Gambling Banker Bets Tech Startups And VC Will Connect On New Platform

Sports betting startups face a problem: the venture capital market is in crisis, making it difficult to obtain early-stage funding, especially since the amount of capital required by a startup is often too small to justify the cost of hiring a company. Find investors. . Meanwhile, the financial sector is being overwhelmed by a wave of half-baked ideas from entrepreneurs. Rob Heller thinks he has the solution: an automated platform that connects gaming tech entrepreneurs with wealthy investors, with Heller's bank, Spectrum Gaming Capital, acting as gatekeeper.

“We did global research, vetted, cleaned [the pitches] and prepared a pitch for this startup,” said Heller, co-founder and CEO of a registered investment bank affiliated with renowned research firm Spectrum Group of Games. . On the other side of the deal, “venture capitalists and family offices typically see a lot of trash or stale ideas, or great ideas that [management] can't implement.” "

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Heller, who has 40 years of experience in investment banking, last month launched tech exchange Spectrum Gaming Capital, which he says makes it easier for tech startups to pitch their ideas to the right investors, and also makes venture capital faster and easier. fund. Source concept. The exchange, which launched just three weeks ago, is still building its roster, with four companies currently seeking capital and 35 investors, including the venture capital arm of a European gaming company and a US venture fund with several deals in sports. And gambling, according to Heller, who declined to name the participants. However, according to Spectrum's presentation, the market potential is huge: the digital gambling market in the US, Europe and Latin America is expected to grow by more than 10% over the next five years. The combined market capitalization of public sports, gaming, and toy technology companies is higher than that of CleanTech, FilmTech, and Immersive Tech, indicating deeper penetration of private companies and startups.

Startups require Spectrum membership and must meet certain criteria. First, they must be involved in gambling, sports, eSports, or a closely related field. These companies should already be generating revenue, seeking $2 million to $50 million in funding, and be on track to reach profitability in the next two years. Investors also apply to participate in the platform if they are qualified buyers, namely high net worth individuals with a net investment of US$5 million or funds of US$25 million or more, and are willing to sign a confidentiality agreement to view the offerings. material. Both parties agreed to maintain the current trading spectrum, with banks only charging fees if funds are available. Heller charges a 5% fee on the first $5 million, plus 2% or 1% for changes in control, such as mergers or acquisitions.

Bringing entrepreneurs, venture capitalists and family office investors together on this technology platform is not a new concept: Axial, Republic and Angellist are three of the biggest names in finance, but Heller believes his company's experience in the often confusing world of gaming can benefit his company. you're the one on the edge. edge.

“We rely on decades of industry knowledge, experience and judgment,” Heller said on the call. "This doesn't mean we're right, but it does mean we have a good chance of being right more than the average banker. That way, we provide more value."

Heller has worked as an investment banker since the 1980s, initially working at Salomon Brothers to help develop the mortgage-backed securities market. However, most of his experience is in the gaming industry, including leading the financing of Borgata and Mohegan Sun, the merger of Penn National Gaming and Hollywood Casinos, and the sale of Caesars World Resorts. After founding and managing the Baha Mar Resort in the Bahamas, Heller returned to banking a decade ago and founded Spectrum Gaming Capital. Since then, his bank has completed $50 billion worth of mergers and acquisitions. Heller noted that Houston Rockets owner Tilman Fertitta is a regular customer.

According to Heller, it is this experience that creates most of the stock market value. Most of them are not automated: To ensure that investors see good opportunities, Heller Group screens startups and works with them to refine their business plans and pitch them to the right level to present to investors. Spectrum contains the specific details an entrepreneur needs to create a suitable investment memorandum to present to an investment committee, as well as a presentation that includes financial statistics and projections. Heller said the lack of up-front costs is an advantage, and the payback is much cheaper than the traditional way of using investment banks to find investors and prepare documents.

For entrepreneurs, Spectrum screens potential investors and also guarantees funds, including a lot of KYC work and investor communications, which is often a requirement from gambling authorities. There are also steps in place to ensure that competing or undesirable parties cannot access premium content.

The idea to create the Spectrum Gaming Capital Technology Exchange came from the bank, which created its own database of global players in the gambling and gaming technology market. Because Spectrum specializes only in the gambling business, Heller believes neither organization knows much about the global market, its players, and the unique regulatory web that companies and investors must navigate. There are currently about 5,000 companies in the database, and the bank has reflected nearly the same number of individuals in its relationship research. Heller believes this internal database can be used to reassure both parties that all participants are trustworthy, while automating much of the investment process.

This does not constitute an endorsement of the deal or an investor request for a spectrum swap, but rather a consideration of what the company finds attractive and a recommendation as to where the parties should focus their due diligence. For example, one of the first exchange applicants was seeking financing at a rate that Heller considered prohibitive based on the bank's other operations. Companies still have to meet other criteria to be listed and priced on the platform, but Spectrum's investment summary states that valuation is what investors should focus on. "Businesses, of course, don't want us to write this, but this doesn't have to be on the list. It's important for us to maintain integrity and verification. I have a reputation that goes back almost 40 years, and I don't take things lightly this," said Heller.

Even with the current downturn in the venture capital world, tempered by portfolio losses and the increasing difficulty of taking companies public, executives expect businesses will start to recover. “Everyone wants to make a deal,” Heller said. “We are building a sorting center.”

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