Online Sports Betting: To Buy or To Build? with Lloyd Danzig, Managing Partner at Sharp Alpha Advisors

M&A activity has become synonymous with the modern igaming industry, especially in recent years as gaming companies rush to gain a competitive stake in thriving sectors such as sports betting.

Building a brand from scratch takes a lot of resources, especially time, some industry commentators believe that it may be more efficient to acquire smaller brands with an already established brand, which of course comes at a high cost. So is it worth it?

We spoke with Lloyd Danzig, Managing Partner at leading Venture Capital firm, Sharp Alpha Advisors to hear his thoughts on the trend of brand acquisition we’re currently experiencing in the industry and what benefits it can have in comparison to building from scratch.

What are your thoughts on traditional sports? Do you see much innovation and exciting new companies coming from this sector?

“The explosion of online sports betting is occurring amidst a transformational growth period for the broader sports tech and gaming ecosystem. Technological innovation is radically changing the fan experience. Sports merchandise, collectables, ticketing, and gambling are all converging into a mobile-first digital entertainment universe.”

There seems to be an increasing trend of buy rather than build, especially from our market leaders. Why do you think that is and what impact will this have on future market growth?

“The sports betting industry is experiencing exponential growth that will require significant innovation to sustain. However, the pace of market development, customer acquisition cost, and regulatory burden combine to incentivize the largest stakeholders to buy or license technology rather than to build it in house. For this reason, M&A is currently the primary vehicle for achieving vertical integration and differentiation in the online sports betting industry.”

Apart from the obvious financial value gained from Sharp Alphas’ investment, how can the new partners also benefit from the wealth of gaming expertise that the firm possesses?

“To succeed in the highly competitive and regulated business of sports betting, start-ups need to understand how all of the puzzle pieces fit together to paint a macro picture of the industry and where it is headed. It is just as critical to know who to call and to be able to get in touch with that person as it is to build differentiated technology. In addition to providing investment capital, Sharp Alpha’s extensive investor network offers portfolio companies immediate connections to the sources of revenue, talent, brand awareness, and future funding that enables them to thrive.”

According to Goldman Sachs, the sports betting industry will be worth $40Bn by 2033. Do you think this is possible and what will be the biggest drivers of this growth?

“The Goldman Sachs projection of nearly $40 billion in annual gross gaming revenues will be reached if sports betting represents the same percentage of personal consumption expenditures in the US as it does in markets like the UK and Australia. There is currently evidence to suggest that sports betting and iGaming will compose a larger share of wallet in the US market than anywhere else in the world. In addition, sports betting operators are now expanding into adjacent verticals such as digital collectables, sports hospitality, and video gaming. The growth of sports betting’s share of wallet and expansion into new verticals will result in a total revenue opportunity that significantly exceeds current projections.”

Editor’s Note:

It’s always exciting to hear about the transformational growth period sports betting is currently experiencing. The opportunities for expansion are plentiful but, according to Lloyd, this must be supported by tech innovation. Managing these factors whilst also tackling the evolving regulatory landscape is a huge challenge for growing companies. This being the case, it’s easy to understand why we are seeing so much M&A activity. If it helps to sustainably integrate great new products into the market then the customer will benefit, increasing engagement and certifying future industry growth.

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