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Term Sheet — Monday, May 7

DUEL IT OUT

Good morning, Term Sheet readers.

All eyes are on New Jersey.

Any day now, the Supreme Court is expected to decide if the state can legalize sports betting. The court is deliberating on NCAA vs. Christie, a New Jersey case that could invalidate the Professional and Amateur Sports Protection Act, a 1992 law that bans sports betting in most states.

If the court rules in favor of the state of New Jersey, it’s likely there will be a massive chain reaction set off in state houses across the nation, allowing them to set their own policies on sports gambling. Annually, illegal sports betting amounts to an approximately $150 billion industry.

This is huge news for daily fantasy sports companies like FanDuel and DraftKings as sports gambling could account for a big chunk of their business. Ironically enough, both companies have long argued that daily fantasy sports, in which users can win cash prizes in exchange for cash entry fees, are legal because it’s technically a game of skill, not a game of chance.

Term Sheet caught up with new FanDuel CEO Matt King to get his thoughts on the potentially historic ruling and how the company is faring after its failed merger with DraftKings. (Quick recap: FanDuel’s merger with rival DraftKings last summer unraveled over antitrust concerns, which means both companies are operating as competitors — again. I played a bizarre game of basketball with the DraftKings exec team to try and understand this. 😬)

King now faces the daunting task of not only proving that the business model is sustainable, but also that the industry can support two companies offering virtually identical products and services. King, who served as FanDuel’s CFO from 2014 to 2016, returned to the company as CEO six months ago to replace former chief executive Nigel Eccles.

FanDuel declined to comment on specifics around the company’s marketing spend and its daily active user numbers, but here’s a glimpse of what King hopes to accomplish during his tenure:

On what he plans to prioritize as CEO: “I’ve re-focused the business on product-driven growth versus marketing-driven growth. I think it’s fair to say that if you look at daily fantasy sports as an industry, I don’t think we’ve innovated the product enough. You look at what our product was like in 2009 when we launched, what DraftKings’ products looked like when they launched in 2012, and when you look at those products today, there’s not enough change.

A lot of the focus in the category has gone into marketing, which users love, but the product wasn’t evolving. So what we’ve done is focused the organization from a strategy and resources perspective in driving product growth. Marketing will always be a core part of what we do, but that marketing should serve to enhance the product itself as opposed to it being the only way we drive user growth. That’s probably the biggest change I’ve made.”

On product changes: “We’ve probably released more new features and more new game types in the last six months than you’ve seen in the entire industry over the last two years. It’s a reframing of how we think of ourselves as a business. One of the beauties of being in a sports business is that there are about 15 big sporting events throughout the year, like the Super Bowl, the Kentucky Derby, March Madness. There’s this natural interest that’s relatively predictable each year. The reality was that we as a business were only relevant at about 4 or 5 of those 15 sporting events. So we started a product roadmap of releasing new games and features that make us relevant throughout the sporting calendar.

On user growth: “The number of registered users we have is growing dramatically. People are engaging at different times of the year, and we’re accessing a broader audience out there. Users are up double digits from last year, and we’re seeing more users on the site. A number of users that we had lost have also come back.”

On new crypto prize offerings: “On the crypto side, we’ve recognized that a lot of what people play for is really around the fundamental competition dynamic. People just like to compete for stuff. They like to win. Given what’s going on in the crypto world, there’s definitely a segment of users that was very, very interested in crypto. By offering crypto as a prize, we were able to tap into something they wanted to compete for. It was a huge success for us, and there was a ton of interest.”

On what he anticipates will come out of Supreme Court ruling: “I would not venture to give you a view. All I know is that a decision has been made. It’s sitting there in an envelope somewhere, and frankly, we’re excited about the future whatever the decision is.”

On what it means for FanDuel if the court moves to legalize sports betting: “It would mean we would get into sports betting. This business is around fan engagement and helping fans feel closer to the things they like, and clearly sports betting is one way to help people to do that. So it would be very logical for us to get into it. We have some ideas of how to make that experience better and ones that we feel will resonate with our users. We think we’re uniquely positioned to fulfill that market demand.”

… And if it doesn’t: “And if it doesn’t, we’ve still got a robust roadmap of stuff without sports betting. So we’re excited about all the things we’ll launch from a product perspective, and 95% of that will be relevant no matter what happens with the Supreme Court.”

On regulation and expanding into new markets: “We’ve always looked to operate in markets where we believe we’re legal. We’ve embraced regulation. In a world not dissimilar from Uber and Airbnb where you’re creating a new market, it can be hard to know where the boundaries are. Consequently, we’ve always taken a more conservative approach to the point where we deliberately didn’t innovate in certain areas because we weren’t sure if it would be deemed acceptable.”

On how it plans to differentiate from DraftKings post-failed merger: “At the core, we want to differentiate based on simplicity. We’ve always tried to adopt an approach focused on the casual fan. To me, simplicity is the key of turning this into a business that has several million paid active users to one that has 10 to 15 million paid active users.

We need game formats that are appealing to someone who may have just 5 or 10 minutes. Frankly, one of the biggest reasons people don’t play or stop playing is that they don’t feel they have the time to do the research. We as a category got too obsessed with monetizing our users in the short-term and that came at the expense of building great product that every level fan can enjoy.”

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‘IT’S ABOUT DAMN TIME’: Backstage Capital, a venture firm that invests in underrepresented founders, has raised $36 million for its new seed fund. The new fund will invest exclusively in black female founders. Arlan Hamilton, the founder of Backstage Capital, tweeted on Sunday: “They’re calling it a ‘diversity fund.’ I’m calling it an IT’S ABOUT DAMN TIME fund.” On average, women founders receive less than 3% of total VC dollars and women of color receive only 0.2%.

Term Sheet featured Hamilton in a January Q&A when she said, “While in the past I’ve said we’re not an impact fund, I’ve actually come around to understand that we are an impact fund, and I’m proud of that. We are an impact fund because of the impact we have, but we are also looking for outsize returns. Those things do not have to be mutually exclusive.”

THE LATEST FROM FORTUNE…

• ‘Rat Poison Squared.’ Warren Buffett Really Doesn’t Like Bitcoin (by David Meyer)

• Why Nestle Is Paying $7.2 Billion to Sell Starbucks Coffee

• The Many Hustles of Michael Cohen (by David Z. Morris)

• Why Elon Musk and Warren Buffett Are Suddenly Trolling Each Other Over See’s Candies (by Jen Wieczner)

…AND ELSEWHERE

Mondelez agrees to acquire Tate’s Bake Shop. Big Pharma vs. Trump. Xiaomi takes aim at Europe’s smartphone markets. John Doerr on leadership, education, Google, and AI.

VENTURE DEALS

Mesosphere, a San Francisco-based hybrid cloud platform company, raised $125 million in funding. Investors include T. Rowe Price Associates, Koch Disruptive Technologies, ZWC Ventures, Qatar Investment Authority, Disruptive Technology Advisers, Andreessen Horowitz, Two Sigma Ventures, Khosla Ventures, Hewlett Packard Enterprise, SV Angel, Fuel Capital, and Triangle Peak Partners.

Lyra Health, a Burlingame, Calif.-based developer of a data-driven platform to identify people at risk of behavioral and mental health conditions, raised $45 million in funding. Investors include Tenaya Capital, Glynn Capital Partners, Crown Ventures, and Casdin Capital. Existing investors that include Greylock Partners, Venrock, and Providence Ventures also participated.

StratiFi Technologies, a San Francisco and New York-based provider of solutions for investment advisers, raised $7 million in Series A funding. Anthemis Group led the round, and was joined by investors including Wolverine Holdings, Cboe Global Markets, HOF Capital and AngelList.

iPrice, a Malaysia-based service that aggregates Southeast Asia’s e-commerce websites in a single destination, raised $4 million in funding. Line Ventures led the round.

PRIVATE EQUITY DEALS

General LED, a portfolio company of The CapStreet Group, acquired Acolyte Group, a New York City-based provider of LED lighting systems. Financial terms weren’t disclosed.

Gemspring Capital acquired a controlling interest in and provided additional growth capital to A10 Capital, a provider of middle-market commercial real estate loans. Financial terms weren’t disclosed.

Arrowroot Capital made an investment in ClickFox, Inc., a Denver, Colo.-based developer of a customer journey analytics platform.

Novolex, a portfolio company of The Carlyle Group, will acquire The Waddington Group, a Covington, Ky.-based manufacturer of packaging containers, from Newell Brands, Inc. Financial terms weren’t disclosed.

OTHER DEALS

Integer Holdings Corporation agreed to sell its Advanced Surgical and Orthopedics product lines to MedPlast, LLC, for $600 million in cash.

IPOs

Vinhomes JSC, a Vietnamese property developer, priced its IPO at the high-end of its range, raising $1.35 billion in the countries largest ever IPO. Read more.

PluralSight, a Farmington, Ut.-based cloud-based learning platform, plans to raise $228 million in an IPO of 20.7 million shares priced between $10 to $12. Insight Ventures Partners (53% pre-offering), ICONIQ Strategic Partners (9.3%), and Keith Sparkjoy (7.4%) back the firm. Morgan Stanley, J.P. Morgan, Barclays, BofA Merrill Lynch are underwriters in the deal. The firm plans to list on the Nasdaq as “PS.” Read more.

OC Oerlikon, a Swiss technology firm, plans to IPO by mid-year, Reuters reports citing sources. The IPO could value the firm at between 600-800 million Swiss francs ($600 million to $800 million). Read more.

EXITS

Advent International agreed to sell MORSCO, a Fort Worth, Texas-based distributor of plumbing products and heating and cooling equipment, to Reece Limited for more than $1.44 billion in cash.

FIRMS + FUNDS

Thompson Street Capital Partners, a St. Louis, Mo.-based private equity firm, is seeking to raise $1.1 billion for its fifth fund, according to an SEC filing.

Foresite Capital, a San Francisco-based private equity and venture capital firm, raised $668 million for its fourth venture fund, according to TechCrunch. Read more.

Golden Ventures, a Canada-based seed stage venture firm raised $57.5 million for its new fund.

PEOPLE

Daniel Jones has left Global Founders Capital as a general partner and is reportedly planning to raise his own fund, according to TechCrunch. Read more.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.