Good morning. In edition #8 of the startup month:

• Betting exchange startup Prophet Exchange CEO Dean Sisun gives an honest appraisal of the difficulties the company is facing up to – and hoping to overcome – in New Jersey. 

• Circl’s CEO and founder Will Hawkins talks about how his idea for a casual game built around watching sports has gone from pub chat to a half-a-million-pound-plus investment from Zeal Ventures.

• Plus, the latest funding rounds and our roundup of growth company news.

The pains of being pure at heart.

Prophet motive

The CEO at betting exchange startup Prophet Exchange opens up about having to let people go as the business strives to gain traction.

No pain, no gain: Prophet Exchange debuted in New Jersey in August last year. But, CEO Dean Sisun told Earnings+More, the company has halted its marketing efforts as it concentrates on building on the player base it has already brought in and awaits an injection of liquidity from two European-based market makers.

• The company has necessarily been cutting staff numbers. “While we're not marketing right now, we don't really need a marketing team or a PR team,” Sisun said.

• “And we are not aggressively going after customers, so we don't need a lot of customer experience roles.”

• He insisted that a path to profitability was visible despite the “friction” being encountered from only having one payment option and a lack of in-play betting options.

• “What we're doing is looking within to build that top line up without having to spend any additional money,” he said.

• It means “getting rid of some of the extraneous stuff” and what “isn’t absolutely necessary to get to profitability”.

A prophet is treated with honor everywhere except in his hometown: Prophet Exchange is Sisun’s first company, although he ran the business when it originally launched in the UK before they shut up shop and decided on a return to the US. 

• He said the company over-hired in its initial stages. “Our fear was that we wouldn't grow quickly enough. We were trying to grow quickly enough to get to our next [funding] round, which I think was also a philosophy that was incorrect.”

• “Instead, we probably should have been tightening our bottom line as much as possible and worked towards getting to profitability faster as opposed to growth at all costs,” he added.

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Liquid refreshment

Stars to guide me: Sisun noted the “biggest KPI” the business has right now is the top line and the liquidity being offered by the unnamed market makers. “I have projections of what our top line will look like and what we are ultimately working towards,” he said. “There is a North Star in my head of what we need to do to break even.”

• But he admitted that responding to the potential step change provided by the increased liquidity brought its own challenges.

• “It’s very difficult, but we have prepared for a lot of this.”

• “We need to make sure that they are not trading in the interests of just themselves, but rather in the interest of the exchange,” he suggested.

• Building a base: Contrary to expectation, perhaps, Sisun said the player base that has been attracted to the exchange to date is customers that are more price sensitive than being sharps per se.

A competitive set: As the most mature sports-betting market in the US, it is not surprising that New Jersey should be the state chosen by companies hoping to establish a niche. Just in terms of exchange-type products, within the past year the market has seen the launches of Sporttrade and Mojo. If not strictly exchanges, they are certainly exchange-adjacent.

• Sisun acknowledged that this brings with it extra pressures. “Your knee-jerk reaction is, you know there's a competitor in your space. I want to squash them like a bug.”

• But after taking a step back, he realized that the extra noise in the sector can “provide the space for the overall message of shifting the sports-betting industry”.

• Plus, they each provide yardsticks. “We've made some mistakes, they've made some mistakes,” he said. 

• “I'm constantly monitoring what they're doing. I'm sure they're constantly monitoring what we're doing.”

Climbing the wall of worry: Sisun said that, while not exactly hunkering down, the company has learned that at this period of time “you can’t be fast and loose”. “We’re not doing anything aggressive until the product milestones are hit, the liquidity provider and the new deposit methods.

• “Then after that we can get a little more aggressive,” he added. “We're going to get so it's kind of like a ladder of getting a little more aggressive each time.”

• “We needed to operate a lot tighter in order to get to that profitability milestone because, again, this comes back to the fact that the market is not growth at all costs anymore. You can really feel it out there.” 

Inside the raise – Circl

The casual game provider raised £550k from the venture arm of German lottery provider Zeal Network.

Circl of life: The live-action sports game has been up and running in the UK since December 2021. It was founded by CEO Will Hawkins alongside serial investor Eddie Ross, with Mark Quinn filling the CTO role.

• The company originally raised £375k in 2020 from a mix of angel investors and the Dutch Sport Tech Fund, which enabled Circl to get a MVP to market.

• DST then largely funded a £450m top-up round in the spring of 2022 alongside a successful campaign on Crowdcube.

Destiny’s child: Hawkins said it was a tip from one of the angel investors that saw his team approach Zeal in the first instance. Circl was looking to raise again and had customers coming through the door, but Hawkins noted the timing was important.

• Hawkins said Cirl had created a “default random number generator” but it needed help in creating life-changing jackpots to attract the needed mass customer uptake.

• “Zeal believed in what we had done to date and believed in the trajectory we were heading,” he said.

• He suggested that the key to the negotiations was that Circl was honest about what wasn’t working as much as what was.

• The new money allows Circl to “bring the next evolution of the product to market”.

Zealous guys: On Zeal’s part, Hawkins said that it uses its venture arm effectively as an R&D division. “We strongly believe our audience is the accumulator audience,” he said. That matches Zeal’s lottery focus. 

• “It is a huge German lottery operator. It owns Lotto 24 and it is looking for product to bring under its hood,” Hawkins said.

• “Their passion is football as much as it is with us, so it opens up new territories.”

Somebody’s watching me: Unsurprisingly, given the presence in the UK market and now with the funding news, Hawkins acknowledged that in recent months it has “become clear there are relevant eyeballs on us”. 

• “It is cool,” he said, but he added that “as you grow, you start to swim in the same water as sharks.”

• “It is a case of understanding your market and knowing at some point you are going after the same market as the bookies.”

The month in transactions

Betty: The real-money and casual mobile gaming operator Betty raised $5m in a seed round led by Karlani Capital. The group obtained a license to operate in Ontario in January and the funds will be used to finance its launch in the province later this month.

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Growth company gazette

Big Unit: Betting and iCasino product and marketing developer The Unit has appointed Tekkorp’s Andy Clerkson as a strategic advisor.

Mojo: The sports stars stock market announced that more than 100 NBA players debuted on the Mojo market ahead of the NBA All-Star Game in February.

Player retention provider Xtremepush has teamed up with free-to-play game provider Chalkline for a solution that combines hyper-personalized omni-channel messaging around live and pre-match prediction games.

Incentive Games has launched its free-to-play game Live Score 6 on LiveScore’s mobile app.

Fantasy sports operator SimWin has signed a contract to broadcast its 24/7 virtual sports on streaming service SimulTV.

Games developer Jelly has licensed the Megaways mechanic from Big Time Gaming.

February’s startup focuses

• Feb 6: Virtual sports game provider Virtually Sports.

• Feb 13: Affiliate SAAS platform Deep CI.

• Feb 20: Betfinder offering Betscope.io.

• Feb 27: F2P and P2P games developer Splash Tech.

Calendar

• Mar 7: NeoGames, Full House Resorts

• Mar 9: Playstudios, AGS

• Mar 10: Genius Sports, Century Casinos

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