A relatively unknown tech company is well on its way to becoming the UK’s next billion dollar firm has revealed the great lengths it had to go to in order to raise capital.
FanDuel, a fantasy league platform for fans of US sports that was founded in Edinburgh but is now headquartered in New York, pitched to over 80 investors before finally closing a $4 million (£2.56 million) deal as part of a Series B funding round in summer 2011. More recently, it raised $70 million (£45 million) in a Series D funding round, bringing total investment in the company to $88 million (£56 million), with the vast majority of that coming US venture capitalists.
FanDuel co-founder Lesley Eccles said: “In the US, more and more people have heard of FanDuel but in the UK we’re still relatively unknown. Nobody realises we’re building a billion dollar business on their doorstep.”
The four-year-old company, which has just moved into the same office block as travel-booking platform Skyscanner, charges sports fans to compete in one-day fantasy leagues across the NFL, NHL, the NBA and other sports. It’s expecting to take $600 million in entry fees this year and $1.5 billion next year. Of the $600 million (£384 million) it takes in 2014, $540 million (£345 million) will be paid out in prize money and $60 million (£38 million) will be pocketed.
Despite the promising numbers, FanDuel has found it hard to raise money from UK investors for its web and mobile gaming platform.
“It’s definitely harder getting investment in the UK,” FanDuel CEO Nigel Eccles told Techworld as the company launched it's new office (see below). “I’ve been down to London and pitched all of those guys. There are certain brand name VCs that have turned us down every round but I couldn’t mention names.
“It’s quite funny. I think one of the problems with the UK VC is they’re not familiar with the US market, which is fair. They don’t see the opportunity around fantasy sports. I’d also say, without being critical, that by they’re nature they need to be slightly more conservative and we were always a very risky bet.”
Eccles said that he dedicated an entire year towards raising the $4 million round. “It’s a full time job,” he said, echoing the sentiments of Huddle CEO Alistair Mitchell last week. “I was fortunate enough to have a strong co-founding team that allowed me to walk away from the business and it would still run,” said Eccles.
Eccles added: "I found it challenging to raise money. For Series B, we pitched 84 different VCs on one term sheet. Maybe it was 86."
Earlier this month FanDuel signed a strategic four-year deal with the NBA, which will see the sports body promote FanDuel's platform, in addition to offering a series of free games on FanDuel throughout the 2014/15 season and beyond.
Eccles described the deal as "phenomenal", adding that it's a major landmark for the company.
Next section: The problems of success
The problems of success
However, in order to become a $1 billion tech company, or a “unicorn” as they’ve recently been dubbed by Silicon Valley, Eccles and his four co-founders now need to embark on an aggressive hiring spree.
FanDuel's existing team of 125 is split evenly between Edinburgh and New York but the company intends to open an office in Glasgow early next year in order to access a wider talent pool in Scotland.
Of the 60 or so staff in Edinburgh, approximately 40 are in the engineering team. This is expected to double to 80 or 90 by the end of 2013.
However, FanDuel isn’t willing to hire any old developers, according to CTO Robin Spira.
“We have a very high bar,” he said. “The number of candidates who make it through our very extensive interview process is quite small. We reject far more candidates than we accept.”
Spira said he is looking for java developers, python developers, architects, business analysts, project managers and quality assurance experts.
One of the main sources of talent for FanDuel is Edinburgh University’s computer science department, Edinburgh Informatics. Indeed, two of the company’s co-founders are graduates, as are a number of the company's more recent recruits. However, Eccles is concerned that too many of the department's top graduates are flocking to London, possibly to Old Street’s Silicon Roundabout, after completing their studies.
"A lot of the graduates just move to London," he said. "I want us to be able to offer an international calibre career from Edinburgh."
FanDuel and Edinburgh University are keen to improve their relationship with one another. The university's principal, Professor Sir Timothy O’Shea, himself a renowned computer scientist, attended the office launch and spoke with Eccles about how the pair can work together in the future.
However, with Skyscanner just a couple of floors below FanDuel, it’s likely that the pair of fast-growing Edinburgh tech firms (who currently share a close relationship) will be going head-to-head in the fight for the university’s best talent.
Skyscanner CEO and co-founder Gareth Williams also attended the office launch. He told Techworld that he wishes FanDuel the best of luck, before going on to hail them as one of the city's best tech startups.
Meanwhile, Skyscanner's director of B2B, Filip Filipov, told Techworld at Skyscanner's office that he wants to see more international tech companies set up in Edinburgh as it helps to put the city on the map.
While FanDuel occupies just one floor in the building next to Edinburgh University, Skyscanner has three, accommodating more than 380 staff.
Both firms have Silicon Valley-style offices and they offer staff a number of perks, from the obligatory ping pong tables to competitive stock options.
With dozens of jobs listed on both of the company websites, it would appear that it's a good time to be graduating from somewhere like Edinburgh Informatics.