VCs are betting on online casinos after the success of sports gambling

A good argument could be made that daily fantasy sports paved the way for online gambling to go mainstream (and legal), with the twin rise of FanDuel and DraftKings in the early 2010s creating the explosive market. But while today their success may seem predestined, FanDuel cofounder Nigel Eccles told me that it was a battle to get a foothold—and to convince the often skittish venture capital sector to get on board. 

Today, Eccles is diving into an even riskier market—online casinos, where users can wager money on arcade-style games from the comfort of their web browsers. His startup, BetHog, is announcing a $6 million round of seed funding led by 6th Man Ventures, a crypto-focused venture fund. It will not be available in the U.S., at least for now.  

The humble start, at least compared to the multibillion-dollar behemoth that FanDuel became, mirrors the difficult path that Eccles faced with daily fantasy sports. When raising money for FanDuel, he faced hundreds of turndowns from VCs, with many declining to invest because of specific provisions in their LP agreements that forbade them from investing in gambling companies. But even beyond that, before FanDuel, there was no example of a successful online sports betting company in the U.S. “I don’t want to speak badly of VCs, but they struggle when there’s not a case study,” Eccles told me. 

And to be fair, FanDuel faced existential threats that justified VCs’ caution, including lawsuits and bans from several states, as well as the Federal Trade Commission’s move to block a proposed merger between DraftKings and FanDuel in 2017. But Eccles’s bet paid off, with a 2018 Supreme Court decision allowing states to legalize sports gambling, and FanDuel becoming as ubiquitous in sports as Buffalo Wild Wings commercials. 

For Eccles, online casinos are the next frontier. The consumer market has certainly warmed up to risk in the years since he founded FanDuel—whether it be with crypto meme coins or the presidential betting markets now available on every smartphone. But online casinos seem to be even a step further, where games are reduced to the bare mechanic of making and losing money, albeit with a cartoonish wrapper. Still, even without the U.S., they represent a massive, untapped market, with the only major company, the Australian Stake.com, raking in around $2.6 billion in revenue in 2022. 

Serge Kassardjian, the cofounder and general partner of 6th Man Ventures, argued that online gambling has become social, with communities forming around anything from Dogecoin to Polymarket on platforms like Discord and Telegram. “It’s almost the financialization of the way people interact with each other,” he told me. 

As a crypto VC, 6th Man Ventures has more freedom to invest in companies built around speculation. But they’re far from the only ones, now that traditional firms like Sequoia back crypto companies and betting markets. 

Both Eccles and Kassardjian said they’re cognizant of the risks of addiction to consumers, but said that appropriate behavior can be controlled through guardrails. “The gambling space is going to exist,” Kassardjian said. “It’s existed for a very, very long time.” 

Now, it’s just a tap away.

Leo Schwartz
Twitter: @leomschwartz
Email: leo.schwartz@fortune.com
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VENTURE DEALS

– Lean Technologies, a Riyadh, Saudi Arabia-based fintech infrastructure platform, raised $67.5 million in Series B funding. General Catalyst led the round and was joined by Bain Capital Ventures, Duquesne Family Office, Arbor Ventures, Saudi Venture Capital, and others.

– Prokeep, a New Orleans-based customer engagement platform for distributors, raised $25 million in Series A funding. Dahlia Equity Partners led the round and was joined by existing investors Ironspring Ventures, S3 Ventures, and Benson Capital Partners.

– Northflank, a London-based production workload platform for developers, raised $22.3 million in funding. Bain Capital Ventures led the $16 million Series A round and Vertex Ventures US led the $6.3 million seed round. They were joined by Kindred Ventures, Tapestry VC, Pebblebed, and Uncorrelated Ventures.

– Cogna, a London-based precision solutions provider, raised $15 million in Series A funding. Notion Capital led the round and was joined by Hoxton Ventures and Chalfen Ventures.

– Tako, a São Paulo-based mid-sized companies’ workforce management platform, raised $13.2 million in seed funding. Ribbit Capital and Andreessen Horowitz led the round and were joined by ONEVC and others.

– Equal, a Hyderabad, India-based identity verification aggregator, raised $10 million in Series A funding. Prosus Ventures, Tomales Bay Capital, and Keshav Reddy led the round and were joined by Blume Ventures, DST Global Partners, Quona VC, and others.

– Brevis, a Singapore-based off-chain computation engine, raised $7.5 million in seed funding. Polychain Capital and Binance Labs led the round and were joined by IOSG, Nomad Capital, Bankless Ventures, HashKey, and angel investors. 

– Fastino, a San Francisco-based foundational AI model provider, raised $7 million in pre-seed funding. Insight Partners and M12 led the round and were joined by NEA, Valor, Thomas Dohmke, and others.

– BetHog, a New York City-based crypto casino and sportsbook, raised $6 million in seed funding. 6MV led the round and was joined by Will Ventures, Bullpen Capital, Karatage, Advancit Capital, and angel investors.

– Oyster, a San Francisco-based employment platform for global teams, raised $5 million in a Series D extension from ServiceNow Ventures.

– Conflixis, a Dallas-based data risk platform, raised $4.2 million in seed funding. Lerer Hippeau and Origin Ventures led the round and were joined by mark vc, Springtime Ventures, and existing investor Cretiv Capital.

– Tranched, a London-based embedded asset-based financing platform, raised $3.4 million in pre-seed funding. a16z’s CSX and SpeedInvest led the round and were joined by Blockwall, Ovni Capital, and Kima.

– OneCrew, a San Francisco-based business management software platform for the asphalt and concrete paving industry, raised $3.3 million in seed funding. Entourage and Bienville Capital led the round and were joined by Alaris Capital.

– Ooodles, a London-based IT procurement fintech for SMEs, raised $2.7 million in funding. āltitude VC led the round and was joined by Traditum and existing investors.

– Paloma Health, a London-based AI-enabled physical and mental health services provider, raised £2 million ($2.6 million) in pre-seed funding. Triple Point Ventures led the round and was joined by Heal Capital and angel investors.

– Nordic Air Defence, a Stockholm-based drone defense technology developer, raised €1.2 million ($1.3 million) in funding. SNÖ Ventures led the round and was joined by others.

PRIVATE EQUITY

– Bishop Street Underwriters, a portfolio company of RedBird Capital Partners, acquired Ethos Specialty’s transactional liability unit, a New York City-based transaction risk management services provider. Financial terms were not disclosed.

– U.S. Compliance, backed by Susquehanna Growth Equity, acquired Hellman & Associates, a Wheat Ridge, Colo.-based environmental, health and safety compliance solutions provider. Financial terms were not disclosed.

– Zennify, backed by Tercera, acquired Terazo, a Glen Allen, Va.-based data engineering and software development firm. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

– Godspeed Capital Management, a Washington D.C.-based private equity firm, raised $675 million for its third fund focused on the defense and government sectors.

– Transom Capital Group, a Los Angeles-based private equity firm, raised $675 million for its fourth fund focused on middle market operational improvements.

PEOPLE

– ARCH Venture Partners, a Chicago-based venture capital firm, promoted Corey Ritter to partner.