Underdog Sports, the rapidly growing paid fantasy sports outfit, raised $35 million in a Series B round of financing, valuing the company at $485 million.
The Brooklyn-based company, which operates in the daily fantasy sports (DFS) realm, said it plans to use the fresh capital to hire more than 100 new employees and to push into regulated sports wagering. BlackRock, which is the world’s largest asset manager, and Acies Investment participated in Underdog’s latest funding round, joining an already star-studded list of investors.
BlackRock and Acies Investment join existing investors Mark Cuban, Kevin Durant, Trae Young, Odell Beckham Jr., Breon Corcoran (ex-CEO Paddy Power Betfair/Flutter), Mitch Garber, Eilers & Krejcik, Liontree Partners, Kevin Carter, Mark Pincus (founder of Zynga), SV Angel, The Chainsmokers, Kygo, Steve Aoki, Nas, Future and many more,” according to a statement issued by the company.
Acies is a gaming-focused venture capital firm and its managing partners include former MGM Resorts International (NYSE:MGM) CEO Jim Murren. In addition to Underdog, Acies has stakes in JefeBet.com, Midnite, Tally, and US Integrity, among others.
Underdog Looking to Leverage
Underdog, which frames itself as a DFS option for players looking to avoid the professionals and computer-based models that dominate larger platforms, is looking to leverage an established playbook: Converting DFS players to sports bettors.
Since the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA), FanDuel and DraftKings (NASDAQ:DKNG) have converted DFS players from their extensive databases to sports bettors. Today, the operators are the two largest online sportsbooks in the US.
“While the typical sportsbook is spending over $500 to acquire a customer, Underdog is bringing in new users for a fraction of that. Underdog’s product is leading to competitive advantages, as Underdog’s customer acquisition and retention success is best in class” said Chris Grove from Acies Investments in the statement.
Underdog investors are hoping Grove is correct about the company’s ability to attract customers in cost-effective fashion. That’s because customer acquisition and promotional spending are the primary hurdles operators face on their roads to profitability.
Underdog Could Be Just That
Underdog could be living up to its name. With its entry into the sports betting space, it’s forging into a hyper-competitive industry dominated by large players, such as FanDuel, DraftKings, BetMGM, and Caesars Sportsbook, among others.
Still, venture investors are allocating capital to sports betting upstarts, including Underdog. Last year, Murren was among the investors allocating cash to sports betting financial technology firm Sporttrade.
More recently, Las Vegas Sands (NYSE:LVS) took a stake in gaming technology provider and software developer Huddle Tech. Rap star Nicki Minaj invested in MaximBet. Those are just two examples of investors backing smaller sports wagering entities.
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