DraftKings, an online daily fantasy sports competition company, made a few big announcements today that make it not only one of the biggest fantasy sports franchises in the country but also one of the fastest growing Boston technology businesses of 2014.
First, the company announced that it has raised $41 million in funding from investors that include new backer The Raine Group, as well as existing investors Redpoint Ventures, GGV Capital, and Cambridge-based Atlas Venture. The new funding will be used for marketing, customer acquisition, and growing the liquidity of the company according to Paul Liberman, DraftKings founder and chief marketing officer.
The new funding is DraftKings’ second big round of financing in the past 12 months. The company raised $24 million in November. Since its founding in 2012, the company has raised close to $75 million. DraftKings is headquartered in the Financial District and has a smaller office in New York.
DraftKings is a daily and weekly fantasy sports website where, instead of choosing players for teams that play full-season fantasy sports competitions against competitors, users choose athletes for shorter periods of time to compete for prizes. While DraftKings has an option for players to compete for free, it also allow users to buy into potentially lucrative contests.
Unlike sports betting, which is outlawed in most states, DraftKings is considered a “skill game,” which are legal in 45 states. “The data shows that there is a significant amount of skill that goes into knowing what players to pick and how everything works together,” Liberman said.
The company said today that it will be having four $1 million single-day competitions each month during the NFL season that will cost users $27 to enter. Additionally, this week, DraftKings and 50 of its players will be gathering at Atlantis in the Bahamas for the company’s $1 million fantasy baseball challenge.
Lastly, the company also announced that it has acquired StarStreet, a Cambridge-based daily fantasy sports site. This is the second acquisition of a competitor by DraftKings this summer; in mid-July, it acquired the third largest daily fantasy sports company , DraftStreet. In the industry, only FanDuel has more users but DraftKings claims larger cash reward payouts.
StarStreet, founded by Jeremy Levine and Nicolo Giorgi in 2009, first gained attention as an athlete stock exchange but eventually shifted to become a daily fantasy sports site. Although competing in the same space, both StarStreet and DraftKings have said that they have a good relationship and have discussed some sort of merger for some time.
Liberman said that StarStreet users will be converted over to DraftKings customers. “As of Monday afternoon, they will be able to transfer their balances over to DraftKings…it will be a very easy transition process for them.”
According to a report by market research firm IBISWorld, fantasy sports will be $1.4 billion industry in 2014, with companies like Yahoo, ESPN, and the CBS Corp. as its major players. The report also stated that more than 30 million Americans will compete in a fantasy sport competition this year according to the Fantasy Sports Trade Association.
Jeremy Edwards, a lead analyst for IBISWorld, said that DraftKings differs from the major fantasy companies because it offers more frequent games. “This attracts a large, and growing, number of fantasy players that are looking for more games and more prizes,” Edwards said.
He added that the recent acquisitions allow DraftKings “to provide a greater variety of products to customers, which is crucial in an industry where service offerings are similar.”
The new round for DraftKings is among the largest for a Boston-area tech company so far in 2014. Here are the top 10: