The Startup Month #1
The funding crunch (or is it?), Underdog Fantasy leads the month’s fundraisings, inside Future Anthem’s recent funding round and a startup (re)focus on SnapOdds.
Hello and welcome to the first edition of our new regular newsletter sent every first Tuesday of the month.
In this debut issue:
How are betting and gaming growth companies faring in the midst of a deteriorating backdrop for raising capital?
Underdog Fantasy completes the biggest betting-and-gaming fundraise of the year so far.
A look inside the recent fundraising at Future Anthem as well as a rundown of other funding rounds completed in July.
The startup (re)focus talks to Thomas Willomitzer at the ‘Shazam of betting,’ SnapOdds.
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The funding crunch
According to a recent CB Insights report, global venture capital is currently going through a crisis with total funding projected to have declined 19% in the second quarter while the number of deals completed set to fall 22%.
The figures confirm fears that investment for growth companies is harder to come by than previously and this goes as much for the betting and gaming sector as any other.
“The report highlights in no uncertain terms what most of us already intuitively know,” says Benjie Cherniak, principal at Avenue H Capital who is invested in a large number of startups in and around the betting and gaming space. “There is less capital being deployed now versus the previous year.”
Chin up: But while the gaming sector “is not exempt” from the macro worries, it is “not all doom and gloom,” says Cherniak.
He points out that VCs raised record amounts in 2021 “much of which remains to be deployed”.
Notably, Blackstone said in its most recent earnings statement it had $78.4bn of private equity dry powder as of the end of Q2.
A new dynamic: Chris Grove, partner at Acies Investments, suggests what money there is for funding in the sector “is pooling into a relatively small number of companies who share a common characteristic - traction”. “Funders are increasingly willing to pay a premium to reduce uncertainty,” he says.
A similar point is made by Peter Heneghan, senior associate at Bettor Capital, who says “valuation metrics are being reset to more closely reflect the current state of public comps”. Companies “will need to prove more execution in a tighter funding environment”.
Says Cherniak: “Companies seeking capital need to demonstrate flexibility and may need to show more patience than they would like but there is still VC money out there.”
Meanwhile, startups without validated business models are, according to Lloyd Danzig, managing partner at Sharp Alpha, “finding it more difficult to sell their vision for the future in order to finance the present”.
Robin Chhabra, president at Tekkorp Capital, agrees and says “the story” right now is about businesses that have raised money at high valuations but don’t have fully-funded business plans. “So they either have to pick a different type of business model and if they can’t do that they are looking at down rounds.”
Sector focus: The macro uncertainty is happening at a time of “sustained annual compound growth,” says Danzig. Or as Heneghan adds, there remains the opportunity to join one of the biggest bandwagons going.
“While broader market conditions may be challenging, we view the fundamentals of the real-money online gaming space to be extremely strong,” he argues.
Chalk/cheese: The situation is different again in the UK and Europe. David McLeish, partner at the London law firm Wiggin, suggests “there is a sense (that investment) is getting harder to come by unless someone involved in the early stages has a proven track record in the sector”.
In the European sphere, he notes that “consumer-facing businesses focussing on dotcom will not be every investor’s cup of tea”. “For this reason, it seems to be easier to secure funding for B2B businesses.”
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The month in fundraisings
Halfway there: Speaking of companies that have achieved traction, Underdog Fantasy has almost reached halfway-to-unicorn status (i.e. a valuation at $1bn+) after it raised $35m in a Series B round which values the business at $485m.
Stars of track and field: The round was led by funds controlled by BlackRock and Acies (aforementioned). Keeping up their involvement is a long list of investors including Mark Cuban, Breon Corcoran, Mitch Garber, Mark Pincus and a host of sports and entertainment stars.
Other recent fundraisings:
Betting marketplace Wagerwire has closed a $3m funding round led by Roger Ehrenberg, co-owner of the MLB’s Miami Marlins and the EPL’s Leeds United, as part of his venture funds IA Sports Ventures and Eberg Capital.
The Melbourne, Australia-based Cipher Sports Technology Group has announced a $5m Series A funding round led by Cygnet Capital. The company runs consumer-facing Dimes.com, which launched in mid-2020, while in B2B terms it produces AI-powered betting advice.
A prediction market startup focused on the Indian market called Better Opinions is seeking to bring Meta on board for a new $2.5m funding round. Also in on the round are Metaplanet VC, YCombinator, Taurus VC, Original Capital, Tremis Capital, Goodwater Capital and Super Capital.
‘German-accented’ slot developer Apparat Gaming announced that Yolo Investments has taken a stake in the firm. The sum was not disclosed.
Esports betting operator Players’ Lounge has raised $10.5% from a Series A investment round. The round was led by Griffin Gaming Partners with participation from Comcast Ventures, Samsung Next, Vice Ventures, WndrCo and Sharp Alpha Partners.
Future Anthem fundraise
Pumped up kicks: The AI and personalization company announced a new fundraise in mid-July, bringing on board betting-and-gaming endemic fund house Bettor Capital which is led by David Van Egmond. E+M caught up with Future Anthem founder and CEO Leigh Nissim to get an insider’s view of how the new funding round came about.
Bettor Capital approached Future Anthem in September but the company only committed to another raise in Q1 this year and an offer was on the table in April before terms were agreed in early May.
While not disclosing the amount raised, Nissim said the company has sufficient capital for some key hires, direct additional funds for product R&D and to grow its presence in North America.
“These are significant activities so you can probably figure out how much this all costs,” he adds.
Capital table: Bettor Capital led the new round but Nissim remains the largest single shareholder. “Our capital table is strong,” he notes.
Fiorucci made me hardcore: Nissim says that despite the external climate becoming “increasingly challenged”, Bettor Capital remained “just as excited” while existing shareholders “appreciated the momentum” the company has shown.
“You should never be too confident, but I do feel privileged to have run such a balanced and timely process, without any intermediary helping me,” he adds.
Milestones: “Everyone needs stepping stones,” says Nissim who says Future Anthem’s milestones include a growing base of monthly recurring revenue, young yet robust products, a strong team across the business, and, finally “a compelling – and believable – vision”.
All the kids want to make the scene: Nissim says that last year, with the focus of the entire sector on North America, he felt like Future Anthem was “in danger of missing out and moving too slowly to capitalize on the early market momentum”.
To compete he felt the company needed market presence, something that he didn't feel could be achieved with its existing resources.
“Raising an investment round and bringing in institutional investors for the first time made sense,” he adds.
The last dance: “One thing I’ve been pleasantly surprised by is the overwhelming support of everyone I meet for us to succeed as we create this new category with AI in gaming. Many think it’s brave. I just think it’s smart.”
Startup (re)focus - SnapOdds
E+M covered SnapOdds in December, so we caught up with CEO Thomas Willomitzer to see what has been happening with the company in the meantime. The company raised $3.5m from investors last year and is not currently looking for additional funding.
What are the upcoming key milestones for SnapOdds? The company has lined up an expected “five or six major rollouts’ with big names in the sector including large affiliates in the next 12 to 18 months.
“Ideally we would also have made inroads with (sports) media and league entities as well,” Willomitzer adds.
The company has one operator going through GLI testing right now for their new mobile app.
Snap, crackle: “It’s exciting for us to see how the app prominently features the ‘Snap’ camera function in the UI, so that users can capture live wagering opportunities instantly by pointing the sportsbook app at a live broadcast at home or in a bar, for example,” Willomitzer adds.
“We have also made some improvements to facilitate integration with select apps, such as a React native wrapper. We really have a lot of ideas around use cases and applicability.”
Upside efficiencies: Willomitzer suggests the current macro backdrop and its potential impact on the consumer provides a use case for the app.
“Communicating the upside around efficiencies and genuinely useful and entertaining functionality for the user has been a focus for us,” says Willomitzer.
“The SnapOdds video recognition engine actually solves many of the costs and challenges around player retention and engagement, combining novelty with utility to provide a truer second screen experience around live events,” he suggests.
The big sell: “The barriers to integration are really very low,” says Willomitzer. “We are talking about 20-30 lines of code that need to be integrated.
Growth company newslines
Parleh Media has rebranded its flagship newsletter to Gaming News Canada (@GamingNewsCA on Twitter). The company’s multi-year deal with NorthStarBets is also now up and running.
Low6 has undergone a complete rebrand including a new brand identity and tagline focused on gamification (‘Make Your Play’). It has also launched a new B2B white label platform.
Apparat Gaming (see fundraising news above) has agreed a content deal with platform provider Hub88. The deal sees Hub88 incorporate Apparat Gaming’s current portfolio of four titles.
4Poker, which hopes to launch in Q4, has announced former PokerStars executive Heath Cram as its COO.
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