See below for this month’s Waterhouse VC newsletter. We specialise in global publicly listed and private businesses related to wagering and gaming.
Since inception in August 2019, Waterhouse VC has achieved a gross total return of 1885% as at 30 April 2023, assuming the reinvestment of all distributions.
Opportunity of crypto wagering
In May last year, we first discussed the opportunity of crypto wagering, which is the fastest growing part of the wagering industry. Some online crypto operators have rapidly become large businesses and well-recognised global brands, such as Stake.com and Sportsbet.io. The global online betting industry generated revenues of circa US$58.2bn in 2021, with US$145.6bn expected by 2030 (GlobeNewswire). We expect that the increased penetration of crypto betting will drive the majority of industry growth.
Sportsbet.io already records US$2.7bn of turnover per month. To put that in perspective, in 2021, Australia’s largest operator averaged US$1.2bn of turnover per month and has around 50% market share in the country. Sportsbet.io has formed strategic partnerships with several prestigious football clubs, such as Southampton, Arsenal, and São Paolo.
Alfa Romeo’s F1 car sporting the Stake.com logo. Source: GambleBoost.
Cryptocurrencies such as Bitcoin, Ethereum, and Litecoin facilitate quick and smooth transactions with lower fees compared to conventional methods. This not only delivers near immediate payouts but also minimises operational expenses for crypto wagering businesses. Players benefit from rapid and efficient deposits and withdrawals, as well as anonymity, security and data privacy when betting online.
Operators like Stake.com and BitStarz Casino have already developed a superior user experience (UX) to online fiat operators. Online crypto operators are focused incessantly on the customer and are now leading the industry with respect to UX, whilst legacy operators have generally been slower to adapt. For example, Stake.com regularly develops new slots games, whilst maintaining its own ‘Stake Originals’ house games.
Stake’s user interface. Source: Cryptonews
Customers of crypto wagering operators benefit from far larger bonuses/offers and superior odds because operators pass on some of their several cost savings, such as lower deposit/withdrawal transaction costs and lower product fees compared to fiat operators. The below selection of Trustpilot scores demonstrates players’ preference for newer crypto operators (represented by Stake.com and BitStarz Casino) over mature fiat operators.
Trustpilot scores for a selection of fiat and crypto operators. Source: Trustpilot
New age wagering platforms
Within the crypto wagering segment, there is a unique opportunity for cutting edge back-end platforms for crypto wagering operators. Whilst there are numerous existing platforms for fiat operators (such as Kambi, SBTech, Entain, OpenBet, Amelco and Aspire Global), there are just a handful of platforms built for crypto operators. Having assessed these platforms, we believe that several gaps remain in their functionality.
We have summarised the core capabilities that we would expect in cutting-edge wagering platforms here. Most existing platform providers are built on legacy technology and require significant development work for any changes to be made to the platform. Modern platforms should offer racing, sports, and gaming, whilst seamlessly integrating payment options in both cryptocurrency and traditional fiat currencies. New platforms should incorporate cryptocurrency as an integral part of their technological framework, rather than treating it as an afterthought.
One of the benefits of investing in a wagering platform is the diversification of revenue across a global client base of operators. Platforms typically charge an integration fee as well as up to 25% of gross gaming revenue (GGR) depending on the number/type of services provided. Some platforms also charge out developers for optional ongoing development costs. By taking a share of revenue from numerous operators, crypto wagering platforms are leveraged to the growth of the entire segment rather than facing the operational risk of one crypto wagering business.
Sanco Technology
An essential part of Waterhouse VC’s strategy is identifying management teams with substantial domain expertise. In this case, we have looked for teams with expertise in constructing and managing successful wagering platforms operating in highly competitive markets. One such team has launched Sanco Technology, a private company currently raising money for its platform build.
Sanco’s platform will be set up to have "plug & play" crypto integration functionality and will serve a global client base, with a particular focus on emerging crypto wagering operators. The platform will be built in a modular fashion to allow for self-customisation from all operator clients.
Sanco’s modular wagering platform. Source: Sanco Technology.
Sanco Technology is one of several exciting crypto wagering opportunities that Waterhouse VC is participating in.
Media
I recently contributed to Compliance+More’s piece, ‘UKGC to Move Quickly on White Paper Changes’, noting that “The growth of crypto wagering is poised to be the most significant industry shift in the coming years.” We look forward to being a part of that growth journey.
On 21st-22nd June, our Portfolio Manager, Peter Stevens, will be speaking at iGaming NEXT Valletta on the topic “State of play: Can the economic crisis yield unique opportunities?”. The conference attracts 4000+ senior delegates for two days of high level networking, world-class content and great hospitality. Register for the conference here.
For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) or through our website at WaterhouseVC.com.
DISCLAIMER AND IMPORTANT NOTES
Please note the above information in relation to Kambi, SBTech, Entain, OpenBet, Amelco, Aspire Global, BitStarz Casino, FanDuel, DraftKings, Stake.com, Sportsbet.io, Sanco Technology, Bitcoin, Ethereum, and Litecoin is based on information provided by the company and should not be considered nor construed as financial product advice. Waterhouse VC has an option deal with Sanco Technology and has positions in Flutter and Bitcoin. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.
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