4 ms·

It’s sort of amazing that given the fast-moving legalization of sports betting, there hasn’t been a lot of VC action in the space, either on the platform side o

It’s sort of amazing that given the fast-moving legalization of sports betting, there hasn’t been a lot of VC action in the space, either on the platform side or on the content/services side. I can count on one hand the number of funded companies over the past six or seven years, and I can think of only one that has exited. Might have something to do with vice provisions dictated by LPs, but it certainly seems like a ripe growth area.

hogFeast 7y ago
There are an absolute ton of companies working in this area (mostly in the UK). But the reason they don't need VC capital is simple...they make a ton of money already (VC funds are naturally interested in capital-intensive businesses that are kind of junky...companies in this sector aren't capital-intensive and are usually obscenely profitable).
- pmart123 7y ago
  I won’t say that’s exactly true. I know Founder’s fund have invested in a couple. I think the need for scale limits VC funded options to companies that are building things like a gambling exchange, but at that point, the funding sources might be better from quant traders/hedge funds as its closer to a capital markets type business. For instance: https://www.bloomberg.com/news/articles/2017-10-30/sports-gambling-is-quant-trading-firm-s-way-to-beat-market-odds https://www.bloomberg.com/news/articles/2017-10-30/sports-ga...
  - hogFeast 7y ago
    The US market is not representative at all. It is basically nothing (and Susequehana's operation isn't large). Exchanges are cumulatively worth tens of billions and they are a tiny part of the market. Again, most of the people involved have no interest in VCs (I know a few people starting exchanges). They know nothing, and they usually have less money than them anyway.
samstave 7y ago
It would be super funny if there was a website where people could gamble on “pick a number between X and N” And where N was differing ranges such that you ccould gamble in the pick a number between 1-10 Or go to a diff room when N was between 1-100, and others like 1-1000 etc And the anti was diff for each and the payoff diff based on paying out from the antis (i dont. Know how to spell anti)
- convivialdingo 7y ago
  Ante is how I learned it. Latin for “before”
paulpauper 7y ago
the answer is pretty obvious: low multiples. A gaming company trades at low multiples whereas a tech company with little revenue can be worth billions. You cannot turn a $1 million investment into a billion with gaming like you can with tech.
holy_city 7y ago
>there hasn’t been a lot of VC action in the space, either on the platform side or on the content/services side Do "social" casinos count? Zynga is all over that and went public in 2011, Big Fish was acquired by Aristocrat in 2017, and I'm sure there are others. If you throw ethics to the wind, there's no reason to make a real gambling app/service when you can give gamblers the same dopamine feedback loop without ever needing to pay them real money. Personally I think there's only so much time left for gambling (in lootboxes, social casinos, or even sports betting) before it gets shutdown by regulation. There's very little pragmatic argument for allowing it to exist in the first place, other than classic prohibition arguments like "personal freedom" and "black markets still exist." Valid, but I think the harm of industrialized gambling through digital platforms outweighs the benefit of taxing it and allowing a black market to exist, but that's just me.
- merpnderp 7y ago
  I’d say it’s a simple argument. Letting adults make bad decisions is preferable to sending guys with guns to stop them and throw people in jail for doing something they voluntarily want to do. Perhaps the people who would have wasted their money gambling instead invest in the stock market, but more likely they’ll piss it away on something although maybe something you find less offensive.
  - holy_city 7y ago
    I'm not saying a drug-war like approach is the best method here, just that some degree of prohibition that prevents industrialized gambling is better than none. For example, even in a fair game the house will eventually take a gambler's bankroll provided the house's bankroll is practically infinite [1]. That's a thought experiment, but it works in practice when you are dealing with gambling addicts that won't walk away from the table. Secondly, those gambling addicts, or "whales" as they call them represent something like 0.15% of players bring in 50% of the revenue [2]. And lastly, I would have agreed with you a few months ago, before I heard this story [3] on NPR about how Big Fish was targeting people and using predatory practices to keep them on the game. It reminded me of a twisted version of AOL's customer retention practices that they were sued for a decade ago. There's also the whole notion of casinos/gambling disproportionately impacting low income communities and how you can't start a gambling business without tons of capital, so it serves as an efficient funnel of money from the poor to the rich. And it's really naive to think that someone going broke affects that person alone. God help them if they have a family. [1] https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin [2] https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-scary-when-0-15-mobile-gamers-bring-in-50-of-the-revenue/#5814fd9f4065 https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-s... [3] https://www.pbs.org/newshour/show/how-social-casinos-leverage-facebook-user-data-to-target-vulnerable-gamblers https://www.pbs.org/newshour/show/how-social-casinos-leverag...

hogFeast 7y ago

There are an absolute ton of companies working in this area (mostly in the UK). But the reason they don't need VC capital is simple...they make a ton of money already (VC funds are naturally interested in capital-intensive businesses that are kind of junky...companies in this sector aren't capital-intensive and are usually obscenely profitable).

pmart123 7y ago
I won’t say that’s exactly true. I know Founder’s fund have invested in a couple. I think the need for scale limits VC funded options to companies that are building things like a gambling exchange, but at that point, the funding sources might be better from quant traders/hedge funds as its closer to a capital markets type business. For instance: https://www.bloomberg.com/news/articles/2017-10-30/sports-gambling-is-quant-trading-firm-s-way-to-beat-market-odds https://www.bloomberg.com/news/articles/2017-10-30/sports-ga...
- hogFeast 7y ago
  The US market is not representative at all. It is basically nothing (and Susequehana's operation isn't large). Exchanges are cumulatively worth tens of billions and they are a tiny part of the market. Again, most of the people involved have no interest in VCs (I know a few people starting exchanges). They know nothing, and they usually have less money than them anyway.

samstave 7y ago

It would be super funny if there was a website where people could gamble on “pick a number between X and N” And where N was differing ranges such that you ccould gamble in the pick a number between 1-10 Or go to a diff room when N was between 1-100, and others like 1-1000 etc And the anti was diff for each and the payoff diff based on paying out from the antis (i dont. Know how to spell anti)

convivialdingo 7y ago
Ante is how I learned it. Latin for “before”

paulpauper 7y ago

the answer is pretty obvious: low multiples. A gaming company trades at low multiples whereas a tech company with little revenue can be worth billions. You cannot turn a $1 million investment into a billion with gaming like you can with tech.

holy_city 7y ago

>there hasn’t been a lot of VC action in the space, either on the platform side or on the content/services side Do "social" casinos count? Zynga is all over that and went public in 2011, Big Fish was acquired by Aristocrat in 2017, and I'm sure there are others. If you throw ethics to the wind, there's no reason to make a real gambling app/service when you can give gamblers the same dopamine feedback loop without ever needing to pay them real money. Personally I think there's only so much time left for gambling (in lootboxes, social casinos, or even sports betting) before it gets shutdown by regulation. There's very little pragmatic argument for allowing it to exist in the first place, other than classic prohibition arguments like "personal freedom" and "black markets still exist." Valid, but I think the harm of industrialized gambling through digital platforms outweighs the benefit of taxing it and allowing a black market to exist, but that's just me.

merpnderp 7y ago
I’d say it’s a simple argument. Letting adults make bad decisions is preferable to sending guys with guns to stop them and throw people in jail for doing something they voluntarily want to do. Perhaps the people who would have wasted their money gambling instead invest in the stock market, but more likely they’ll piss it away on something although maybe something you find less offensive.
- holy_city 7y ago
  I'm not saying a drug-war like approach is the best method here, just that some degree of prohibition that prevents industrialized gambling is better than none. For example, even in a fair game the house will eventually take a gambler's bankroll provided the house's bankroll is practically infinite [1]. That's a thought experiment, but it works in practice when you are dealing with gambling addicts that won't walk away from the table. Secondly, those gambling addicts, or "whales" as they call them represent something like 0.15% of players bring in 50% of the revenue [2]. And lastly, I would have agreed with you a few months ago, before I heard this story [3] on NPR about how Big Fish was targeting people and using predatory practices to keep them on the game. It reminded me of a twisted version of AOL's customer retention practices that they were sued for a decade ago. There's also the whole notion of casinos/gambling disproportionately impacting low income communities and how you can't start a gambling business without tons of capital, so it serves as an efficient funnel of money from the poor to the rich. And it's really naive to think that someone going broke affects that person alone. God help them if they have a family. [1] https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin [2] https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-scary-when-0-15-mobile-gamers-bring-in-50-of-the-revenue/#5814fd9f4065 https://www.forbes.com/sites/insertcoin/2014/03/01/why-its-s... [3] https://www.pbs.org/newshour/show/how-social-casinos-leverage-facebook-user-data-to-target-vulnerable-gamblers https://www.pbs.org/newshour/show/how-social-casinos-leverag...