FanDuel co-founder on how he created and developed a $1bn start-up tech company

Chris Stafford pictured in George Street, Edinburgh

We’re sitting in a George Street café in Edinburgh on a cold November evening discussing perhaps the greatest scale-up story to have come out of the Capital in modern times.

Chris is one of the five founders of FanDuel – a household name in the United States but a brand that means very little in its native Scotland.

Unless you work in the tech industry or harbour ambitions to be Scotland’s next ‘unicorn’ – a privately-owned start-up tech company with a valuation in excess of $1 billion – you’re unlikely to be familiar with the fantasy sports app that has revolutionised the market across the pond.

You may, however, have heard the stories about the founders suing their former company for $120 million, following the sale of FanDuel to Paddy Power Betfair – a suit that was brought in Scottish courts and subsequently withdrawn, with rumours continuing that the plaintiffs would be renewing the claim this year.

Unsurprisingly, Chris is unwilling to discuss the details. “In terms of how exactly it went with FanDuel, I think it’s probably fairly public that we’re not exactly delighted with the outcome,” he says.

“But when you’re going through the founding process there’s a lot more intensity and, frankly, for the first couple of years you’re working for close to nothing and taking a lot of chances with your life and earning potential. For most start-ups, that doesn’t pay off. It’s important, therefore, that when things do work out, that pay-off is there. I think that’s important for founders and the angel community if you want the ecosystem to exist.”

It’s an ecosystem that was very much in its infancy when Chris first started working with two of the future FanDuel founders in 2003.

He credits Edinburgh University with helping to kick the whole thing off. It was while working in one of its incubators on a burgeoning tech product with Rob Jones and Tom Griffiths that he landed his first angel investor and met Nigel Eccles who – along with his wife, Lesley – would form the fivesome that would launch FanDuel.

“Nigel was looking around with an idea, a pitch deck and business plan but no tech co-founder,” Chris recalls. “He said ‘I love the team, but my idea’s better’. And we all went – ‘He’s right’! We were able to take our angel investor with us, because he said he was investing in the team.”

Their first product, HubDub, was reliant on advertising revenues, which crashed after the economic crisis of 2008. The team was forced to rethink the whole company – a not entirely linear process that kicked off in Austin, Texas, during a festival.

“We were post-series A, we got some investment and a team together and we had a lot of insight into what consumers wanted to do, so it was that kind of question of how do you turn that into a different business?” Chris explains.

“We had identified that sports was the key market and we were always very interested in the US because of market size, it’s a fantastic place to scale and so we were saying: ‘What can we do around sport in the US?’

“One of the things people clearly loved doing was daily fantasy, within the legislation that was marked out as legal. So we saw a small window. It’s a fun game and it’s an engagement thing – we were always very focused on doing something that made a positive difference to people’s lives.”

The team continued with HubDub while testing the idea for FanDuel. The speed of development took them all by surprise – any concerns about persuading the board to pivot were quickly quashed by the proof that they were able to gather from the beta testers.

“People were willing to PayPal us the entry fee and put down the team selections. For FanDuel, the proof came so thick and fast that it was never an idea you were ever going to put down,” he says.

As chief technology officer, Chris was tasked with creating the programming to make the game possible. He admits to sleeping very little as they worked on iteration after iteration, trying to keep pace with the game’s popularity. It launched with the baseball season in 2009 and then moved into American football.

Chris laughs: “We didn’t know at that point how hard you hit football! Lesley had immediately started on a really good marketing plan on a limited budget, just proving that we could put $10 to acquire a user, and we found that that user would never go away! Technically, we struggled through that season – and every season for the next few years!

“What works for 500 users really falls apart for 5,000 and then again for 50,000 – so, on a technical level, every time you’ve got a solution that meets your rapidly evolving needs and scales to your current user base, almost immediately your user base is going to increase to a level where you just can’t cope.

“It’s a feature of a lot of growing companies. The tradition of the Twitter Fail Whale!” (This was the illustration that would appear on screen when the social networking service was over capacity.) “We tried not to do that; hopefully we were a bit more successful than Twitter! One of our concerns was – unlike Twitter – with us, people have got money on the line and, quite reasonably, it changes their attitude to downtime at the wrong moment.”

A large part of the company’s success was the engagement on both sides – from the game’s online players to the sports’ powers that be. It quickly became apparent that FanDuel was bringing a new audience to sports – one that watched several games in a row avidly and became very knowledgeable about the players.

By the fifth fundraising round, the owners of the National Football League (NFL) and National Basketball Association (NBA) teams were investing in the company.

In 2010, FanDuel started growing rapidly. Hiring the neccessary talent to keep pace became a huge challenge for Chris and the team. At that time, the only model they could refer to was Skyscanner, the other oft-quoted Scottish ‘unicorn’, which was growing apace, slightly ahead of FanDuel.

Most of the potential employees for the firm were working as computer scientists in financial organisations where risk was low – the banking environment encouraged extensive testing before rolling out a new piece of technology. FanDuel did not have the luxury of time, and finding candidates who relished that pace of development and level of risk was tricky.

“We had started to hire out the team – developers and CIS admin; the pressure wasn’t off because the problems got bigger, but there were more people to share the load,” Chris remembers. “As soon as you have people on the team who are willing to attack problems as they arise and are willing to go through the fire, it’s easier.”

Chris advertised on recruitment site s1jobs.com to begin with – and interviewed until the tech team hit 50. After that point he simply tried to remember names as the US office opened and the Edinburgh office expanded – at a rate of “five new people a week”.

Maintaining the culture of the company while expanding rapidly was a challenge – the founders were keen to create bonds by celebrating the wins as they happened and guard that start-up mentality.

“It’s an interesting environment and you’re trying to draw some organisation out of chaos without making anything too hierarchical,” Chris says. “You’ve got to have a few people that you’re talking to – to make things happen – and trust them to run teams.”

FanDuel began to hit problems when the question of whether or not it was a game of skill or gambling was raised in several states. The company tried to stay true to its culture of transparency as far as the legal considerations would allow.

“From an emotional perspective, it’s difficult when you’re looking at some of the accusations that are being laid, and you’re thinking ‘that isn’t our product!’” Chris says.

“Nigel and Lesley and the PR team, Justine and Melanie, were great at putting out where we actually were with it and saying everything we could. When we could talk – we talked.”

A merger with rival DraftKings was called off in mid-2017 after federal regulators moved to block it. A year later, the legislation banning sports betting was declared unconstitutional, and a few weeks later FanDuel was bought by Paddy Power Betfair. It allocated its US assets plus $158 million in cash to the purchase, giving it a 61 per cent stake in FanDuel.

By this point none of the original five founders were still with the company. Subsequently, Chris was the only one of the five founders not to sue – for more than $120m. In the sale, preferential shareholders in the deal were paid first, leaving no money for the founders or employees who had bought into FanDuel. The law suit was brought about in an attempt to recoup their share value.

Chris had actually left the company shortly after the issues first arose around whether or not the game constituted gambling, claiming that FanDuel had grown so big that he didn’t feel he was the right person for the job any more.

“It’s certainly very hard because you’re not only handing over a company, you’re handing over a hand-picked team who trust you and depend on you and, in a way, you’ve made a commitment to them –that this is the environment they work in,” he explains.

“Of course there are regrets. The company is a result of thousands of decisions and outcomes, some of which you make with duff information on a rainy Wednesday. There are probably things I look back at and think: ‘That was a bad move’. And other places, I think: ‘I threw the dice on that one and it went so well!’

“I wish I was a strategic genius; some of the best hires were those kind of ‘I’ve got a good feeling’ hires – but it’s very difficult to put down why.”

Chris now works in Scotland and runs the technology consultancy Amber 80, giving the benefit of his experience to companies of all sizes, from start-ups and scale-ups to large corporate entities. And he seems much more comfortable working in this fashion.

“The tech scene is a very social environment and I knew lots of different people in different companies, I thought I could do something useful here and have more impact,” he says. “There’s definitely a lot to be said about that stage where you can make a difference in a shorter space of time.”

In an industry evolving as rapidly as the tech sector, having a veteran on board can only be a bonus, especially one whose company helped shape the industry in Scotland.

Chris admits that things have changed – even in the decade since FanDuel started – and he tries to keep pace with developments.

“There are a million practical things [I’ve learned] – you can look at the shape of things that are happening and think ‘this is not going to go well’, for example,” he observes.

“It’s based on experience at the time and it’s important to know how that might play out, but you have to stay current with what the sector looks like at the moment. The way you go about getting funding now is rather different.”

As for FanDuel, Chris describes it as having been a “very, very full-on process” but agrees it is pretty impressive to have created something that has shown the next generation of Scottish entrepreneurs what is possible when you start a company in Edinburgh.

“It’s obviously cool, but it’s seven, eight years that you live day by day,” he says. “If we inspired people – cool – I’d like to hire them!”

After such a steep learning curve, has the experience put him off start-ups?

He laughs again: “I think if you get the right combo of people and ideas – people first – then I feel like I could be sucked in!”

Tips for building a tech scale-up

Do you need to have qualifications in computer science or engineering?

Having a background somewhere other than tech is useful. I was always technical in my spare time. I quite deliberately didn’t do a computer science degree – I did economics and philosophy.

How important is the team?

I’m most proud of the team. We built a tech team that I feel could take on anybody in the country. Our team was really solid and solved some really hard problems using some pretty cutting-edge technology. I am a techie at heart, and I love that we were able to do that and everybody in the team filled their role.

Do the stakes get higher as you grow?

From a personal point of view, I’d say that arguably the stakes get less high. At the start of the journey you’re kind of risking everything with almost every decision you make. I wouldn’t like to use too much of a gambling analogy…

As you grow to a larger company obviously you shouldn’t be gambling so much, you have a responsibility to staff and other stakeholders, like customers!

Do you need to focus on world-domination?

I think we had the dream. I’m not sure the dream even looked that big. It varied between us – Nigel’s always been fantastically bullish and that’s hugely motivating to have someone on the team always pushing for bigger and higher. I think, probably, to varying degrees the rest of us had an ambition that was a bit more limited.

What kind of market should you focus on?

A lot of scale-ups look at a market and think ‘this is a big opportunity’ – well, then, you’d better have a really good plan for how you’re going to take over the market! For us it was ‘this isn’t even a market – but it could be’.

It’s more abstract, but it gives you a little bit of space to go into. I don’t think we envisaged creating a market – we were looking for a gap.

Should I start a business straight from university?

Our first business was typical of a student straight out of uni – we had a vision and a dream but actually making it happen and having an idea that was focused enough was difficult. Now there are so many incubators and support.

This article first appeared in The Scotsman’s winter 2019 edition of Vision. A digital version can be found here.