Esports odds and risk management provider Oddin.gg has raised $4.5m through a Series A funding round which included investment from both Velo Partners and Genting Ventures.

Velo Partners is a VC fund specialising in early-stage investments in gaming and gambling companies, while Genting Ventures is the corporate venture arm of Malaysian casino conglomerate Genting Group.

The funds will be used to strengthen Oddin’s esports B2B betting business and to expand into new verticals.

Oddin said it has seen strong demand for its solution and had not lost a single client over the last three years.

The company signed landmark B2C contracts with operators such as Betway, Yolo Group and Loot.bet, while concluding major B2B deals with companies including OpenBet, Aspire Global and Altenar.

Oddin co-founder and CEO Vlastimil Venclik said he feels fortunate to receive this investment, which will enable Oddin to scale up operations.

“This round will help us to continue enjoying our exponential growth,” he commented, adding that the development of new services will cement Oddin’s position as a leader within the industry.

Oddin operates on all continents, and recently started offering its services in the US state of New Jersey. The company has also applied for licences in other US states, as well as in Ontario, Canada.

With an almost nine-digit monthly handle in US dollars under management, Oddin delivered a 6.7% average margin to its clients in H1 2022.

The company broke even as of July 2022, a rarity in the esports betting ecosystem.

“We were immediately impressed with Oddin’s best-in-market esports odds products, as well as their broader strategy of building an esports ecosystem to service all of their customers’ esports needs,” Velo Partners commented on the financing round.

Oddin provides betting operators with data visualisations, marketing, odds feed and risk management across esports via its proprietary iFrame solution.

Genting Ventures said: “From an industry standpoint, we see the dynamic potential of esports, and identify Oddin.gg as a key player offering top-tier data and service for its partners in the competitive gaming space.”

The Series A round comes after a successful seed round in early 2020, in which Oddin raised $1.2m.

The macroeconomic climate is making venture capitalists in the iGaming space more cautious about investing in start-ups.

While capital is still being deployed, VC firms told iGaming NEXT that the bar is much higher due to a worsening economic outlook and a correction in public company valuations, which is affecting VC investing.

Lloyd Danzig, founder and managing partner of US sports betting VC fund Sharp Alpha Advisors, said: “Early-stage deal velocity has slowed as investors require more conviction to enter new positions and seek to bolster the balance sheets of existing portfolio companies.

“Time spent in diligence has increased, as has overall negotiating leverage on behalf of venture capital investors. Valuations and multiples have receded as well, although many founders are still navigating their way through the price discovery process.

“The lowest quality deals are simply not getting done at all,” he added.

Sharp Alpha Advisors founder Lloyd Danzig: “Rising interest rates and inflation concerns have made the cost of capital in 2022 significantly greater than during 2021.”

Meanwhile, Eilers & Krejcik Gaming, a research firm focused in the gaming industry and merged with Fantini Research, mentioned in their US sports betting market monitor for July 2022 that the “private market for online sports betting start-ups is turning cutthroat”.

“We’ve heard multiple reports of investors pulling out of signed deals or demanding more favourable terms,” said E&KG. “One Vegas land-based operator agreed a strategic investment in a start-up, filling the round and bumping other investors, only to later pull out of the deal entirely.”

Elsewhere, Y Combinator, the start-up incubator that gave rise to the likes of Airbnb, Dropbox and Stripe, and recently welcomed US sports betting exchange start-up Novig, told founders in an email in May to “understand that the poor public market performance of tech companies significantly impacts VC investing”.

On this topic, Danzig added: “The macroeconomic climate and correction in public company valuations has caused private market investors to adjust their expectations regarding potential exit sizes and then make corresponding adjustments to the entry points that satisfy return criteria.

“Rising interest rates and inflation concerns have made the cost of capital in 2022 significantly greater than during 2021.”

Gambling is considered a fairly resilient sector in times of economic crisis. But this begs the question, what sort of start-ups will not only survive, but thrive, in current market conditions?

Eilers & Krejcik Gaming note that venture capitalists “did not point to one type of company but said the more speculative deals were off the table”.

However, there is understandably widespread agreement that investor interest remains high in companies that have already validated their products.

Danzig points out there is still a huge opportunity for iGaming start-ups since the largest operators are keen to acquire innovative technologies by way of M&A, rather than in-house development, which is often costly and takes time.

“Great teams solving big problems with demonstrated traction and attractive growth rates are absolutely getting funded,” reiterated Danzig. “VCs have record levels of dry powder waiting to be deployed and investors are congregating around the most coveted deals.”

Peter Heneghan of Bettor Capital: “We remain bullish on the industry’s prospects, regardless of broader public market conditions.”

This is particularly true in the US online sports betting and iGaming industry, which still presents one of the sector’s greatest opportunities as the market is still maturing.

“In virtually any conceivable macro environment, [US] industry revenues will grow at a 30-50% CAGR for at least five to 10 years,” said Danzig. “There are tens of billions of dollars in annual revenue up for grabs.

“Other geographies, like Latam, are benefiting from similar growth patterns attributable to changing regulation,” he added.

One gambling-focused VC firm, Bettor Capital, which last week led a multi-million funding round for AI specialist Future Anthem, remains equally “bullish on the industry’s prospects, regardless of broader public market conditions”.

Senior associate Peter Heneghan told iGaming NEXT the firm would continue to “actively invest in the sector”.

He said: “Unlike many other sectors, the iGaming industry will continue to benefit from the tailwinds of legalisation in additional jurisdictions, especially in the US and Canada.

“We’ve also seen continued strong growth numbers in more established states, and are excited to continue investing into a high growth market,” he said.

Bettor Capital forecast continued deal activity for the second half of the year and into 2023.

However, Heneghan agrees that quality trumps quantity, and that financing will primarily focus on “best-in-class businesses that are demonstrating continued growth and clear paths to future profitability”.

According to Heneghan, Bettor Capital is adamant there will be “significant opportunities for B2B providers to drive sales momentum in the space as operators look for ways to optimise user acquisition costs and increase focus on customer retention, user experience and product”.

So in conclusion, all hope is not lost for start-ups looking to enter the online gambling space right now – as long as they can prove their product is the real deal.