Earnings+More - The Startup Month #5
The Startup Month #5Gambling regtech’s investment moment, Investor focus – Drive by DraftKings, Inside the raise – Dabble, November’s fundraisings +MoreWelcome to edition #5 of the startup month, sent to Earnings+More subscribers every first Tuesday. On the agenda this month:
In regtech we trustInvestment in companies providing regulatory and compliance solutions has been a running theme this year, with significant raises being completed by Odds On Compliance, Xpoint (twice), OneComply, U.S. Integrity, Kinnectify and, most recently, Department of Trust. Problem-solving: Investor interest in companies providing regtech solutions into the gambling sector is on the increase. AML, geolocation, affordability solutions and sports integrity are the areas represented by the largely undisclosed cash raises this year.
Truth or consequences: “Investors are particularly enthusiastic about regtech opportunities for two simple reasons: it’s needed and it’s not a well-developed area yet,” says Eric Frank, CEO and co-founder at Odds On Compliance.
Blank slate: Peter Heneghan, senior associate at Bettor Capital, which includes Xpoint and Compliable among its portfolio of investments, says there is an opportunity for startups in the gambling sector to address “pain points” specifically related to the online realm. ** SPONSOR’S MESSAGE** GiG is a leading gaming platform and sportsbook provider for online and land-based operators with digital aspirations. We deliver a full end-to-end solution through our award-winning iGaming and sportsbook solutions. Built for regulated markets and a top-class customer experience, GiG is pioneering the multi-platform era. If you are looking to expand your operations into new, profitable markets, our strategy is the solution. Find out more at sales@gig.com. Vacant lotFixing a hole: Joseph Martin, CEO at AML provider Kinnectify, points out that the historically small US gaming sector did not previously offer up enough in terms of potential opportunity for software-based regtech companies to invest in the necessary sophisticated tech.
AML-zapoppin: Martin says AML has been an “underserved vertical” in gaming and is “ripe for innovation and modernization”. Noting this extends “beyond meeting simple regulatory requirements”, he suggests it is following a similar path to banking post-9/11.
Future-proofing: As for areas of interest to investors, responsible gambling is the one that catches the attention. Frank says it is the “primary current gap” in the regtech space.
The fundraising month
Investor focus – Drive by DraftKingsMeredith McPherron says the ‘sense of escape’ brought by sports and sports-betting entertainment will see it survive any downturn. Backgrounder: Led by CEO and managing partner Meredith McPherron, who has 25 years of experience investing in startups and growth companies, Drive by DraftKings is a multi-stage VC firm that invests in the sports technology and related entertainment field.
Be careful out there: McPherron says that while she remains confident going into 2023, the five consecutive interest rate hikes and the worsening economic backdrop are hard to ignore. “In our space, in sports tech and entertainment, we continue to be bullish, but advise our companies to manage cash carefully,” she says.
Working within Jason: DraftKings anchors the fund and also shares insights and access. “We see the DraftKings name as a big plus,” says McPherron. “They can help accelerate companies, whether as a potential customer, channel partner or through connections they are willing to make for our portfolio."
Raise: The DraftKings name also helps when it comes to raising cash, and McPherron notes that last year’s fund raise was 20% oversubscribed. Drive by Draftkings has “seen a thousand deals since we started”, she says.
Inside the raise – DabbleIn early October, the Australian sports-betting-social-media startup Dabble announced a A$33m investment from Tabcorp that values the company at $165m. Quick move: Dabble co-founder and CSO Jon Robin says discussions about a growth raise started in March with the group “mostly talking to existing shareholders and early-stage VCs”, with Tabcorp entering the scene in June. “They came relatively late in the process, but we were very impressed with how quickly they moved once they were interested,” he says.
Capital reluctance: Access to capital is difficult currently and Robin admits the group was talking to VCs at the same time the market was falling. “There was a sense of reluctance from even the most interested investors,” he notes, suggesting the raise was “a lot harder than if we were running it 12 months prior”. Sticking with the wheel: Robin says Dabble is “all-in” on social betting but the company hasn’t attempted to create a new peer-to-peer betting niche. “Every user has a profile and everywhere you can bet, you can do something social. We haven't tried to change the betting journey, we've just added a social layer on top of it.”
Growth company gazetteGeolocation provider Xpoint has gone live with its Verify product with Mojo in New Jersey. Betr has reached a market access agreement for Indiana via a deal with Caesars Southern Indiana and the Eastern Band of Cherokee Indians’ gaming entity, EBCI Holdings. The B2B sports-betting and iGaming software supplier startup PlayEngine has appointed former PlayUp boss Laila Mintas as CEO. Sightline Payments has launched its mobile loyalty platform Mobile+ at the Talking Stick Resort and Casino Arizona venues in Scottsdale. U.S. Integrity has announced a comprehensive partnership with BetSkybox, a sports-betting kiosk operation set to launch in January in Ohio. Flows has announced an agreement with the Italian gaming service supplier Microgame for the provision of its no-code innovation platform. Colorcast, the Austin-based fan engagement company, has launched a sports-betting platform and has officially rebranded as Outlier. Chalkline has partnered with the CRM provider Optimove to develop conversion and retention metrics for free-play sports games. Recent startup focuses
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