CoinScan, a new cryptocurrency analytics platform, has emerged from stealth mode with $6.3m in funding to fuel its product development and expansion.
CoinScan background
CoinScan, the first product to be released by web3 company CryptoHub, aims “to give traders an edge in the market with free in-depth charting and safety features.”
The platform offers several key features including safety checks, holder and airdrop analysis, social sentiment, pending transactions and market navigation.
Its fundamental objective is “to elevate the experience for crypto and DeFi users of all experience levels,” the company said in a statement.
CoinScan further suggested that better access to data in the cryptocurrency sector could have helped avoid the almost $1bn lost to crypto exploits, hacks and scams this year alone.
The platform prides itself on its range of safety features, as well as using transparent data pulled from multiple sources “to provide the deepest charting insights available on the market.”
It is also the first to bring a pending transactions feature to the market in a user-friendly format, it said, giving traders insights into the price action of a token before transactions fully complete.
“This gives users an unprecedented advantage, as they can essentially see into the future,” the firm said.
“No one wants to spend all of their time researching and analysing blockchain transactions and social media just to avoid getting scammed. The bar for crypto data was very low, so we built the platform that we wished we had,” said CoinScan CEO Eliran Ouzan.
“We’re not just giving traders an edge, we’re introducing tools that allow new investors to enter the market with free, accessible, unbiased information that will allow them to succeed.”
New funding
The $6.3m in new funding has been raised from a variety of high-profile investors including DraftKings’ largest individual shareholder and founder of SBTech, Shalom MecKenzie.
Since SBTech merged with DraftKings in 2020, MecKenzie has turned his focus towards the cryptocurrency and web3 industries.
Other CoinScan investors include Playtech CEO Mor Weizer, alongside the supplier’s head of business development and M&A, Roy Samuelov.
Other investors include Shy Datika, founder and CEO of cryptocurrency-focused company INX Limited.
Also taking part in the funding round were Tel Aviv-based VC firm iAngels, and publicly listed web3 firm Tectona.
Investor commentary
SBTech founder MecKenzie said: “Crypto, much like sports betting, should give people the tools and data to make their own assessments about risk and reward.
“CoinScan is introducing a hub of crypto information that users can finally trust for accurate, real-time insights. I see CoinScan as becoming the home page for anyone involved in the crypto industry.”
Tectona chairman Yariv Gilat added: “CoinScan is leading the charge in bucking crypto’s negative reputation by providing better access to data directly from multiple sources.
“The platform provides unmatched safety features that make me optimistic for the industry’s future growth, and we’re thrilled to support CoinScan on their mission.”
As the first episode of Investor Vibe Check by BettingStartups.com is released, iGaming NEXT gives a rundown of five hot takes offered up by the podcast’s guests.
Starring in this episode were Acies Investments co-founding partner Chris Grove, Discerning Capital managing partner Davis Catlin, and SeventySix Capital managing partner Wayne Kimmel.
Below are the five key takeaways from this debut episode.
1. Reg tech in pole position for investment
One area of particular interest for all of the podcast’s guests is reg tech, as companies in this space help operators to manage regulatory compliance and responsible gambling.
“I think that reg tech is an area that continues to grow month-by-month to grow in importance, and I think that’s to do with the sustainability of the industry, and it’s also an attractive model,” explained Catlin, suggesting the growing importance of such solutions in an increasingly strict regulatory environment.
In addition to the fundamental importance of regulatory compliance in the gambling sector, reg tech has further advantages when it comes to securing capital, according to Grove.
“I think one of the reasons why there’s so much interest in reg tech and payments (and some people will bundle those together) is that there are big pockets of external capital that can get behind reg tech,” he suggested.
“It has enough similarities to the financial services sector, that there’s a shared language that allows your larger capital allocators to look at that part of the industry and say ‘that’s where I want to be’.
“Reg tech and payments are very attractive to a very powerful slice of non-endemic capital,” he concluded.
2. Rising interest rates hinder capital deployment
Interest rates have been headline news for several quarters now, with the impact of global rises hitting businesses where it hurts in their search for capital.
That reality brings with it significant challenges to start-ups seeking funding, as the increased cost of capital makes parting with cash more difficult for investors.
“There’s a couple of things that have changed as relates to private funding,” said Catlin on the matter. “And I’d say specifically, one is that interest rates are no longer zero.
“It’s easy to underwrite deals to a 10% return conceptually, when rates are zero. But now that interest rates are somewhere around 5-6%, that 10% deal looks a lot less attractive. So I think that does naturally kind of take people’s willingness to take risks down.”
3. US sports betting no longer the new kid on the block
Hot on the heels of the fifth anniversary of the repeal of PASPA, guests on the podcast were quick to remind listeners that US sports betting is no longer the exciting emerging market it once was.
It is also far more competitive, with multiple companies offering the same solutions.
“Anyone who is investing in this space is now seeing a lot more [businesses] than they would have seen if you were pitching the same thing in 2020, or 2021,” said Grove.
“Something that might have felt fresh or novel or unique or inspiring at that time, they’ve probably now seen that deck five, 10, if not 30 or 40 times.
“So realising that the foundational view of what’s new, what’s fresh, and what’s been heard before, and how founders present things as a result, is another layer of the ‘realism pass’ businesses should go through when seeking investment.”
Gone are the days of getting mega valuations simply by using industry buzzwords in a pitch deck, Grove’s fellow guests agreed.
“Leading the deck with ‘sports betting is broken, and we’re going to fix the whole thing with this start-up’ is probably no longer going to get you there,” he concluded.
4. US wagering market still has plenty of runway left
While the industry is no longer brand-new, it’s important to remember that it is far from being fully mature.
Podcast guests put that into context by discussing just how much growth the market has left, and the impact that will have on businesses within the sector.
“In the formation stage of an industry, everyone’s rushing. But now, I think we’re moving towards a world where things like efficiency, product, user experience, all of that matters a lot more,” commented Catlin.
“I think everyone on this call believes that sports betting and gambling generally will get much much bigger. And with that context, I think we need to get to a stage where the operators are thinking about returns on their investments.”
Indeed, operators across the US have shifted their focus to profitability after a hard-fought opening period saw them spend big in a bid to carve out market share.
To make that pivot successful, Catlin suggested: “I think you’ve either got to lower the customer acquisition costs, or deliver incremental value on the player lifetime value.
“I think that is the new phase that the industry is entering into. And I think if I was an entrepreneur, that’s the kind of macro view I would have of where there’s a lot of opportunity,” he concluded.
5. Pivot to retention is well underway
In order to turn a profit as outlined above, operators have shifted their focus away from costly customer acquisition and towards retention.
“A fundamental change has been a shift from customer acquisition as the primary focus to customer retention and reactivation, which is a fundamental paradigm shift in terms of who your important partners are, where dollars are going, where bandwidth is going,” said Grove.
“What results from that is more of a focus on product, because if I’m no longer looking to just acquire, but to inspire and develop some kind of loyalty, I do need to bring a better product to the table.”
Those developments in product may well lead to increasingly blurred lines between sports betting and iGaming, Grove added, as he expects “to see more and more sports betting games that look less like a traditional sportsbook rows and columns, and look more like casual games, mobile games and casino games.”
Such product differentiation is likely to be key in the retention of existing customers, and therefore the turn to profit for many US operators.
One recent example is Entain’s acquisition of Angstrom Sports, a sports pricing and analytics company expected to help the operator improve the sportsbook margin of its US-facing joint venture, BetMGM.
To do that Angstrom will, among other things, bolster BetMGM’s same-game parlay capabilities, allowing it to offer a broader range of high-margin betting markets to customers.
Other operators are likely on the lookout for similar acquisitions that could help them strengthen their own product offerings.
Hosted by industry veteran Jesse Learmonth, The Betting Startups Podcast is one of the most popular industry business podcasts, and the only one dedicated to its vibrant early-stage ecosystem. iGaming NEXT MD Pierre Lindh appeared on episode 60, which was first broadcast on 15 February 2023.
The importance of venture capital in iGaming cannot be denied. With countless funds either involved in the sector or focused on it exclusively, VC funding can be seen as a lifeline for start-ups and emerging businesses looking to shake things up.
But as with all things, accepting VC funding has drawbacks as well as its benefits, and founders must carefully consider whether it represents the right path for them.
This begs the question, when is VC funding the right option, and when should founders focus instead on bootstrapping their businesses and building up independently?
A numbers game
Of course, VC firms spread their capital across a variety of businesses and sectors with a view to hedging their bets and making major returns from a few breakout winners.
While the goal of a fund should be to turn a profit on all of its investments, in the choppy waters of iGaming, the reality is that many start-ups, whether VC funded or not, are destined to fail.
Indeed, while statistics on the matter vary, plenty of sources – including Harvard Business School senior lecturer Shikhar Ghosh – suggest that as many as 75% of VC-backed start-ups fail to return any cash to their investors.
Jon Nordmark is a serial entrepreneur, who co-founded online retail business eBags in 1998 before it was acquired by luggage giant Samsonite for a cool $105m in 2017.
Today, he is co-founder and CEO of technology company Iterate.ai, and something of an evangelist when it comes to bootstrapping businesses.
For him, VC funds and their successes are comparable with the batting averages of professional baseball players.
“Usually, a batter will hit the ball three times out of 10, and get put out on the other seven,” he told iGaming NEXT.
“And even out of the three times they hit it, less than one of those becomes a home run – the others barely get to first or second base. The start-up funding game is very much like that.”
That reality creates huge risks for founders, he explains, as contracts are set out so that when companies don’t make the grade, any money which is returned (often via a “fire sale” of any remaining assets) will go back to the VC investors as a priority.
“So in seven out of 10 cases, the entrepreneur loses everything,” Nordmark explains. “The VC may get some of their money back on a few of those, and only in the other three out of 10 cases does anybody make any real money.
“But the ones making a lot are usually only those outliers on the very end of the spectrum.”
That spells trouble for the companies that fail to rank among the very top performers.
Go hard or go home
Not only do VCs want to find high-growth, breakout businesses, but they also want that growth to come quickly.
In light of that, Nordmark suggests: “When you take on venture funding from a traditional fund, you’d better be going for a billion dollar company fast, because that’s the only way to return their money.
“And if you’re not on that path, they’d just as soon get rid of you. I’ve seen it so many times – it’s all friendly until you’re not that breakout company.”
Lloyd Danzig, managing partner of online gambling-focused VC investment fund Sharp Alpha Advisors, agrees that for most companies, going down the VC route is the wrong choice.
He told iGaming NEXT: “We pass on 99% of the deals that come across our desk, and my colleagues at other firms do the same. This suggests that even venture investors agree: most companies are not well-suited for venture capital.”
However, Peter Heneghan, senior associate of gambling-focused VC fund Bettor Capital, suggests that VC capital should be used to help founders push the accelerator pedal on rapid growth, especially in tech-driven industries such as iGaming.
“Many technology businesses have a significant gap from initial ideation to product launch and revenue, so raising outside capital will likely help accelerate this process and capitalise on the market opportunity,” he says.
Those cash injections, which are often used to pour fuel on the fire of an emerging business, can make all the difference between a start-up becoming a hit or a total flop.
“We pass on 99% of the deals that come across our desk, and my colleagues at other firms do the same.”
– Lloyd Danzig
“Early-stage businesses often don’t have the benefit of time to slowly grow – another start-up or an established business with greater resources may launch a similar product that makes the market more competitive,” Heneghan suggests, acknowledging that in many cases, speed to market can make or break new companies on the scene.
Think VC (Very Carefully)
Because of the inherent risks of accepting VC capital, Nordmark believes start-ups should – wherever possible – aim to bootstrap their businesses and “work really hard to get product/market fit with the lowest amount of money possible.”
For him, the product/market fit is the key to success.
Without it, companies should not be seeking VC funding, he argues. Nordmark also describes VC funding as a “start-over” event, with a whole new set of goals.
“Those goals become mandatory, because they’re no longer your goals – they’re the goals of whoever invested in you,” he adds.
If investors sink cash into a business and leave it there for 10 years, they expect returns of at least 2.5x-3x over that period.
“The problem is that a lot of times, funds are investing more in the people or in ideas that aren’t fully baked.”
– Jon Nordmark
That pressure means VC-backed companies have to act fast, in an all-or-nothing attempt to turn their dreams into reality.
“When you raise money, they’re usually paying for you to hire a bunch of people who can then turn on the growth engine,” says Nordmark. “You go get marketing people, sales people, smart developers, and you’re betting that those people can pull it off.
“But the problem is that a lot of times, funds are investing more in the people or in ideas that aren’t fully baked. And because the product/market fit isn’t there yet, founders try to use the money to find it. And in about 75% of those cases, that doesn’t work.”
The clock ticks louder during this period, because VC contracts are often set out over maximum 10-year time periods.
“That time horizon creates tremendous pressure for founders,” Nordmark suggests, “and that pressure flows into the start-up.”
What do VCs offer besides cash?
While accepting funding undoubtedly puts additional pressure on founders’ shoulders, Danzig believes there are a slew of advantages VCs can offer beyond the simple injection of capital.
“VC firms can be valuable partners that provide significant capital and are incentivised to leverage their networks and capabilities to help portfolio companies succeed,” he says.
“Good venture funds help companies with recruiting, corporate finance, public relations, negotiating commercial agreements, go-to-market strategies, and regulatory needs.”
However, he also recognises that venture firms have their own return thresholds, exit ambitions, and governance requirements, as well as dilution to founders over financing rounds.
While many founders will rightly be reluctant to dilute ownership in exchange for cash, Bettor Capital’s Heneghan suggests that additional benefits can more than make up for the cost.
“A primary focus area of Bettor Capital’s investment strategy is not just being a ‘source of capital,’ but also a strategic partner for the companies that we invest in,” he explains.
“We believe an investor partner should offer portfolio companies something other than money – whether this is support in business development, strategy, operations or financial planning.
“A founder is trading some near-term dilution for capital and greater long-term upside, and a VC investor should be bringing something to the table that helps achieve this outcome.”
In that way, when done right, VCs and their investments can aim to build a symbiotic relationship where everybody wins.
Does slow and steady win the race?
Nordmark suggests that instead of shooting for the moon as quickly as possible (and using other people’s money to try and get there) that most founders should focus on opportunities to create an attractive business with relatively low costs.
“Capital is no longer the barrier to starting a business,” he says. “It’s brains.
“The first business I started in 1998 [eBags] required millions of dollars – all the code had to be written from scratch, and you had to buy servers at $50,000 apiece.
“Whereas now, you’ve got Google Cloud and Amazon Cloud, services that don’t require you to buy hardware, plus code libraries that you can implement – none of that existed back in the old days.”
“Capital is no longer the barrier to starting a business. It’s brains.“
– Jon Nordmark
Those technologies have helped make the world of business “more democratic,” he argues, because online service providers don’t require you to be technical and you no longer need to buy servers.
“People all over the world can start companies,” he adds.
Danzig agrees, insisting that a bootstrapped beginning can put founders in a position of strength before stepping up to the negotiating table should they need additional capital.
If a company can prove its strength independently, it becomes a much more compelling investment case.
“The most attractive investments are often the companies that don’t need investment to sustain operations,” Danzig concludes.
Don’t forget to enjoy the ride
According to Nordmark, the process of slowly building something from the ground up also allows entrepreneurs to enjoy the process.
“A lot of the best entrepreneurs don’t really get in it for the money. It’s all about the build, the creation, and the money is just a side product.
“Because it’s so risky along the way, and so many businesses fail, you’ve really got to enjoy the journey.”
For many founders, that journey will include external investment, and there could be great successes at the end of that particular path.
For others – Nordmark included – going slow and steady almost certainly wins the race.
And even if it doesn’t, it at least makes for a more enjoyable ride.
Industry investor HappyHour.io has taken the lead on a seed extension investment round in Ontario-licensed iGaming operator Betty.
HappyHour said it had chosen to invest in Betty due to its “unique positioning, proprietary platform and experienced management team.”
According to HappyHour, the brand is well positioned to challenge the existing landscape of online casinos made for players in the online sports betting market, “by creating a ‘safe, social and inclusive’ experience for slot players.”
The brand is focused on casual online casino gamers, with a particular focus on female players as its core target market.
Two in a row
Betty is currently live in Ontario, having previously raised a $5m seed round led by tech-focused operating fund Karlani Capital ahead of its soft launch in the market in February.
HappyHour said the business is well-positioned to expand into new markets, with a focus on “lucrative” North American iGaming jurisdictions.
The investment from HappyHour is intended to help Betty achieve its expansion goals.
Betty has also secured investment from industry veteran Seth Young, angel investor Mark Mariani, sports betting investment and media consultancy Endzone Media, and investor network Milwaukee Venture Partners.
Investment rationale
Commenting on the investment, HappyHour managing partner Robin Reed said: “We are excited to be leading Betty’s seed extension in order to support the company’s growth plans.
“The management team at Betty.ca is strong, and we believe that they are well positioned to succeed in the North American market.
“Combining their operational knowhow and proprietary technology with our product expertise, we hope to help Betty.ca expand its reach and bring its unique gaming experience to a wider audience.”
Betty is led by co-founder and CEO Justin Park.
Park was previously the co-founder and CEO of QL Gaming Group, a sports betting media and data platform which was acquired by New York-listed broadcasting company Entercom for $32m in 2020.
Park added: “Robin Reed and the HappyHour team are arguably some of the best iGaming VCs in the world right now.
“With their expertise, Betty will be propelled towards our mission of becoming a top offering in North America, with entertainment and inclusivity as cornerstones.”
Post-hype profits
The Financial Times has this week weighed in on the topic of dried-up funding for start-ups that are not able to prove their path to profitability.
This has been recurring theme throughout 2023, particularly in the iGaming space, as investors and VC firms take a more cautious approach to investing in growth companies.
The FT points out that once upon a time, start-ups were encouraged to remain lossmaking in order to grow revenues and gain market share.
The wider economic environment had turned that situation on its head, and now investors are demanding to see evidence of sustainable profits.
FT journalist Daniel Thomas wrote: “The new mantra is two years runway, according to one leading tech executive: in other words, enough money to see a business through to 2025, when capital markets and global economies are expected to have stabilised.”
Firms that are unlikely to turn a profit by 2025 will have difficult decisions to make between now and then, including cost cutting and switching strategies.
One VC CEO was quoted in the broadsheet as saying we are now in a “post-hype” landscape, which has brought about the “end of easy money”.
The FT backed this up with data from CB Insights. Total venture funding for 2022 dropped by more than a third, to $415.1bn, although deal volume fell by only 4%.
Europe suffered a 17% drop in funding to $81bn, comparatively better than the US. Between 2021 and 2022, the count of new “unicorn” companies more than halved to 258.
AI has left the starting Gates
Bill Gates is excited, and he’s not the only one as we have all witnessed the rapid advances in AI since the release of OpenAI’s ChatGPT at the end of last year.
When the Microsoft co-founder speaks, the business world listens. This week, Gates shared some thoughts on his personal blog GatesNotes.
Declaring that the “age of AI has begun”, Gates described AI as the most revolutionary technology he has seen in decades.
“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone,” he wrote.
“It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it,” he added.
Gates described meeting with OpenAI since 2016 and being impressed by their steady progress.
In September, he witnessed the company’s AI model answer 59 out of 60 questions correctly on an AP Biology exam correctly, which left him in awe.
“The rise of AI will free people up to do things that software never will – teaching, caring for patients, and supporting the elderly, for example,” he wrote.
He said he believed AI could also help scientists to develop vaccines, teach students math and replace jobs in task-oriented fields like sales and accounting.
He suggested that one day, AI could go through a person’s email inbox and schedule their meetings, and we will all have “personal agents”.
Gates briefly acknowledged AI’s shortcomings, but said that it’s important to keep in mind that we’re only at the beginning of what the software can accomplish.
“Whatever limitations it has today will be gone before we know it,” he concluded.
Gates is no stranger to the transformative power of technology.
Celebs cough up cash for crypto charges
The New York Times was one of several outlets to report on charges filed against crypto entrepreneur Justin Sun and his celebrity marketing entourage this week.
The SEC charged Sun – who apparently refers to himself as His Excellency on social media – with securities law violations linked to his management of three crypto companies.
The SEC also charged eight celebrities who agreed to pay a combined total of $400,000, including Lindsay Lohan and social media influencer/boxer/Betr co-founder Jake Paul.
The enforcement is the latest in a series of federal charges targeting the crypto industry following the meltdown of the FTX exchange founded by Sam Bankman-Fried.
In 2023 to date, the SEC has levied fines and penalties against crypto lending firms and settled a case with Kraken, one of the largest US crypto exchanges.
Coinbase could be next, after the company warned the SEC was planning on bringing an enforcement action against the company.
“We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for,” said Coinbase.
Crypto is proving to be as expensive as it was once lucrative.