Welcome to the first Startup Month of 2023. Included in this issue:

• Talking to sector investors about their hopes for the year ahead.

• Our top 10 startups to look out for this year.

• A review of funding in 2023 shows a quarter-of-a-billion dollars was invested in betting and gaming startups in 2022.

The love kick starts again.

Kickstart

Funding might be constrained but investors will be looking to innovation in the area of betting and gaming startups in the year ahead.

Rock the boat: If an entrepreneur was at all inclined to launch a startup in the betting and gaming space in the year ahead, then more than likely it would be a business with personalization and customization at its core, probably involving AI, data-heavy and also more than likely a B2B. It would also have early profitability written through it like a stick of rock.

• “As operators place a greater degree of focus on near-term profitability, there will be ample opportunity for startups to lead with product and technical innovation to deliver significant value to their customers,” says Peter Heneghan from Bettor Capital.

• “Personalization and differentiation should be key buzzwords in 2023,” suggests Benjie Cherniak from Avenue H Capital. 

• “It may be the year where genuine innovation with AI and machine learning will start to emerge from the pool of lookalike startups that use the terms primarily as fundraising bait,” says Chris Grove from Acies Investments.

Beg to differ: David Sargeant from iGaming Ideas believes the shift to the “more mature” phase is seeing the focus move towards “more sustainable businesses”. But in hoping to integrate new ideas and innovations, operators will still likely rely on external sources around conversion, retention and payments.

• “Startups offering new products will be sought out as companies try to differentiate themselves from the mostly undifferentiated brand voices the market is currently suffering from,” says Sargeant.

• He adds that, despite the failure of Fubo Gaming, the “idea of media integration will continue to be a hot topic”. 

• Simon Collins, chairman at Jogo Global, agrees that payments “will see more creation”, with companies such as Ecospend “offering innovative ways to transact with customers”. Likewise, customer verification will also see a lot of improvements via the open banking ecosystem.

Decisive turn: On funding, a sea change has taken place. Across the whole economy, this is no time to be raising money and the gambling space is as much affected by the financial squeeze as any other. As Collins puts it, this is an investor's market and they will “get to dictate terms and have plenty of options for where they place their bets”.

• Raising money in the last two years was “too easy”, suggests Grove. “This year will be a tough year for gambling startups,”

• “Investors are favoring paths to profitability over growth, and decision-makers are requiring a higher degree of conviction,” says Lloyd Danzig from Sharp Alpha.

• “The smart money is coalescing around fewer, higher-quality deals,” he adds. 

• “Companies that aren’t oriented toward outsized outcomes will struggle to raise venture capital, especially in comparison to 2021.”

• Cherniak agrees: “The really hot startups and scaleups will be competitive, whereas everything else will present opportunities for VCs to capture value on price and related terms.”

• Grove predicts a larger-than-expected number of early-stage companies will combine as “market realities and a tougher funding environment create a compelling logic for teaming up versus continuing to struggle as a standalone”.

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10 for ’23

E+M’s companies to look out for this year…

Betr: The Joey Levy-led and Jake Paul-backed microbetting challenger has already succeeded if the aim was column inches. Having gone big way ahead of launch, the real business of trying to make betr stick starts with the launch in Ohio in January. Paul’s profile alone means betr will stand out and it will be hoping to sway enough of his ’gram followers to sign up to what will, by all accounts, be a microbetting-only offering.

• Previous E+M coverage: a startup month deep dive and a market debut in Ohio this week.

Underdog Fantasy: If UF was ‘just’ a DFS story, it would be worth inclusion on that score alone. It is the fastest-growing daily fantasy site right now and, having raised $35m from a Series B round in July, the business is now worth $485m and has a high-caliber list of backers including BlackRock and Acies. But what is really interesting about UF is what it does next in sports betting, again in Ohio where it gained a license in late December.

• Previous E+M coverage: a $35m fundraise in July.

Department of Trust: As detailed in a recent Startup Month, investment in gambling regtech was a running theme throughout 2022 and the first of the companies to come from this space in our list is Charles Cohen’s affordability-check provider. Its big test will also come early in 2023 with the UK government’s long-promised White Paper, which, as per the leaks from last summer, is likely to focus heavily on statutory affordability measures.

• Previous E+M coverage: a startup focus from February and news of a $3m fundraise in November.

Angstrom Sports: While some startups crave publicity to help garner interest in their story, Angstrom has taken more of a Thomas Pynchon approach, shunning the limelight in favor of quietly building a reputation as a foremost provider of sports forecasting and data analytics. Led by Sion Colley, Angstrom completed a Series B fundraise last year with Acies Investments leading the cap table.

• Upcoming E+M coverage: a startup focus is in the works.

OrbitalBet: Matt Howard’s bootstrapped sports-betting-backend provider says it has the solution to many issues around problematic development roadmaps. The solution is to sell the IP to the codebase, which means that all further decisions down the development path are their own.

• Previous E+M coverage: A startup focus in August.

Beyond Play: The streaming of gaming is a huge area of interest and Beyond Play is one of the companies at the forefront. Led by Karolina Pelc, the company achieved something of a coup in October when it added Oakvale’s Daniel Burns to the board. The company, founded in 2021, brings multiplayer experiences to gaming sessions and is backed in part by LeoVegas’ VC arm, which invested €1.1m.

• Previous E+M coverage: A startup focus from June.

Future Anthem: The gambling sector doesn’t as a rule lead when it comes to the application of new technologies, which makes Future Anthem stand out. The company brings AI to player personalization with what it calls the gambling sector’s first game data science platform and is working with an impressive set of clients, including Betfred, Big Time Gaming and Bally’s. 

• Previous E+M coverage: A fundraise in August led by Bettor Capital.

Data Skrive: One theme from the last couple of years that is sure to gain even more attention in the years to come is fan engagement. Leading the way is this Seattle-based content producer that already has deals across the sports media and sports-betting space, including with FanDuel, ESPN and Catena Media.

• Upcoming E+M coverage: a startup focus is in the works.

Dabble: It can often be forgotten there are other interesting markets aside from the US. Australia is prime among them and social-betting startup Dabble made something of a splash in October with the news of its investment from Tabcorp. Tabcorp said of the company that it would enable it to reach a younger demographic. Dabble co-founder and CSO Jon Robin told E+M at the time of the deal that Dabble “didn't exist before TikTok did. Our competitors existed before smartphones.”

• Previous E+M coverage: Dabble raises A$33m from Tabcorp in October.

Kinectify: Our second gambling regtech entry is the AML service provider Kinectify, which raised $3m of Seed funding in the late summer from the likes of OpenBet and Acies Investments. A key dynamic for Kinectify is its inside knowledge of the working of gaming company compliance departments. It is this “domain experience” that the company hopes it will be able to leverage in the relatively small gaming space.

• Previous E+M coverage: an Inside the Raise feature in September spoke to Kinectify’s CEO Joseph Martin.

2022 review

Over a quarter of a billion dollars was raised by 49 betting and gaming startups in 2022.

Raise the roof: Earnings+More estimates that sector-related growth companies raised over $250m in the year just gone, led by significant raises on the part of betr, Underdog Fantasy and Dabble. According to the quarterly tallies tracked by E+M, the amount garnered totals $234.2m. 

• However, adding in the assumed amounts raised by a further 15 companies where the sums secured were undisclosed, E+M believes the total would have been pushed to above $250m.

• This was spread among 51 tracked transactions involving 49 companies, with XPoint and Kero Sports raising twice.

• The average amount gathered from the companies that disclosed the total raised was $7.4m, while the median amount was $3.75m.

🔥 Growth company fundraisings in 2022 by quarter

Leading the way: Micro-betting startup betr secured the most, with a $50m raise in August, ahead of DFS challenger Underdog Fantasy, which raised $35m in July. 

🎯 Top 10 investments in 2022

Names in the frame: Sector specialist investors led the way in terms of the amount of deals they were involved in. 

• Acies Investments topped the charts with seven tracked deals, including The Gaming Society, Tally Technology, Kero Sports, Underdog Fantasy, Kinectify, XPoint and Angstrom.

• Sharp Alpha and Benjie Cherniak’s Avenue H were the next most prolific with four tracked investments apiece.

• Sharp Alpha’s included Kero Sports again, Future Anthem, SharpRank and Griiip.

• Avenue H weighed into Ultimate Odds and OneComply as well as joining in the fundraisings at Kero Sports and Future Anthem.

• Further serial investors in the space included Bettor Capital, Tekkorp, Eilers & Krejcik, Happyhour.io, SeventySix Capital and Yolo, all with two tracked investments each.

• Names from the wider venture capital space are rarer, with Sequoia, BlackRock, Next Stage and 8vc participating.

Exit strategy: One of the more prolific investors was Las Vegas Sands but, as was detailed in November’s Startup Month, the company has pulled back on its investments in online following the departure of Davis Catlin and David Williams. The pair have since launched venture capital outfit Discerning Capital.

The month in fundraisings

US-focused B2C online gaming operator PlayStar announced it had received a letter of intent from Meyer Global Management that outlines a potential $15m investment designed to support the iCasino operator’s US expansion plans. 

Growth company gazette

• Simplebet signed its latest micro-betting supply deal with Caesars.

• Esports-betting operator Real Luck said growth in real-money players rose 97% in November.

• Toronto-listed mobile live dealer tech provider Playgon announced a C$5m convertible debenture private placement.

Calendar

Jan 10: Deal Talk #6

Jan 17: Due Diligence #3

Contact

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com