US sees influx of non-gaming investors
Investors from outside of the igaming space are taking an unprecedented level of interest in the industry post-PASPA, according to Morgan Stanley Equity Research managing director Thomas Allen.
As the US sees the gradual state-by-state roll out of legalised sports betting and gaming, investors from a variety of backgrounds are vying to take advantage of the burgeoning market.
Speaking on the Can The Meteoric Rise In Investment Into iGaming Continue? panel at xxx, Allen said in 15 years of experience across the US gaming industry he has never seen such an influx of different investors.
“I probably spend more time on the phone with internet and media investors today, than I do with gaming investors just given how attractive this opportunity is”, he said.
Despite the high level of interest, Allen also said there were many investors that were passing up opportunities in the states due to a feeling that the market may never become profitable from a B2C perspective.
“We disagree with them,” he added. “We know there are hundreds of companies all over the world that do this business and are highly profitable and we don’t see the unique market characteristics of the US, like market access fees or anything like that is actually that big of a deal.”
He admitted that the state-by-state nature of the US roll out means what profitability is unlikely for most players before 2024, but he added that “one of the things that the US companies have that I think are really attractive for long-term profitability is customer acquisition advantages”.
For example, legacy casino companies in the US have big casino databases and, more importantly according to Allen, daily fantasy sports companies such as DraftKings and FanDual, have large databases, which have really proven to be excellent acquisition grounds for gaming customers.
Looking at the investment market from the European perspective, Symmetry Invest CEO Andreas Aaen said strong “unit economics”, or the lifetime value divided by customer acquisition costs, was the best marker of which gaming companies are prime for investment.
Giving the examples of Kambi and Gaming Innovation Group, both of which are part of Symmetry Invest’s portfolio, Aaen said: “These two companies invested heavily in technology, in new markets and in getting their platform licensed. Everyone was questioning them that this business will never scale and now suddenly they took their margins from 10 or 15 per cent to 40 or 50 per cent”.
Meanwhile, both investors said that companies needed good environmental, social, and governance (ESG) practices to be in with a chance of attracting investment.
“We have to focus on how we should brand ourselves as a fund doing iGaming investments”, said Aaen. “We always look at whether the company is working to make the industry better or worse. We only work with those that are trying to improve the ESG in their business.”
You can watch the session with Andreas Aaen (CEO, Symmetry Invest A/S), Thomas Allen (Managing Director, Equity Research, Morgan Stanley) and Mikael Pawlo (Angel Investor, Co-founder Mr Green) on igamingnext.tv.