The power broker: Ex-Barstool and FanDuel dealmaker David VanEgmond on his blockbuster deals

Few in the industry have gotten as close to the action as David VanEgmond, former investment banker turned top dealmaker for FanDuel and Barstool Sports.

VanEgmond facilitated FanDuel’s sell-off to Paddy Power Betfair (now Flutter) as well as the 36% purchase of Barstool Sports by Penn National Gaming in a partnership that will see the launch of the Barstool Bets online sportsbook in Q3 of this year.

At the helm of two of some of the biggest deals in the US betting space, VanEgmond has learned exactly how to upsell a brand and its audience to gain the necessary leverage within a sector that is still too nascent to have formally decided who has the upper hand.

And with each deal and each situation entirely unique, VanEgmond is branching out into the consultancy world to aid the next generation of power moves.

Here, he speaks to EGR NA about his predictions on potential media partnerships ahead, as he reflects on some of the key decisions made in his career.

David VanEgmond was at the helm of the Flutter/ FanDuel acquisition and the Barstool Sports deal with Penn National

EGR North America (EGR NA): How did you start out in the betting industry?

David VanEgmond (DV): I started at FanDuel before DFS got big in early 2015. I was a customer of the company for a couple of years [when] I lived in Silicon Valley in San Francisco and was advising tech companies as an investment banker.

I just wanted to move into one of those companies that I loved as a customer and I strongly believed in. I saw friends go to Facebook, Uber and Snapchat and I said, “hey, I want to take my shot at a company that I believe can become just as big as some of these new wave tech behemoths,” and so I joined FanDuel in early 2015.

It was a bit of a checkered ride as DFS grew rapidly but then came under significant regulatory scrutiny. We obviously had to make some hard decisions and make some operational choices that were painful as we had raised a lot of money and spent it all on marketing and then hit a material slowdown in the growth of the business.

That was quite a learning experience to go through all that and manage the business, to then steadying the DFS business and ultimately having the opportunity for sports betting when PASPA was repealed.

EGR NA: What was FanDuel’s approach to real-money sports betting initially?

DV: In December 2017, when the Supreme Court took up the PASPA case, FanDuel started preparing. We knew we had a brand and a large database in the US, so we thought we would be able to do well in that market. I think in a daily fantasy business a lot of people knew of the sports betting market but did not have significant experience actually being an operator in that space.

We were looking for an investor partner or a strategic partner to help us and that’s ultimately how we landed on a transaction with Paddy Power Betfair. They obviously had assets in the US and they had already started building the infrastructure for the US assuming PASPA was going to get overturned.

They had leadership and people that had run these businesses in international geographies already and that combination with FanDuel, its brand and its database made for a good marriage.

EGR NA: Were there any other international or European operators considered?

DV: We talked to everyone. I was in London at least three different times during the first quarter of 2018. We were talking to lots of different parties in the market, but I would say Paddy Power Betfair was the most interested of the parties.

EGR NA: What do you think about Flutter’s latest move to acquire The Stars Group and its impact in the US as it moves to operate a dual-brand approach with FanDuel and Fox Bet?

DV: I think it was less about running a dual-brand strategy. It was important for them to get a global poker business to get some of the other assets that The Stars Group had and international geographies.

And now they have to take on Fox Bet but I think it’s just a by-product of the deal as opposed to a motivation of the deal. We’ll see how that strategy in the US evolves over time because obviously FanDuel is number one in the market, so they don’t necessarily need another brand.

EGR NA: When and why did you make the move to Barstool Sports last year?

DV: I saw the success that Barstool was having as a marketing partner of FanDuel. It was their exclusive sports betting partner in 2018 when we had launched in New Jersey, and I thought, “wow, this company really has the top-funnel marketing engine.”

It was the largest digital sports platform in the United States and I thought having done the FanDuel Paddy Power deal, a lot of the casino companies we had met with along the way in the brick-and-mortar business clearly loved their brands and would go with them as they transitioned online.

But I looked and I saw Penn National, Boyd Gaming, Eldorado and Twin Rivers [as potentials]. There were a lot of regional casino companies in the US who had big footprints and market access and would ultimately need to transition their business to online.

And they operated either a corporate brand or disparate portfolio of brands in the regional markets in which they operated, so they weren’t going to be able to use any of those.

They needed a brand and a database that was on par or bigger than FanDuel and DraftKings’ databases that they could convert at slightly lower rates but at strong numbers to build an audience that ultimately could compete.

And I think what we’ve seen in the market receptivity to Penn is that the market believes that it is going to capitalize on its partnership with Barstool and convert a lot of the Barstool audience into sports bettors as their way to try to catch up to FanDuel or DraftKings.

I joined Barstool with a very specific mandate to figure out how they could make more money in sports betting if they did a big deal, and if that ultimately ended in getting some of the shareholders being bought out or selling the entire business then that was great.

Jon Kaplowitz, the head of Penn Interactive, used to be at Comcast, which was an investor in FanDuel, so I knew Jon and had relationships there that I was able to utilize to begin a dialogue and then ultimately we went through the dating phase and thought it was going to be a good marriage.

(Photo by Cliff Hawkins/Getty Images)

EGR NA: What do you say to those that thought Barstool’s valuation was too high?

DV: If everyone thought the value is too high it means I did a good job. No, I think the value was fair. I mean Barstool was approaching $100m in revenue so at a $450m valuation you’re talking something just south of five times trailing revenue, which for digital media companies is not out of the realm of the top range.

Digital media just trades on a revenue multiple as opposed to more established online or retail gaming businesses that are very straight on EBITDA. Unlike most major media businesses, Barstool was profitable. It was growing 50-plus percent year over year and the business continues to do well.

I think if you look at Penn National, the stock has gone up on the Barstool news in a world where the retail gaming business is down because of Covid-19 closures. If you asked Penn National now, they’d say perhaps it was even undervalued at $450m given this company is somewhat resistant to what’s going on in terms of impeding its growth.

Certainly, there’s some level of softness but the business continues to grow very nicely.

EGR NA: Before Penn National, did you consider any of the online-only brands as a potential partner?

DV: I approached Penn National and it was very intentional. To get maximum value for the Barstool brand we needed a company that did not have an online brand. Going to a retail casino that had casinos in multiple states, but not one consolidated brand, was of critical importance.

And the company that was going to pay the most for the Barstool brand was the person who had the most market access and largest footprint. And Penn National has that in the United States.

Barstool advertised for PointsBet in 2019 and [they’ve seen] nice market share growth in the US, and Barstool helped build their brand and awareness and they leveraged some Barstool IP in their app to make it relatable to the US customer.

But I don’t think PointsBet could ever pay what Penn National could pay so it was very intentional to go to bigger retail casinos that needed a brand as well as the media integration.

EGR NA: Did Penn National always intend on finding a media partner with a brand to adopt?

DV: I think they would probably tell you they were in the market with everyone else looking at the CBSs and Sinclairs of the world and they understood that as they didn’t have a brand, a media partnership would be important. I think they might have gone with one of their own brands or another brand, but we were able to upsell them.

EGR NA: How involved is Barstool in the development of the sportsbook product?

DV: Barstool is very involved from the perspective that we’re going to be promoting it. Penn wants us to love the product and wants everyone on the Barstool talent side who is going to be promoting it to be aware of that and provide input. I would say Barstool is integrated in terms of the app development.

EGR NA: Do you think the current Covid-19 situation will cause any setbacks in marketing and launching the product in Q3 2020?

DV: No, I don’t think so. Barstool is a digital company first so we’re going to promote the app launch digitally. As we’ve seen in New Jersey, retail is less than 20% of the total volume in the state. In a world where the casinos are back at full capacity and we can do a big event and bring big crowds to the retail sportsbooks, we’ll do that but otherwise we’ll just continue to promote the app.

EGR NA: What are your expectations for wider industry media deals?

DV: I think they’re going to continue, there are more dominoes to fall. I think Sinclair is on the market from my understanding. NBC Sports is also on

the market. I imagine the upcoming football season will serve as a catalyst to finalize those deals because people want to start seeing value during that time, especially with sports returning.

And then I think there are others that are potentially interested in the digital side. There was a rumor a couple of weeks ago that DraftKings was looking at Bleacher Report. There are still several operators that haven’t done anything, so I expect a few more deals to happen before the football season.

EGR NA: Who has the leverage in these industry media deals?

DV: I think demand is high right now, so the media companies [have the leverage] – certainly if multiple operators are interested. I am telling prospective clients that if they hire me it will help give them additional leverage.

I do think there is a strong demand right now and as the available marquee assets decline, and NBC and Sinclair will be gone soon, there are interesting companies on the digital side that should become more valuable as operators look to do something.

Frankly, not to speak poorly of some of the other media companies in the space, but I think Yahoo! and CBS will be challenged in terms of delivering what William Hill and Roar are expecting. I think those are legacy platforms and if you can’t really integrate on linear with CBS, how effective will [the partnership] be? Digital is not their strong suit. I think those two partnerships could be a little challenging.

And if they are, that only creates more demand for all digital native opportunities that a lot of operators are going to look to differentiate on.

EGR NA: What is your new venture, Bettor Capital?

DV: I thought, “hey, I’ve done two of the bigger transactions outside of the DraftKings IPO in the US sports betting market, so what should I be doing to really capitalize on this?” I could continue at Barstool and support the Penn partnership, but I believe there’s going to be more consolidation in the industry.

There’s going to be lots more media deals, partnerships and key professional sports teams getting into the fray, given that in some states they may have market access.

I just saw all this play out in the DFS space and felt there was a huge opportunity to do lots of different deals and consult with companies as an adviser, helping them secure these bigger partnerships or, if they’re a supplier, help with business development in terms of getting the operator as a customer.

I’m an equity holder in social betting platform Betsperts and I’m on the board of directors. There are a couple of other earlier stage start-ups in the sports betting space, one around content distribution and one around supplying technology to operators, that I’m involved with as an equity holder, and there are a couple of consulting clients that I have coming on board.

One is a professional sports team that has market access they’re looking to monetize, and then I’m looking at some other adjacent media businesses smaller than NBC or Sinclair but who are exploring immediate partnerships with operators.

EGR NA: Is Betsperts looking to sell or find an operator to partner with?

DV: It’s not the intention today. I think there’s a lot of growth still to come for Betsperts on its own. I think this football season will be a huge growth period for the company. And there’ll be lots of new product features that come out in the next couple of months before the return of football.

We’ll see where that takes us, how big the audience grows and what it means for monetization. There are several different monetization strategies that we have and paths that we could pursue. And then ultimately, as we build audience and scale, we’ll consider what the right use for that is.

Are there direct monetization paths? Do we ultimately want to partner with one operator or get bought by an operator or media company? That’s still a long way off.

EGR NA: What are you really looking for in investments and firms to partner with?

DV: From the investment side, I’m working for companies in the supply chain in both marketing and software technology. I think the market is really unique; you have things like geolocation and KYC payments where these software companies exist just for the sports betting market.

There’s a big opportunity for growth there as the market is still in the very earliest stage of its development. And then on the marketing side, whether it’s media companies who are ripe for partnership or advertising revenue like affiliates in the sports betting space, I think there are a lot of interesting companies that are going to be on the other side of receiving investment dollars from sports betting operators as they look to acquire customers that will help those businesses grow over the next five-plus years.

EGR NA: How deeply integrated can sports leagues be in the industry?

DV: I don’t think they can be deeply in terms of their data and then they’re going to try to sell as many sponsorship assets as they can. But ultimately, they’ve all made the decision; they’re never going to take a percentage of revenue because they don’t want to feel like they have a side that they hope wins the game.

I think they’re going to try to extract as much value as possible for their data and upsell people to branding and partnerships. I think you can ask a lot of people in the industry and some assets certainly are good.

The data is a commodity that they’re forcing you to buy but if you didn’t have to, I don’t think operators really would. Some of those partnerships and sponsorship assets are interesting, and maybe if they’re exclusive they’re slightly differentiated.

Penn National did a deal with NASCAR to own that sport on an exclusive basis in an interesting way. So, I think it’s about the most interesting assets. If 10 operators all get some sponsorship assets from the NBA, I don’t think it’s really differentiated.

EGR NA: For those seeking to enter the sector, what sort of expectations do firms have in terms of deals and returns?

DV: I think expectations are mostly in a good place. I think there’s a tonne of enthusiasm in the market and everyone’s looking to maximize their value. But on the marketing side where you have different fixed guarantees, how much aligned incentives are there on the upside, whether on CPA or revenue share?

And if it is CPA and revenue share, I think the suppliers need to be thoughtful about who their partners are. If your partner is a 1% market share participant, there’s probably only so much you can get on a revenue share basis because it’s not going to be that big of an opportunity.

I’m having good conversations with clients and prospective clients because I understand how these deals are put together. I know the different nuances to think about and consider to ultimately move the needle on value.

We’re going to go after the highest headline number and we’re going to get other features in the deal which make up a lot of value in the way that a lot of these deals are structured right now.