Welcome to the February 2020 newsletter for the Waterhouse VC Fund.
The Fund specialises in gambling assets and businesses that are related to the gambling industry. We leverage our unique expertise and existing assets to create high growth opportunities for investors.
Since inception, the unit price of the Waterhouse VC Fund has risen from $1.00 to $2.25, as at 31st January 2020. If you would like more information on the Fund, please get in touch.
Making a bet on BetMakers
Investors could be forgiven for giving the BetMakers Technology Group a quick look and throwing it in the ‘too hard basket’.
Only 18 months ago, the company wanted to build software products for betting companies, while also competing against them with its own retail betting business. And when you're competing against the large corporate bookmakers and the TAB, you need a lot of capital to win and retain customers.
The company hadn't produced a dollar of positive operating cash flow since it listed on the ASX. Existing investors were diluted as the company raised cash year after year. The share price languished.
So, what changed for the BetMakers? Well, they sold their bookmaking businesses TopBetta and Mad Bookies to PlayUp for $6 million, and acquired Dynamic Odds (DO) and Global Betting Systems (GBS) to round out their suite of leading B2B products.
Now the company is 12 months into a new strategy focusing solely on providing software to betting companies and racing authorities. Compiling 100+ data feeds from racing jurisdictions around the world and supplying it to bookies via a single integration. They’re essentially a middleman between racing authorities and bookmakers – and they get paid from both sides.
For the racing authorities, BetMakers produce and distribute race data that bookies need to deliver a racing product, such as race fields, speed maps, commentary, official prices and live vision. The racing bodies charge bookmakers 2-3% of turnover to bet on their 'product' and pay BetMakers in return for packaging this up and also supplying the data needed to monitor the integrity of their sport.
For the bookies, it's better to use BetMakers rather than linking up with every single racing body globally, and many times cheaper than doing it in-house.
BetMakers distribute over 200,000 races every year, half of which are international races into the Australian market. Clients include all the major corporate bookies in Australia, 30-40% of the tier one bookmakers in the U.K and and they have now added new customers in the U.S, an exciting and growing market.
These recurring, contracted revenues are being deployed into improving their products and developing new B2B revenue streams.
Growth opportunities
BetMakers has established strong connections with racing bodies, boosting their reputation to win deals overseas. We saw early evidence of this recently, with BetMakers signing a 10-year deal to exclusively manage fixed odds horse racing in New Jersey. The company is inserting itself between more racing bodies and wagering operators, providing the 'package' of content and clipping the ticket on turnover. If this market grows as expected, further deals in the U.S. could provide huge upside to the current valuation.
With $2.7 million in the bank as of 31st January, the company has the resources to invest in further deals in the U.K. and U.S.
We have been impressed with CEO Todd Buckingham’s ability to pivot from what was a difficult situation for the business and his vision for growing BetMakers here and overseas. We were investors in BetMakers even before our recent partnership.
If you're a wholesale investor, interested in opportunities in the gambling industry's growth markets and want to partner with someone who knows the space intimately, please get in touch.
February 2020 Fund Update