• We The Bookie founder opens up on the struggles of achieving traction.

• Sharp Alpha’s founder Lloyd Danzig talks about raising $25m.

• Prime Sports’ Joe Brennan talks about taking on the market with no budget.

• The month’s funding rounds and startup focuses.

Well, I started down a dirty road.

Flying lessons

I guess I’ll know when I get there: Getting to the point of being able to prove an idea actually works is merely the first step in a long journey for a startup. But convincing investors to finance a project beyond the minimal viable product stage is a trickier task. 

Sparks fly: The Ireland-based We The Bookie came directly from a “lightbulb moment” on the part of founder Malcolm Wilkinson. “The model is that we operate like a ‘normal’ sportsbook, using industry-average odds,” he says.

• But the twist is the company redistributes 50% of each month’s GGR to the losing customers in direct proportion to each one’s loss that month.  

First time around: Wilkinson is not an industry insider and, indeed, We the Bookie is his first attempt at starting a company. Understandably, he is learning lessons along the way. “The first six months were devoted to proving to myself the model would be financially viable,” he says.

• “Harnessing my actuarial background and input from newly made contacts in the betting world, I created projections which did show viability,” he adds.

Making it count: But the biggest initial lesson covers that area of funding. To get the project off the ground, Wilkinson raised €150k in a friends and family round. “Raising at the idea stage is very challenging, especially when you are a first-time founder,” he says.

• “I probably set the valuation too low, at €450k pre-money,” he says.

• “In retrospect I probably could have raised the same amount [for a lower percentage of the company], leaving me more equity for future rounds.”

More money has since been forthcoming to fund the transition to a new platform, after the initial choice was found to be not fit for purpose, with two tranches of €50k added to the pot – one in December and the latest just this month – at a pre-money valuation of €4m.

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Proving ground

Metric of the light: Wilkinson suggests the unplanned platform switch actually provided a proof point for the concept, in that almost all the customers from the first iteration “patiently waited” and re-registered on the new platform.

• “This is a strong signal that our model and brand will foster a bedrock of customers who will be very sticky,” he argues.

• He adds that he was pleased with the number of new customers coming through the WeShare program. 

• “Customers have received at least 40% of their losses back in three of the six months since relaunch,” he says. 

However, with further capital to fund a customer acquisition marketing campaign, coming up with a customer acquisition proof point has been tricky. “We’ve had mixed success with promotional events,” Wilkinson says. 

• Can’t take my eyes off of you: “I think at the moment we suffer a bit from the ‘too good to be true’ phenomenon, combined with a lack of visibility,” he says.

• “I believe there will be an inflection point, which will be met once the public have seen or heard about We The Bookie from multiple sources.”

But Wilkinson says he regrets not having raised more both initially and post-launch. “Zero marketing budget is double-edged as it reduces traction, which makes raising capital from institutional investors more challenging.” 

• He added that it also wastes capital on not meeting monthly minimum targets set by third-party providers. 

On the circuit: Being from outside the industry, Wilkinson says his main route into speaking and pitching to potential investors is through the conference circuit. “I find that creating investor materials and pitching to investors focusses my attention in important areas that could get lost in the shuffle of running a live business,” he explains.

• “Getting to the stage of actually speaking to investors is tricky,” he adds. “I've only actually spoken to about a dozen investors.”

Being in the gambling sector limits any startup’s options, with the somewhat controversial nature of the business precluding founders from much of the institutional help that exists for other industries.

• “There are also blockers to gambling companies looking to raise in Ireland,” he says. 

• “I’m not allowed to participate in any Irish accelerator program or even pitch to the Irish angel groups.”

Would like to meet: Still, Wilkinson holds out hopes of being able to entice a next round of investment on the promise of a unique idea. “Investors are generally intrigued by our model but almost all have the same requirement: traction,” he says.

• “I need to find that investor who believes enough to dip their toe in and fund a modest marketing budget.” 

+More startups

Funding rounds

Player conversion and reactivation services provider Enteractive secured a new limited and non-controlling investment from Bettor Capital in order to fund a further push into the US market.

• Enteractive was founded in 2008 and, according to David VanEgmond from Bettor Capital, has established a global blue-chip customer base and market leadership position that has the company “primed for continued growth.”

Poly tunnel: Crypto-based prediction market provider Polymarket has raised $45m in a Series B round led by Peter Thiel’s Founders Fund. The company has now raised $70m in total.

Growth company news

Prop-betting supplier specialist Sports IQ was sold to DraftKings for an undisclosed amount, which sources suggested could be upwards of $50m.

The decentralized betting exchange BetDex, founded by ex-FanDuel co-founder Nigel Eccles, has officially launched operations in Ireland. 

Toronto-listed esports and Gen Z-focused sports-betting operator Rivalry has launched the $RVLRY token.

What we’re reading

Kicking the startup habit: Tim Heath talks to Investing.com about why Yolo Fund II will be looking more at companies with a “proven track record of success who know precisely what they need from a funding partner.”

The month in focuses

• AI-based iCasino games provider XGENIA.

• Games provider Baricata.

• New gaming affiliate Third Planet Affiliates.

• Machine learning-based anti-fraud tools provider Fluid.

Inside the raise – Sharp Alpha

Fix up, look sharp: The oversubscribed $25m fund raise undertaken by the sector-endemic venture fund Sharp Alpha points to what principal at the company Lloyd Danzig suggests is an “increasingly favorable” fundraising environment.

Speaking to E+M, Danzig says that with 2023 proving to be very challenging for startups and funds alike, it does appear the market has now “found bottom.”

• “We observe many institutional LPs deploying capital in a barbell strategy, with large brand name firms and small specialist firms receiving the majority of allocations,” he suggests.

• He says while many family offices that found it easy to allocate to risk assets in 2021 are now finding it more difficult, there are others that generated significant wealth investing in the wake of the dotcom bubble and 2008 financial crisis and are now putting chips on the table.

Pen to paper: One change in the dynamic in 2024 versus what went before, Danzig suggests, is that investors are writing fewer checks but of a higher value and with a higher-conviction.

• “Venture capital firms are paying for traction rather than giving credit for future unrealized growth opportunities,” he says.

• “In an environment of capital scarcity, investors are especially looking for resourceful management teams who can scale businesses efficiently and sustainably.” 

One other dynamic more apparent now than previously becomes evident when looking at the pool of companies Danzig hopes to be investing in, which, he suggests, now tend to be “lean, nimble and relentlessly resourceful.”

• “At the same time, deal terms have shifted in favor of investors,” he adds.

• “This is why 2024 will be one of the best vintages in the history of venture capital.” 

Apply within: In terms of where the $25m+ will be heading, Danzig says his firm has its own set of “fundamental beliefs” around consumer psychology, economics and tailwinds in competitive entertainment that will continue to drive deployment. 

• “We look for incredible founders who tell us what the next big trends will be and why they are singularly positioned to capitalize on opportunities that aren’t on everyone’s radar yet.”

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Prime time

None but the brave: A B2C startup in the US OSB market is a rare thing given the long list of established national and international gambling companies – such as Churchill Downs, Wynn Resorts, Unibet and 888 – to have cut their losses and exited the space in the years since PASPA was repealed. 

• “We’re not looking to compete with ‘FanKings’,” says executive chair Joe Brennan at Prime Sports. “Their product is for the casual player,” he argues. 

• “The high-action player has largely continued to bet with offshore bookies or on street corners,” he claims. 

• “They have not migrated to the regulated market. Our intention is to be the bridge, the first sportsbook trying to migrate that player.”  

Clutching victory from the jaws of defeat: The Prime sportsbook rose from the ashes of Brennan’s previous venture SportAD, which launched fantasy sports in casinos five-and-a-half weeks before Covid shut them down.

• “That crushed us as a venture-backed company,” says Brennan. “We always wanted to use DFS as a springboard for sports betting and Prime Sports provided that.”

• Don Best co-founder and former CEO Chris Kape was the lead investor, which provided the funding that allowed SportAD to transition into Prime Sports.

• “I’ve been down the VC dance a few times,” says Brennan. “We didn’t want to give away the store and we didn’t want to over-promise. This is our version of bootstrapping.”

On location: Prime has launched in states with large metropolitan areas or which border states where sports betting has not been legalized. Ohio, for example, has big sporting cities such as Columbus, Cleveland and Cincinnati but also borders Pittsburgh, Detroit, Indianapolis and Louisville. New Jersey will cover New York and Philadelphia. Kentucky is next.

• “We are targeting a particular type of player and that player is willing to drive across the Jersey Bridge to get better odds,” says Brennan of New Jersey’s proximity to New York.

• “A go slow approach is beneficial to us,” he continues. “You see these states and a rush to market with big market access deals. But they’re all leaving and they’re leaving behind significantly cheaper market access deals.”

Progress report: Prime Sportsbook launched in Ohio in September 2023 and it became New Jersey’s 19th online sports-betting operator in March this year. It quickly rose from last place among Ohio’s 20 sports-betting operators to 10th, just behind Hard Rock and above the likes of Rush Street Interactive, Bally’s, Betr and Parx.

• “We had a tough Super Bowl,” says Brennan. “But we’re losing money to the right people.”

“Circa Sports is the only regulated sportsbook doing something similar to us,” he says. “Large bettors are always looking for more places to get money down. And we’re just one more place. If you can get just 10-15% of their payroll then you will have a good business.”

Calendar

• Jun 18-20: Canadian Gaming Summit

• Jul 16-19: iGB Live, Amsterdam

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