FanDuel acquires mobile app developer Kotikan

This is the first acquisition for daily fantasy sports company, which recently raised $275 million

(Updated with additional information regarding Koitkan's future)

FanDuel, a rising star in the fast growing daily fantasy sports space, is having quite a month. First it raised a huge $275 million funding round, and now it has just made its first ever acquisition.

The company has purchased Scotland-based mobile app developer Kotikan, it was revealed in a blogpost from Gavin Dutch, Founder and Managing Director of Kotikan.

Founded in 2007, Kotikan is a mobile app development agency with a team of over 50 employees with a £2.4 million ($3.7 million) turnover. While no financial terms of the deal were disclosed, this sounds like an acqui-hire for FanDuel, as Dutch says that the company will "devote the entire Kotikan team to crafting FanDuel products."

"This is an acqui-hire where the entire Kotikan team has been offered roles at FanDuel," a FanDuel spokesperson told me.

Kotikan's employees will complement FanDuel's existing teams in Edinburgh, Glasgow, New York, Orlando and LA.  The company is still seeking to increase headcount this year and is actively recruiting in the UK for software engineers including java, python and front-end developers.

The two companies has been friends "since the very beginning," he said, and FanDuel co-founder and CPO Tom Griffiths was a mentor to Dutch since his "early entrepreneurial days.

"Kotikan and FanDuel started working together in 2013 to pursue a shared mission of building the world’s best mobile app in fantasy sports. We have had an immensely strong working relationship ever since and been lucky to see the app top the App Store charts and pick up two Webby awards along the way," he wrote.

Founded in 2009,  FanDuel has over 12,000 leagues open every day, with over $10 million in real cash prizes paid out every week. The company says that it now represents 65% of the daily and weekly fantasy sports market.  In 2014 the company paid out more than $560 million to users and generated $57 million in revenue.

The acquisition of Kotikan will, no doubt, help the company deliver apps that will help it go up against its two biggest rivals in this space.

The first is DraftKings, which currently has over one million users, and several hundred thousand monthly active users, and its growth can be seen in how much it has been giving out in prizes: In 2012, there was $5 million given out, a number that jumped to $45 million in 2013. That number jumped to around $300 million in 2014.

Last August, DraftKings raised $41 million, giving it a total of $75 million in total. The company was said to be raising another $250 million from Disney and ESPN this year; that didn't happen, but it did sign a dealto get exclusive rights to advertise fantasy sports on Disney’s ESPN properties starting in 2016.

The second big competitor is a late entry, but a formidable one: Yahoo, which announced the launch of Yahoo Sports Daily Fantasy earlier this month, giving its users the option to compete with their friends and win cash on a daily basis, rather than having to play a whole season.

Yahoo has been offering fantasy sports on a season-wide basis for year, so its has an inherent advantage: it's fantasy sports players grew 40% in the last year, hitting more than 56 million across the U.S. and Canada.

All three of these companies are vying for dominance in a very fast growing space,  as the entire e-sports category is on the rise. 

Companies in the e-Sports and game-streaming categories have raised just over $295 million since the start of 2010. The most amazing part: that over half of those deals, a total of 56% of them, have come since, you guessed it, September of 2014. It is not a coincidence that that just happens to be when the biggest deal in this entire category went down, when Twitch was acquired by Amazon for nearly a billion dollars.

(Image source: fanduel.com)