Good morning. On today’s Startup Month agenda:

• Disruption in the betting and gaming space is perhaps more often talked about by startups and growth companies rather than actually achieved.

• E+M takes a look at six companies tipped to disrupt the sector.

• For Inside the Deal, E+M analyzes the betting marketplace startup WagerWire’s recent agreement to integrate its tech into the Betr platform. 

Turn and face the strange.

The disruptors

Changing the nature of the game is difficult in betting and gaming, but not impossible.

You can’t do that: The regulated nature of the betting and gaming sector puts those hoping to break the mold in a very real bind. “Real disruption is materially harder in the highly regulated world of gaming,” says Davis Catlin, managing partner at Discerning Capital.

• “Every part of our industry is so regulated that many large innovations that would represent a revolution for the industry are often illegal or not contemplated by the existing rules and regs,” he adds.  

• “I think there’s typically an inverse relationship between regulatory capture and innovation,” says Chris Grove, co-founding partner at Acies Investments.

• Within the sector, he says, that “manifests itself” in several ways.

• “It’s harder to get investment across the board; if you're a supplier, it’s harder to get clients to take a chance on your product,” he says.

• “If you’re a B2C operator, you likely face higher hurdles to marketing your product, and so on and so forth.”

• Moreover, sector knowledge can be a double-edged sword. “It cuts both ways when it comes to assessing innovation,” Grove adds.

• “That knowledge is critical to understand the mechanics of what’s possible and the logistics of achieving key goals.” 

• “But on the other hand, sector knowledge can also bog you down in assumptions about what customers want, assumptions that may be outdated or otherwise lacking in usefulness.”

The big country: The advent of expanded sports betting and (fairly limited to date) iCasino does, however, change the balance of the scales somewhat. Arguably the home of tech disruption the US has, as Catlin says, the “most vibrant ecosystem for innovation in the world”.

• “As new markets open up, we can always expect more disruption,” says Kelly Kehn, partner at HappyHour.io. 

• She points to comments in E+M’s interview with her colleague Ben Clemes from the September edition of The Startup Month that new markets always engender innovation.

• “The US has loads of potential for growth and disruption, especially in iCasino,” she adds. “The growth and development of LatAm is also creating more room for innovative companies to join.”

• Benjie Cherniak, principal at Avenue H Capital, agrees: “As entrepreneurs assess opportunities related to the US, be it B2C or B2B, this will lead to innovation not just from US-based entrepreneurs but from Europe, Australia and beyond.”  

New sensation: The corollary of new markets is it brings new consumers to the space and even, potentially, new generations of bettors. “We are seeing some innovation in the space but I believe the true innovation won’t come until the next generation of punters are front and center.” says Cherniak.

• “To date, we are only scratching the surface,” he adds. 

• But as David Sargeant from iGaming Ideas suggests, mass market gambling “does not make all its money from tech-sensitive generations”.

• “It is the 40-plus demographic with spending power that historically has been the main target for gambling companies.”

• By Sargeant’s reckoning, the next generation of products that appeal to Gen Z “haven’t really hit the mainstream regulated markets”.

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Change is gonna come

Nothing Moore, nothing less: The feeling of being left behind persists, suggests Catlin, because the sector doesn't have its equivalent of the chip industry’s Moore’s law, which has dictated that innovation happens at pace in a short period of time. But he does feel that incremental change is happening.

• “We are seeing lots of small changes compounding each month and that should represent pretty material innovations over time,” he argues.

Bear traps: Grove says the danger is thinking the rules don’t apply when it comes to entry into the space. “The number one danger is underestimating the warping power of regulatory capture,” he warns. “It’s like a black hole – it bends all logic and rationale that one might seek to apply to the industry.”

• In trying to escape this net, it can mean that entrepreneurs are led astray.

• “The danger is that innovation in online gambling can often bump up on the edge of being illegal gambling,” says Catlin.

• “Finding a new way to bet or offer bets to consumers is great for the industry, but it can also come in the form of accidental illegal operations.”

In media res: Catlin adds that this can be viewed “in real time” right now with the example of the fantasy sports space. “There is a battleground on X (the artist formerly known as Twitter) between goliaths behind closed doors around the ‘same game player props’ model and traditional, regulated online gambling,” he adds.

• “PrizePicks found a way to offer something 'similar' to betting into states without regulations and the contention of some states’ regulators and the big four sportsbooks is that it's illegal,” he says. 

• The company might be forced to “pivot very quickly or will be unlikely to survive in its current form”.

Early doors: Another potential fate is simply being too early to market with a product that the consumers are not ready to embrace. This can happen “even if the concept has merit and is something the market ultimately will adapt to”, says Cherniak.  

• “Entrepreneurs who are ahead of their time need the patience, fortitude and capital to weather the storm as disruption usually doesn’t take place overnight.” 

• Kehn says she is hopeful that the sector will see “much more disruptive technology and disruptive companies join the industry in the near future”. 

• Catlin agrees and points out that when disruption does happen, the rewards can be enormous. 

• “The value of innovating in any industry where there is fast growth and billions of dollars in revenues is massive,” he says.

• The biggest tailwind, says Grove, is the “digital mediation across nearly all components of human commerce and interaction”.

• Kehn says that “true disruption not only depends on great ideas but also external factors happening in the wider society and how we make use of emerging technologies”, such as Generative AI, streaming, VR/AR, blockchain and others. 

The final word: Kehn suggests that startups with new business models “need to be keenly aware of consumer behavior, social trends, regulatory matters and new technologies that are impacting society overall before they invest their time, sweat and capital into a new business”. 

“So there are pitfalls for companies to be aware of, for sure, but thinking this industry won’t or can’t be disrupted goes against most of how we operate,” she adds.

The disruptors

Six companies that are looking to change the sector.

Kinectify: The AML platform designed for the gaming sector is the brainchild of founder Joseph Martin and is an example of how the growth in the gambling sector is beginning to filter through to sector-specific solutions in the regtech arena.

Huddle: The next-gen odds provision company is now starting to build some momentum for its suite of bespoke pre-game and in-play trading services. The recent deal with Betr (see below) will see its offering integrated into Betr’s forthcoming platform, while earlier in August it announced a deal to power BV Group’s US offerings on its BetVictor site. Note: for full disclosure, Huddle has previously been an advertiser of Earnings+More.

Kero Sports: Also working on next-gen odds provision is micro-betting specialist Kero Sports. Micro-betitng feels like an itch that the North American sports-betting operators are just starting to scratch at and Kero could find itself in the position of being the right provider, in the right place at the right time.  

BeyondPlay: Kaolina Pelc’s company is busily bringing multiplayer entertainment to the online gaming experience. It is, as the company says, a brand new way of playing and it is notable that BeyondPlay recently took part in the TechCrunch Disrupt Startup Battlefield in San Francisco 

Sporttrade: Bringing the principles of financial trading to the sports-betting space is an idea that has been tried out in a number of variations. The New Jersey-based operator could well be the one that proves the potential for an offering that taps into the ready-made market of financial speculation.

Pikkit: Calling itself the “ultimate sports-betting community”, providing an app that allows users to sync all of their sportsbooks, monitor and interact with their friends’ picks, share their own bets with the larger community and tail the top performers in the industry.

Q3 funding falters

Novig is the standout, as deal flow continues to be sluggish.

The sluggish state of the betting and gaming sector’s startup funding continued to be a feature of the third quarter, with less than half-a-dozen deals announced. Novig notched the biggest deal when it raised $6.4m in August, with Pro League Network raising $1m. The remaining three deals were for unspecified amounts.

🐌 Betting and gaming-related startup funding rounds in Q3

• There were further deals in sector-adjacent areas. In publishing, Fantasy Life raised $2m to continue building out its fantasy newsletter offerings.

• In sports data provision, SportsVisio raised $3m in seed money in August from sports investment fund Sapphire Sport.

• Finally, just under the wire in September, the France-based, definitely-not-interested-in-gambling sports prediction offering Omada raised €7m from a group of investors including Felix Capital, 20VC and Play Ventures.

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Inside the deal – WagerWire and Betr

The betting marketplace startup signed a deal in September to integrate its tech into the Betr platform.

Ripe: Five years on from PASPA and the “sports-betting experience is ready for a revamp”, suggested WagerWire founder Zach Doctor, who believes his company has found its like-minded soul in Betr.

• “Our goal is ultimately to be plugged in with all the operators – the resulting network effect will create a truly robust and thriving secondary market – but there are a number of synergies unique to Betr, specifically on the content and media side,” he said.

• “Being able to sell to a friend or buy from a celebrity brings a fresh socialized experience that allows bettors to directly interact with Betr’s roster of creators led by Jake Paul.” 

• Doctor believes today’s bettor is looking for something more than what is currently on offer and suggests the retail investor revolution – particularly around crypto and collectibles – has “turned us all into speculators and day traders”. (Speak for yourself, Ed).

• “The WagerWire marketplace brings this type of experience to sports betting in an intuitive and entertaining format,” Doctor said.

With a little help from our friends: The tie-in with Betr is more than simply about a shared vision. WagerWire is also backed by Betr founder Joey Levy’s 305 Ventures. “Now it’s about realizing that shared vision of creating a unique and differentiated product experience for users,” Doctor said.

• The hurdle to wider acceptance, of course, is technology.

• “Many operators are either working with third-party technology providers or dealing with their own backlogged product roadmaps,” added Doctor.

… and Huddle too

Betr has also signed up to integrate Huddle’s pricing and trading capabilities into its upcoming V1 sportsbook platform.

A better offer: Betr’s in-house platform will deploy Huddle technology to enhance its core, derivative and player prop markets when it launches in the new year. Huddle will provide fully bespoke and custom trading services across both pre-game and in-game offerings.

• At the same time, Huddle’s offering will allow Betr visibility on sharp money and liquidity to help make strategic pricing and limit decisions set by its own trading approach.

• Co-founder Leo Gasper said Huddle was delighted to be working with Betr, which, he noted, was “ “already making waves” with its micro-betting-led offering in Ohio, Massachusetts and Virginia.

• “Their disruptive approach, leveraging social media and original creator-led content, has allowed them to achieve the lowest CPA in the US gaming industry,” he added.

• Joey Levy, CEO and founder at Betr, said using Huddle’s tech would “accelerate our product roadmap and our path to product parity on the sportsbook side of the house”.

Further reading: E+M on Betr’s recent good news/bad news week.

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Growth company gazette

SB22: The sports-betting platform challenger announced two deals at the end of September. The first is a tech integration deal with WagerWire that will see the latter’s proprietary marketplace integrated into the SB22 platform.

• The second deal sees SharpLink add its AI-powered C4 BetSense to the platform.

Micro-betting in LatAm: Sports-betting platform Vibra Solutions and micro-betting provider nVenue have teamed up to offer in-play micro betting in Latin America.

• Recall, nVenue recently signed a multi-year partnership with NASCAR for in-race micro-betting markets and predictive content.

Simplebet launched micro-betting markets at the LIV Golf Chicago tournament this past weekend with Hard Rock Bet.

What’s the story: New fantasy-sports startup Units has launched its namesake app in 19 states, including Washington DC. The differential for Units is that instead of numbers-driven lines, its contests are based on character-driven storylines.

• New-York based Units was founded in January by Torey Korsunsky, who has worked in the sports media area with CAA, WSC Sports, and Deloitte.

• Korsunsky said Units makes fantasy play “accessible to all fans through easily consumable storylines and formats”.

The Betting Startups newsletter provides a guide to startup founders on how to survive and thrive at G2E.

The month in focuses

• Fantasy sports provider Verse Fantasy.

• Sports-betting platform provider BetChill.

Calendar

• Oct 8: GeoComply Challenger event, Las Vegas

• Oct 9-12: G2E, Las Vegas

An +More Media publication. 

For sponsorship inquiries email scott@andmore.media.