Betegy has closed an investment round led by Yolo Investments – the venture capital arm of the Yolo Group, which operates the Sportsbet.io brand.
Betegy – which provides data visualisations, automated on-air and retail graphics, and casino marketing assets to operators – intends to use the funds to continue its scaling in the US. The announcement follows a previous funding round led by JKR Investment Group, which was announced in 2020.
iGB spoke to both Betegy founder and chief executive Alex Kornilov, and Yolo Investments founder and GP Tim Heath to discuss the deal and how Betegy plans to further adapt its products for the US market, and the startup funding sector as a whole.
What encouraged you to invest in the business; what do you think that Betegy brings to the market that wasn’t on offer before?
TH: Betegy’s great innovation is to automate the previously time-consuming process of turning reams of data into world-class content. We know the product works because it’s been successfully integrated into the Sportsbet.io brand, but we also saw potential synergies across several Yolo Investments portfolio companies.
Today, a great betting or gaming product needs to be a personalised and curated experience. Customers expect to be engaged beyond the core product. Betegy is empowering operators to do just that, and that’s a really powerful proposition.
What sort of expansion opportunities will this latest round of funding allow Betegy to pursue?
AK: The goals for the round were clearly defined from summer 2021. That was when we decided to go for the next round of investment, because our growth in the US was pretty significant and we saw a huge opportunity. The previous round with JKR helped us assess how Betegy could sell its products, and how the American market would react.
By summer 2021, we had that validation when we launched our broadcast product, which was an immediate success, with a deal signed with the World Series of Poker.
It took us three months to shop around to see how the company should be positioned, the potential revenue and the products needed, to assess the amount we raised.
Tim Heath was already a client through his SportsBet.io brand, so he’s been with us since the start. After a few rounds of discussions he decided to invest – he’s used the product before, his team knows my company, so we didn’t need to go through a stage of product validation.
We did have to transition from being a European business to a full US company, driven by US clients. That was the big challenge behind the round, making sure we did that right and how we could prepare for future [funding] rounds. We had to prepare to bring in US investors in future; that was a key operational challenge. That, not the negotiations, took us the longest.
Betegy has worked successfully with a range of media giants, on both sides of the Atlantic. Alex, how do you plan to leverage these relationships alongside your sports betting partners? Do you see scope for convergence?
AK: It’s interesting because we have multiple dimensions to converge. We have sports betting and media; Europe and the US. It’s a four-way bridge we are building.
Going backwards, we started talking to big media companies four or five years ago, about how to bring betting to their content offering, and in a way that’s exciting and modern, and not just a promotional element.
So those talks started talks years back, and I’ve been in those meetings discussing how we can make something engaging. It took four to five years to go from realising the opportunity to implementing the strategy among the media companies, so we’ve taken time to build those bridges.
How difficult was it to raise capital considering the wider macroeconomic factors at play?
AK: Raising capital is something that combines many different forces. On one side you have the macroeconomic factors, such as market conditions, and investor appetite rises and falls.
On the other you have the microeconomic factors, specifically related to the company, the industry, and when we started those discussions with the board, we noted that the markets were in a downturn. It obviously started with a bit of tension in the boardroom, because a company must grow, even if it’s getting harder to do so.
But as we discussed the microeconomic factors, such as our growth, our clients, our burn rate, and how efficient we are on the production side, we realised we are able to deliver much better results than other companies from the [investment].
The ones that struggle are the unprofitable businesses burning cash, whereas we are coming from a lean perspective, so for venture capitalists, who are going to be more risk averse, there was an opportunity.
The [macroeconomic conditions] play to our strengths; it makes it easier for us to talk to investors. I don’t have to lower my valuations because I know we are growing above the market rate. My operations are solid, our strategy looks solid, so we really turn the downside into an upside, thanks to the years of work and the structure of our operations.
How have these market conditions changed the way you look at investment opportunities, Tim? Has that changed what you look for in a business?
TH: I’ll always support – both financially and strategically – people and teams building products that solve real-world problems.
The details change as the market evolves, but the principles are the same. The question we’re asking ourselves more and more these days isn’t, “Can this business or product succeed?” but rather, “What value can we add if we invest?”.
Yolo Investments now holds equity in more than 80 companies across gaming, fintech, blockchain and more. There’s incredible power in this network and our edge is in finding those synergies that can supercharge a great idea or a strong team into a game-changing product.
Essentially, is an innovative product no longer enough? Do you see the capabilities of the founding team, their track records, and the existing backers as potentially decisive factors?
AK: Definitely; 99% of a company’s value is the people. You build IP and assets that you can assign a value to, but I cannot stress just how important the people are.
There are different types of colleagues I have, some that have been here from the start, and they form the backbone of the business, but the people who join now are still massively important, as we’re in our growth phase. We have a multilayered interview process, which finishes with a cultural interview – we want to find the right people, we don’t want toxic people.
All my colleagues are not only model professionals, but they are humble, hard working and driven not just by the financial benefits of working for Betegy. It’s not just the idea, it’s the team that investors invest in. You can get your clients and create your IP but to get there, you need the people.
TH: An innovative product has never been enough. Ideas are cheap without execution. For us at Yolo Investment, it actually goes beyond things like the founding team and their track records. The company needs to make sense within our broader network as we feel that’s where we can really add value. We don’t want to be passive investors. We’ve assembled a team with unparalleled expertise across several fields, and we want to find opportunities where that expertise can take an investment to the next level.
Looking specifically at the US opportunity, how important will unique and engaging content be to the sportsbook ecosystem going forward? Is this in short supply currently?
AK: If we step back and look at the bigger picture, the way marketing works is across two threads; there are the things you can track and use to build your funnel on one side, and your brand building and awareness tools on the other, such as TV advertising and sponsorship.
Usually the easiest way to make a statement is to spend on branding. You turn on the tap, get the result, turn it off. But after that initial burst of growth you will have to justify that spend increasingly, and merge those two marketing tactics together.
It’s something that will define who will win or lose. Someone who does performance marketing, crunches the numbers, assesses all metrics, and ultimately does it better, supported by branding spend, they will prevail. That won’t come in one or two years, however.
Performance marketing is day-to-day work without seeing too many results at the beginning, but ramps up over time. That then lets you allocate less money to branding, while capturing the players better. Being a provider that helps people grind, build things long-term, enable personalisation and automate the production of creative is something we’re really looking forward to.
More and more clients are looking to make their banners more efficient to maximise spend, for example. [Being able to facilitate that is] what we’ve staked our future on, backed up what we see going on in the market.
Where in particular do you see room to grow in the United States?
AK: I would say the most exciting for me now is the convergence of broadcasters, sports media and sports betting. The audience is ready for this, much more so than in Europe.
Betting and sports obviously go hand in hand, but the US soil is much better prepared to combine it into a single experience. This comes from fantasy sports’ deep roots in the US; so they know their teams, know the stats, and have done since way before sports betting was legal. All of those things together – content, plus betting, plus live sports, plus new platforms – excites me.
And what are your thoughts on the US opportunity – do you feel the supply side is going to be the most attractive target for investors going forward?
TH: The growth in the US has been so impressive that it’s easy to forget that it’s still very early days for the market. It’s probably fair to say that the way several states have regulated online gaming has helped a handful of large-scale incumbents dominate on the operator side.
From the suppliers’ perspective, the barriers to entry are lower and this creates some interesting opportunities for investors. Several Yolo Investments companies are already thriving there, and we’ll always be open to hearing from others who feel they can bring something new to the table.