Fantasy sports startup DraftKings has raised another $41 million in funding led by The Raine Group. The company is also announcing that it’s acquired competitor StarStreet to capture an even larger portion of the daily fantasy sports market.
In addition to The Raine Group, existing investors Redpoint Ventures, GGV Capital, and Atlas Venture all joined in on the Series C round of funding. That raise comes less than a year after the company raised $25 million last November. In all, the company has brought in nearly $75 million in outside financing.
All that money was raised in part because DraftKings has grown rapidly since being founded just two years ago, riding the wave of interest in fantasy sports competition. The company differentiates itself from most of the major fantasy sports leagues out there, however, by operating a series of daily contests that its users can log in and join.
Making its contests daily — or in the case of football, weekly — as opposed to operating season-long leagues means that DraftKings users are less likely to lose interest over the course of the year.
Every day there’s a new series of contests to participate in and try your hand at beating the competition. And, of course, if your roster isn’t very good one day, you can always change it the next — as opposed to being stuck with a bunch of underperforming bums all season.
That’s a model that consumers seem to love, based on the growth of its user base and the size of the prizes that it is now giving away. According to co-founder and CEO Jason Robins, DraftKings expects to pay out about $200 million in prizes this year. It will have four monthly prizes of $1 million each during this year’s NFL season. Compare that to the $100,000 grand prize that it promised during its first NFL season two years ago.
Preparing for the NFL season is one reason DraftKings decided to take the most recent investment from The Raine Group, Robins told me. The company hadn’t been shopping around for new funding so soon after its most recent round of funding, but the firm was interested in making an investment in and offered decent terms, Robins told me.
“It’s a very seasonal business when it comes to customer acquisition, and the NFL season is the best time to acquire them,” Robins said.
According to him, DraftKings hope to leverage The Raine Group’s connections in the media, entertainment, and gaming worlds to help grow its business. It will use the funding to accelerate customer acquisition through a number of different media channels, including TV, radio, digital, and mobile ahead of the NFL season.
DraftStreet will also use the funding to invest in product development, especially as it seeks to improve its mobile products. Until about a year ago, the vast majority of the business was on the company’s website. But increasingly it’s hiring to go after the mobile opportunity, since mobile is where most fantasy sports seem to be going.
Of course, DraftKings isn’t the only daily fantasy sports site out there, but it continues to grow, in part thanks to a couple of acquisitions the company has made. About a month ago, it acquired DraftStreet and today it’s announced the purchase of StarStreet.
In both cases, the acquisitions were about acquiring new users, as it has shut down those sites and moved users over to its own platform. In the case of DraftStreet, DraftKings kept a good part of the team and the company’s office in New York City. But for StarStreet, DraftKings will be acquiring the company’s assets only, as its founders move on to work on different projects.