Fantasy sports are becoming big business. At least, new and existing investors in DraftKings, an online hub for armchair general managers, seem to think so.
DraftKings is expected to announce on Monday that it has raised $41 million in a new round of financing. The investment was led by the Raine Group, the merchant bank that specializes in media and technology deals, and included existing investors Redpoint Ventures, GGV Capital, and Atlas Venture.
Behind the investment by Raine and others is the belief that fantasy sports will become a huge industry. According to DraftKings, the market already counts nearly 37 million players in the United States and Canada.
Some professional sports leagues, particularly Major League Baseball, already have warmed up to daily fantasy leagues, hoping that they will stoke the passions of paying fans.
“Daily fantasy sports represents a tremendous area for growth in the multi-billion dollar world of fantasy sports, and Raine is pleased to lead this investment round for DraftKings,’’ John Salter, a partner at Raine, said in a statement. “DraftKings has established the optimal mix of cutting edge technology, broad industry knowledge and a deeply loyal user base to further push its leadership in this space and we are delighted to partner with them as they continue to expand.’’
The two-year-old DraftKings has already put the money to good use: It’s also expected to announce on Monday that it has acquired another fantasy sports site, StarStreet.
It also plans to use the new money — which will add to the $35.4 million that the company had already raised — to expand its mobile and Web offerings, hire more employees and bolster its sports lineup and contest prizes.
Already, DraftKings plans to pay out $1 million to four players in four months through its NFL Fantasy Football Millionaire game, which the startup says is the biggest-ever promotion for daily fantasy sports.
The company is also hosting a $3.3 million fantasy baseball competition in the Bahamas, with a $1 million top prize.
The deal is the latest sports-related transaction involving Raine in recent months, largely on the investment bank side of the business. The firm advised former Microsoft chief executive Steven Ballmer in his purchase of the Los Angeles Clippers professional basketball team and the National Basketball Association in its buyout of the owners of the holdover Spirit of St. Louis team.
It is also representing David Beckham and the British media entrepreneur Simon Fuller in their work setting up the new Miami team for Major League Soccer.