Iden Azzopardi, CFO at VentureMax Group, says the appetite for funding and M&A is high and shares insights into what he looks for when considering an investment opportunity.
Funding and M&A activity has shifted up a gear in the first half of the year with some of the industry’s power players opening their chequebooks as they look to buy their way into new markets, access their own tech or simply snap up sound businesses that align with their wider goals.
According to Earnings Wagers + More, a total of $55.1m was raised across 10 deals in Q2 and while this was a slight slowdown on the Q1 figure of $60.6m across 16 deals, in total, more than $115.6m has been raised across 26 deals in the first half of the year alone.
In terms of M&A activity, on the supplier side, we’ve seen takeovers such as EveryMatrix buying FSB and operator deals such as MGM Resorts’ LeoVegas subsidiary acquiring Tipico US and Boyd Gaming (and now reportedly as a JV with Flutter) bidding for Penn Interactive.
This has always been an industry propelled forward at great speed by funding and M&A activity. Indeed, it’s what has allowed the likes of Flutter, Entain and BetMGM to become the titans they are today and to deploy quickly in new markets to leverage the first mover advantage.
But there are opportunities across the industry, from start-up studios bringing new and exciting mechanics to market to never-seen-before payment solutions and even affiliates deploying product-led tools and experiences that allow them to acquire customers at an unprecedented scale.
It’s these start-ups that we believe are the driving force behind innovation, disruption and growth and where VentureMax focuses most of its efforts and resources. Of course, start-ups can present a high level of risk, and this is why we have a strict investment criterion that a business must meet.
These are some of the key things we consider in order to determine if an opportunity is the right one for us or not.
Is it an early-stage business and how big can it be:
We need to be able to get involved with the business at an early stage for several reasons. The first is that it allows our experts to guide the business and its founders from the beginning, and this in turn helps to maximise the potential return on our investment.
Our role is to empower entrepreneurs and companies with exceptional ideas, products, experiences and solutions and then give them the financial and strategic support they need to deliver as this is ultimately what allows them to achieve transformational growth.
It’s important that we can see this transformational growth potential from the outset – by getting in early, we can do our bit to maximise the potential for all involved.
Is the business disruptive:
This is a very exciting industry with a lot of different businesses looking to make their mark. Most claim to be innovative, but true disruption is rare to come across.
Disruption and innovation can be mutually exclusive, and businesses achieve great things simply by doing what is already being done, just a lot better. But in my experience, the bigger the disruptive force, the bigger the impact it will have and the greater the success the business will achieve.
So, if we are looking to invest in an online casino operator, we’re more interested in one that has developed its own blockchain platform or perhaps has an in-house game studio focused solely on non-traditional content to differentiate its offering to players that a white label brand.
This leads to the next criterion we consider, and probably the one that has the greatest impact on our decision to invest.
Is there proprietary tech in play:
We are super interested in businesses with proprietary and innovative technology as this is what causes disruption and brings the greatest value. This is a technology industry at heart and all of the significant step-changes in recent times have come from tech advancements.
Technology covers a lot of areas, too, from artificial intelligence to marketing solutions and
regulatory tech. With compliance being such a key focus for operators looking to expand internationally, this is an area of particular interest for VentureMax.
Are the opportunities defensible as well as scalable:
We need to see that the company can scale but it’s just as important to see that it can defend its market-leading position. As soon as a business brings something new and smart to the table, others copy it so it’s important to be able to defend its place at the front of the field.
This applies to the products, solutions and experiences the company provides, as well as the markets in which it can find success.
These are our main investment criteria, and of course, we consider other factors, too. As a business looking for investment, you can make yourself attractive by ensuring you tick as many of the above boxes as possible.
It’s also important to ensure the founding team is strong and experienced, and that they understand why the business needs investment. They don’t need to have founded a business before, but they do need a high level of relevant experience and the ability to manage and motivate their teams.
They also need to show us that they are willing to work with our team and that our goals ultimately align – this is the only way we can ensure success for both parties.
There’s a strong appetite for funding and M&A activity, and I expect to see even more deals cross the line as we move into the second part of the year. At VentureMax, we are excited to be including our investments in that total and to begin working with more disruptive founders and their businesses.
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