First published by The Herald on 26 November 2016
LESLEY Eccles is feeling pretty pleased with herself. Having co-founded online fantasy sports business FanDuel in 2009, she and her fellow founders have signed off on a merger deal with DraftKings that will not only help the firm win a far greater chunk of market share but should give it greater clout to overcome ongoing US legal hurdles too.
Though the deal is still subject to regulatory approval and is not expected to close until the latter part of 2017, Ms Eccles said she is “excited about the opportunity”.
She added that it will allow the business to “accelerate our rate of innovation, offer a greater variety of products and appeal to new users more quickly than we could separately”.
It is also represents a huge step forward for Ms Eccles and husband Nigel, who less than a decade ago gave up lucrative jobs in the City to move to Edinburgh and set up their own business.
“We’d lived through the dotcom boom and felt there were still a lot of opportunities there,” she said. “We came up with an idea in mid-2007 for a game based around predicting the news but neither of us were developers so we couldn’t get it off the ground ourselves.”
The Eccles subsequently met up with FanDuel’s current chief product officer Tom Griffiths, head of design Rob Jones and lead engineer Chris Stafford, and they all shared the ambition to “do something transformational and really cool”.
Having received $1.2 million of funding from venture capitalists Pentech Ventures and Scottish Enterprise, the founders soon ditched the prediction game because, Ms Eccles said, “the revenue model in our original idea was flawed”.
“We took a step back and talked to a lot of people we’d met over the previous year, primarily Americans,” she said. “Some were very into fantasy football and we realised there was a huge opportunity to do something in that space. It was an area that hadn’t been disrupted at all.”
Although none of the business’s founders had any experience of American football leagues, the popularity of fantasy sports in the US led them to target that market exclusively, with the disruption coming from the fact that users can win games on a daily basis rather than having to wait until the end of the season.
“Looking back what we did was pretty crazy – we were super ambitious and very, very courageous,” Ms Eccles said. “We focused from the start on the US market purely because of the size of it – there are 50 million players of fantasy sports there. We had no network, we knew nobody who had done this before and there was no tech scene in Edinburgh then.
“When I think back, we built a billion dollar business in the US market from Edinburgh and from nothing. It’s pretty insane. If I’d known then what I know now I’m not sure I’d have done it.”
The reason she would not have done it is mainly that “in those days we were going out of business every six months” – a scary prospect given that the Eccles had invested their life savings in the venture.
Now FanDuel, which makes its money by taking a 10 per cent commission on every player’s entry fee to a game, turns over in the region of $100m and the Eccles have such confidence in the future of the business that they have moved their family from Scotland to be closer to the action in the US.
The DraftKings merger will bring the business added bulk both in terms of turnover and user numbers, although building scale was not the only reason FanDuel had for doing the deal.
When they announced the combination DraftKings and FanDuel said in a joint statement that it would help them more efficiently lobby policymakers for a standard regulatory framework for the relatively new industry in which they operate.
Joining forces to do this makes sense, given that both have been hit by numerous states saying the games they offer are ones of chance rather than skill and as such are illegal.
They are making some headway, with states including Indiana, Virginia, Massachusetts and New York all lifting restrictions on their activities this year.
Ms Eccles noted that the business has “figured out a way forward with the attorney general in New York”, although she admitted that while the dispute was going on “there were dark days when I would be losing sleep about it”.
“I think because we’d been through so many tough times in the early years it [the legal challenges] felt not insurmountable,” she added.
Whatever happens in the states where such legal issues have yet to be ironed out, Ms Eccles is comfortable that she and her co-founders have come a long way towards achieving what they set out to less than a decade ago.
“There’s still a lot of growth to come – there are 50 million people in the US who play fantasy sport and we [pre-merger FanDuel] have around six million of them,” she said.
“This is more than just FanDuel – it’s a whole industry that we’ve started. There are hundreds of other businesses that have sprung up as a result of this.
“To have done that is pretty amazing but to have done that from Scotland in such a foreign marketplace with no experience is pretty phenomenal.”