DraftKings and FanDuel: $1 Billion Unicorns Ready for NFL 2016 Season

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Special to 24/7 Wall St. From PrivCo

When HBO’s “Hard Knocks” returned this August, it marked the beginning of a marketing and media firestorm that will lead up to the start of the NFL season, which this year begins with a Superbowl 50 rematch of the Panthers and Broncos on September 8th.

While we are certainly excited for the NFL season to return, there are two companies that have been waiting even more patiently than we have: FanDuel and DraftKings.

FanDuel and DraftKings just went through a blistering off-season similar to the roller-coaster ride the Ravens saw after winning the Superbowl and then losing two of their pillars (Rice and Lewis) in the following two years. The Ravens went 8-8 the following season and failed to make the playoffs, but that isn’t where the story ends for them, and it’s not where the story ends for DraftKings or FanDuel.

DraftKings and FanDuel’s Superbowl moment was achieving unicorn status. Their Ray Lewis departure moment was then they saw those valuations drop considerably as 21st Century Fox cut the value of its 11% stake in DraftKings by about 40%. Finally, their Ray Rice moment came when New York Attorney General, Eric Schneiderman, hit the two companies with an injunction that halted the sites’ operations in New York. In a joint interview he gave with the New York Times andFrontline, Schneiderman called Daily Fantasy Sports (DFS) a “convoluted scheme” and, “a particularly pernicious form of gambling.”

That is about as bad as an off-season as one can have; things, however, are looking up for the two companies, despite allegations of imploding by the squeaky clean, Disney-owned, ESPN. (If 11,000 words is too long to comprehend, Dan Primack of Fortune did a much better summary of the findings here)

Legal setbacks are the death of some companies and for some, it’s an example of their resilience. Uber and Airbnb are perfect examples of where legal uncertainty can hinder a company (some feel it is the reason neither have gone public, along with a number of other reasons).

Last Monday, DraftKings and FanDuel passed one legal hurdle that was pivotal for both. They will be allowed to resume operations in New York for one year. It’s not a touchdown, more of a field goal, but in a statement made to PrivCo from a company spokesperson within FanDuel, the company’s “long-term future is bright.”

We decided to look into PrivCo’s Private Company Financial Database to look into the performance of these companies during their short histories. PrivCo also reached out to FanDuel and DraftKings spokespeople to get their take on the new ruling, hear their plans for the future, and learn what the daily fantasy legal implications could mean for the industry. (DraftKings was unavailable for comment at the time of PrivCo’s release).

Both companies have a wealth of information to analyze, and we took a look at the information we had on both as well as a number of data points that FanDuel supplied exclusively to PrivCo. Below are our findings.

Profits & Losses:

Each company’s revenues have followed a growth trajectory that would make any tech company investor eager to be a part of. Some are saying it is the beginning of the end for gaming prohibition in America and that these two companies are at the forefront of that disruption. As you can see below (numbers unconfirmed for FYE by both companies), the two have dramatically increased revenues each year, both showing a 1-year growth rate in the triple digits (FanDuel grew by 203%DraftKings by 162%).