Welcome to edition #3 of the startup month, sent to Earnings+More subscribers every first Tuesday.

• In this edition, we provide our quarterly roundup of fundraisings announced over the past three months.

• We look at a current subject of debate in the startup scene – whether companies are ‘default alive or default dead’.

• We also talk to Sporttrade founder Alex Kane after his company debuted its sports-trading offer in New Jersey.

• We roundup the latest transactions as well as the news from growth companies in the sector.

Pennies, nickels, dimes, quarters, dollar bills, hundred dollar bills.

Third quarter fundraisings

Deals valuing at least $115m were announced over the third quarter even as the macroeconomic storm clouds gathered.

Bumper crop: Helped by some very big deals indeed, the total raised by betting and gaming sector startups and scale-ups in the three months to the end of September, where figures were given, was way above the publicly stated totals earlier in the year.

• Since Earnings+More has been tracking startup funding rounds in the first quarter of this year, the totals raised by companies that stated a figure stood at $46.1m in Q1 and $31m in Q2.

• In total there were 15 deals tracked in the third quarter compared to 13 in both Q1 and Q2.

Blockbusters: Leading the way this month were two high-profile raises for DTC businesses in the US, Underdog Fantasy and betr. Both featured prominently in previous startup months in August and September. Taken together, they would suggest there is still ambition within the US sector to break the mould and aim for the very biggest of prizes.

• Say when: Despite their respective raises of $35m for Underdog Fantasy and $50m for betr, the suggestion from market watchers is that they will need to raise even more money if they are to crack their targeted markets.

• Bet boost: Betr’s micro-betting strategy received a boost recently when the closely associated Simplebet (both companies feature Joey levy as a founder) announced a deal with bet365 for the global provision of its US sports-based products. 

• Fantasy money: Underdog Fantasy, meanwhile, made news in early September with the largest fantasy football season tournament in history, with $10m in total prize money.

Singing a song in the morning: A company with its eye on the US market is London-based Future Anthem, which raised an undisclosed amount in July. The subject of an Inside the Raise feature in the August startup month, the data AI company said the cash raised would help go towards its North American expansion as well as new hires and a further product R&D.

• A continuing theme within the betting and gaming startup space is sector-specific regtech and this month there were further examples, including the Seed funding for Kinectify and a follow-up funding round for geolocation provider XPoint.

• However, a matter of days after its funding announcement, it issued a statement to say that a legal action against the company has been launched by market leader GeoComply.

• During a panel session at the SBC Summit in Barcelona, David VanEgmond from Bettor Capital said innovation comes “because of the regulatory challenges”.

At the cap table

Names in the frame: It has once again been a busy quarter for some familiar names in the sector-specific funding space. Acies Investments, led by Jim Murren, Dan Fetters, Edward King and Chris Grove, was involved in three investments – UnderDog Fantasy, Kinectify and XPoint.

• Also making multiple investments was Bettor Capital, led by the above-mentioned David VanEgmond, with two investments: again with XPoint and also with a stake in Future Anthem.

• Lloyd Danzig’s Sharp Alpha also notched up multiple deals over the quarter with investments in Future Anthem, Players’ Lounge and SharpRank.

• Other notable names from the wider investment sector include BlackRock’s involvement in Underdog Fantasy and Y Combinator’s slice of Better Opinions.

• Betr’s list of backers includes a list of big names from the investment space, including Austin-based 8VC and Miami-based houses Aliya Capital Partners and Fuel Venture Capital as well as FinSight Ventures, which has also previously partnered with betr co-founder Joey Levy’s own 305 Ventures.

A note of caution

Cap’n crunch: The amount raised in the quarter appears to be all the more impressive because it seems to go against the macroeconomic tide and what is going on in the wider world. As was noted in the Startup Month in August, while funding in the sector remains relatively buoyant, a tightening of the market is already evident.

• Not so rosy: A recent All-In podcast pointed out that the headline figures for dry powder raised by US venture capital this year can be disputed given the timings of announcements.

• All-In’s David Sacks noted these funds might have been announced in 2022 but they may have actually been raised in 2021.

• Sources suggest that similar timing issues might apply to the headliners this quarter in the betting and gaming sector.

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Default alive

Dead or alive: A phrase increasingly being repeated in discussions about startups is whether a company is ‘default alive or default dead’. It is a phrase coined by Paul Graham, the founder of startup incubator Y Combinator. 

• In a 2015 essay, he said the question he posed to all founders was: “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?”

• He said the rest of the conversation with the founder “depends on the answer”.

• “If the company is default alive, we can talk about ambitious new things they could do,” Graham wrote. “If it’s default dead, we probably need to talk about how to save it.”

Can we fix it? Graham suggested it is never too early for founders to start asking this question as it is “dangerous to start asking too late”. The reason is because of another phenomenon he wrote about, the fatal pinch: “default dead + slow growth + not enough time to fix it.”

One reason why founders don’t ask themselves whether they’re default alive or dead, Graham suggested, was that “they assume it will be easy to raise more money”. 

• “But that assumption is often false, and worse still, the more you depend on it, the falser it becomes,” he wrote.

• Investor interest is a “function of growth”. “Investors are so fickle that you can never do more than start to count on them. Sometimes something about your business will spook investors even if your growth is great.”

• Raising more funds “can only ever be plan A”. “You should always have a plan B as well”, and that involves knowing precisely what is needed to survive if you can’t raise more and when a switch to plan B will be necessary.

September fundraisings

• Betegy raised an undisclosed amount. The 10-year-old Poland-based company, led by Alex Kornilov, takes sports data and turns it into graphics.

• As noted above, XPoint raised an undisclosed sum from its latest funding round from Acies Investments and Bettor Capital. This follows a Seed round in February involving Courtside Ventures, the Raine Group and Suro Capital Sports.

• SharpRank, a sports-betting testing agency and the subject of a previous Startup Focus, has raised $2.5m in Seed funding from Sharp Alpha Advisors, Eilers & Krejcik Gaming, Old Line Capital, Metarail Capital and others. The company previously raised pre-Seed funding of $1.4m from TEDCO.

Startup (re)Focus – Sporttrade

The sports trading app has reached a significant landmark with its debut in New Jersey in early September.

Hands on: Speaking to Earnings+More a week after it launched in New Jersey, CEO and founder Alex Kane noted that, even though it was still early days, it had been satisfying to see users on the app behaving as had been hoped.

• “Launching doesn't come without its complexities and things you never can plan for,” he said.

• “But it’s been great to see trades flow in, watching the games and seeing trades happening in time.”

• He added that it was a “very modest start in terms of absolute users” but the activity had been “great to see”.

Speed to market: The Sporttrade app was built from scratch in two years on the notion that Americans would “really lean into” the notion of sports trading. “Sports take care of the volatility,” he said.

• “We’ve seen people using the full functionality; tight spreads and zero delay,” said Kane. “That’s what has been cool to see.”

• He noted that once customers get to see the product, “they get it”. “It’s not a new concept but it’s a new concept in the sports-betting sphere.”

• He suggested that in the first days Sporttrade wasn’t attracting “a ton of sophisticated players”, but was seeing players come at a lower level. “And that is the customer that we need to make the product successful,” he added.

Next steps: Kane said the company would be waiting for more data to see if this confirms their ideas about what drives adoption. “I’m looking forward to really leaning in to show people how great the in-play experience really is,” he added.

• “That liquidity actually being there, so we don’t have to think about it? That’s the corner we will need to turn.”

Growth company news

• Staying with trading in New Jersey, another startup focus subject Mojo also launched a sports trading app in late September. Mojo uses tracking to reflect changes in the value of players by focusing on team outlooks and player statistics that become available as the season unfolds.

• Kero Gaming won the First Pitch competition at the SBC Summit in Barcelona ahead of Network Gaming, OSAI, Paradox, Pow Gaming and XRBet.

• Trading platform specialist Betswap is supplying its services to New Jersey and Colorado-licensed sportsbook PlayUp.

September’s startup focuses

Sep 26: B2B pricing provider Sparket.

Sep 19: Affiliate market data science provider StatsDrone.

Sep 12: Consumer-facing bet history provider Juice Reel.

Sep 5: Australian-focused Twitter-meets-Sportsbet DTC operator Dabble.

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com