Wow, this year has been a busy one for startups in the real money gaming sector. There seems to be no end to new igaming ideas in the sports and casino spaces. The challenge for many of the new startups is that they really can be unaware of the amount of effort required to bring a product to market and then keep the operation going long enough to attract a sizeable enough customer base and ultimately make a profit.
You might expect some significant changes are driving the barrier to entry ever upwards? Well, there have not really been any step changes, just an ongoing maturity of the market bringing increased competition and regulation. On the regulatory front GDPR (General Data Protection Regulation) is now in force and the more established businesses are undertaking ISO27001 as a foundation plank for GDPR. Its yet to be seen, however, the fines for breach of GDPR can be up to 7% of annual turnover. Speaking of fines, it seems the UKGC (The Gambling Commission) are also increasingly imposing fines on companies for breaches, be it in player protection or other areas of compliance.
So what does this mean for startups? Essentially, there’s even more to worry about in getting a venture off the ground. Taking the idea, getting funding, developing the game, getting ATF (Accredited Test Facility) approval, applying for a UKGC licence, getting a player fund account, perhaps even setting up a business on foreign shores like Malta or Gibralter, the list goes on. We estimate an investment of between £250k and £350k is required for the first year of operation and that doesn’t take care of the expensive game of marketing and player acquisition!
A common approach to getting off the ground is to accrue sufficient seed funding through friends and family to build a concept version of the game App to show potential investors. Having secured an initial third party investment, startup businesses can then go on to actually launch, licence and re-engineer based upon player feedback. Funding can be sought from Angel Investors, Venture Capitalists (VC’s) or Crowdfunding. Each method has its own pitfalls and nuances, however seeking funding from an Angel who knows the sector and has contacts can bring not just the financial backing but a wealth of experience. In comparison, Crowdfunding will generally only supply the startup with money.
Another fly in the ointment and possibly a very positive one is blockchain. What this really means for the Gambling Sector is not for this article, however it is another area that startups are weaving into their operation either through the use of established crypto currencies or through offering an initial coin offering (ICO) to raise funds.
Not all is doom and gloom for the startup - there is some good news in the form of available help. Organisations like Gamcrowd and Gambling Startups Meetup are a useful place for advice and resources. If its hands-on help to obtain an operator licence, i.e. being steered through the process to save time and money in the long run, then there are established businesses like Best Gambling that help startups in this space.
An alternative approach would be to use an intermediary operator. This is an operator that uses its licence to operate the startups brand on it’s behalf. There are some that can provide the whole end-to-end platform such as Bet Construct, however if it’s a straight forward ‘operate our game’ scenario then new entrants Best Gambling may be the way forward. The benefits of this approach are getting to market up to 3x quicker and up to a 50% reduction in operating costs. The startups are also free to focus on acquisition rather than worrying if there has been a change in ‘remote technical standards’ from the UKGC for example.
There are risks to using a third party to operate the brand. A good contract protecting the startup’s Intellectual Property and player information ownership (as opposed to the player data collected for UKGC) are key areas to look at – i.e. making sure startups can exit seamlessly further down the line to operate their own game is essential.
If you are launching a new game this year then invest the time in talking to others who have done it before – it may save you a lot of heartache.
Alan Moon, BG Sales and Commercial Operations, December 2018.