Fantasy Sports, Real Money: Atlas Re-Ups with $7M in DraftKings

We’re in the middle of a frenzied period in major American sports: the NBA playoffs, the NHL playoffs, and regular-season Major League Baseball all competing for attention, along with the draft and offseason reshuffling in the NFL.

All in all, not a bad time to reload with more investment cash if you’re a fantasy-sports startup.

That’s the case today for Boston-based DraftKings, a two-year-old startup that provides daily fantasy sports contests for rabid fans, both online and through mobile apps. The $7 million Series A investment comes from Atlas Venture, the Boston-area venture capital firm that bankrolled DraftKings’ previous $1.4 million seed round (and just raised a new $265 million fund).

DraftKings has a somewhat different take on the classic form of fantasy sports, in which fans assemble a mythical roster of individual players and rack up points based on those individual competitors’ statistics, which translate into “scores” in head-to-head competitions with their friends.

The DraftKings spin on things makes for a faster game—its contests are daily, as opposed to long-term commitments that can stretch over a whole season. And in the Web version, there’s actual money at stake: DraftKings says it will award more than $20 million just during the current fantasy baseball season.

Sounds like betting, right? Yep, but it’s actually legal under federal law to win money on fantasy sports contests, because choosing which players to pick is considered a skill rather than a game of chance, like playing against the house in a sports book. DraftKings does, however, have to block players in certain states that have more restrictive gambling laws.

For mobile apps, DraftKings has users play for virtual currency—which they can buy more of with real money, like in many freemium mobile games.

DraftKings says it now has about 1 million users between its Web and mobile platforms—not enormous numbers, but it’s just a year into the game. In a press release, CEO Jason Robins says the startup is seeing hopeful signs in users who stay with DraftKings for more than one sport season.

“We were amazed to see how popular fantasy basketball became with our fantasy football customers, and we are now seeing similar conversion from fantasy basketball to fantasy baseball,” Robins says.

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