrepreneurs execute the ideas especially as sports and policy intersect. It was also announced that Murray will become a member of the DraftKings board.
It is unclear as to how the latest investment into the company will affect DraftKings. The company is currently not yet profitable as costs from 2015 were far higher than the revenue earned, even as the environment became friendlier based on legalization and regulations.
Costs in 2015 included legal fees due to the negative opinions by attorney generals in several states in the US as well as class-action lawsuits that were brought against the company. When the brand had to leave states due to the legal climate, it also caused a decrease in revenues. Costs were also incurred due to lobbying for the passage of new laws in regards to legal clarity of the industry within individual states. Additional costs were also incurred as states began to pass laws in regards to daily fantasy sports with licensing fees and taxes put in place.
Legal Sports Report provided information by Eilers & Krejcik Gaming, where Adam Krejcik stated that based on research, the new valuation of DraftKings was short of the $2 billion that the company was valued at previously. According to Krejcik, the fundraising round was completed at post-money valuation of $1 billion.
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