Welcome to the August 2020 newsletter for the Waterhouse VC Fund.
The Fund specialises in gambling assets and businesses that are related to the gambling industry. We aim to leverage our unique expertise and existing assets to generate yield and capital growth for investors over the long-term.
Since inception, $100,000 invested in the Waterhouse VC Fund has risen to $322,570, as at 31 July 2020.
Selling picks and shovels in a gold rush
During the gold rushes of the mid-1800s in California and Australia, prospectors would head out to the goldfields every day, hoping to strike it rich. It was a high-risk, high-reward endeavour that drew in people from all over the world. Most lived a hard life and went home with nothing. Few struck it rich.
The people who really made a fortune were the traders who sold picks and shovels to the miners. Better to sell the tools to the dreamers - and get paid every time.
It’s a great lesson to keep in mind when investing in a booming industry.
In the US, competition in the wagering ‘gold rush’ continues to grow every month. Of course, there will be massive winners, but it’s not yet obvious who will strike it rich. The ‘pick and shovel traders’ in this context are the companies providing the tools needed by wagering companies to provide a betting experience for end customers.
Under the radar
Another reason you want to look for these companies is because they’re not as glamorous and rarely get the headlines that the customer-facing companies do. Sportradar is one of these.
The Swiss company partners with sports leagues like the NBA, NFL, NHL and many others to distribute unimaginable amounts of data to bookmakers around the world. This service is critical to sports leagues for monetising their product, and equally critical for bookmakers to offer a betting product to their customers. Sportradar pipes data from things like the finish time of a game (so no more bets can come in) to the names of individual players.
Sportradar also creates betting odds by feeding sports data into mathematical models. This is sold as odds suggestions to bookmakers who aren’t creating their own. For in-game betting, this requires constant recalculation of odds using live data collected by Sportradar.
In 2018, Sportradar was valued at approximately US$2.4 billion, and has probably appreciated significantly since then, in line with the growth of the US market. Last month, the company was rumoured to be exploring plans to go public, so hopefully we’ll know soon how valuable picks and shovels really are.
The ‘Sportradar for horse racing’
BetMakers Technology is the horse racing equivalent, with their flagship Global Racing Network (GRN) product connecting racing authorities to wagering companies. GRN allows bookmakers to access racing content from around the world in a uniform data stream so that the racing content in their betting apps is consistent, whether it’s from Flemington or Fairmount Park.
It’s also great for the racing authorities who get direct access to the world’s largest wagering operators via a single integration with BetMakers. For example, Monmouth Park Racetrack in New Jersey had their product piped to “approximately 20 of the major operators globally within a matter of weeks” after signing with BetMakers, creating a revenue stream for both the racetrack and BetMakers.
The US has 87 thoroughbred race tracks and twice as many races each year than we have in Australia. Further, with no fixed odds racing in the US, the BetMakers GRN is well placed to continue winning exclusive agreements to connect racetracks and bookmakers.
For wholesale investors that want to follow gaming’s global growth, please follow us for updates on Twitter @waterhousevc.