Insight

Funding the future

As the iGaming industry has matured and consolidated over the last couple of years, some of the veteran operators became venture capitalists, sourcing much needed start-up angel investment for whomever manages to prove traction.

Can you briefly introduce Optimizer Invest and tell us about your experience in funding iGaming start-ups?

Optimizer Invest kicked off in 2012 and was founded by the Swedes Henrik Persson and Mikael Riese Harstad, and Norwegian André Lavold, who previously have managed a number of successful iGaming companies such as Betsafe, NordicGaming Group (NordicBet) and BestGames Holdings. We are a fully founder funded investment firm. I was appointed CEO in April 2016. To date, Optimizer has invested in more than 20 companies. We are involved in some major online gambling-related investments and have stakes in Gaming Innovation Group (GIG), Hero Gaming and gambling-focused affiliate publishing company Catena Media, which grew from just four people to now over 200 people. Catena Media was actually one of our first investments. Betit – which was recently sold to GIG – is another start-up that we incubated from ground up. But it is not all iGaming. We also have companies from other sectors in our portfolio, for instance fintech and eCommerce.

What makes you invest in a company, and how do you see the role of a VC?

We want to be involved in digital companies. In the iGaming industry, a company must be able to grow within the first three years to be of interest to us. When we started out, we were more adventurous and supported people who just had ideas. But right now, we are looking for companies that have established their prototype and already have customers. We want to see a little bit of traction before we invest. However, there are exceptions to this rule. For instance, we currently have a company in our portfolio that developed a mobile phone wearable watch for kids, with calling and smart location features. They approached us when they needed funding for the next development stage. Start-up investing is about more than just funding. This distinguishes us from other venture capital (VC) firms. We do get involved on an operational level and hold executive positions within the firms that we fund. We all come from different backgrounds and share our experience and knowledge but we phase out once the necessary skills have been built up within the start-ups. We even incubate some start-ups to work from our office.

What is your exit strategy?

Exit strategies are part of our business but not our only motivation, it’s important for us to understand where the entrepreneur wants to go with their business and in most cases when we invest we can already sense where something is going to go. We have taken companies all the way to an IPO. Of course, as a VC, we are about entering and exit.

Start-up investing is becoming a global asset class, however for a long time the iGaming sector didn’t receive much attention. How would you describe the current investment climate?

Funding remains an issue for start-ups, despite the recent focus on early-stage investments and excitement around what is being achieved in the world of tech. Raising capital was very difficult and it is still difficult. However, there are a lot more angels and VCs out there today than there used to be 10 years ago. The hardest part is probably not the financing but finding VCs that are ready and available to give entrepreneurs and early-stage companies advice and support during the crucial phases of their start-up.

What advice would you give to an iGaming start-up trying to raise capital?

A lot of start-ups wiggle around: I have an idea but I don’t have enough money to get customers interested. For us, at the stage we are interested in investing in, it is all about traction and returning customers. If people are coming back, then you are onto something. I think there are a lot of things left to tackle in the iGaming sector. Timing is everything in this regard. Start-ups also need to keep in mind that investors are not just about money – you need to see what they can teach you and what they can expose you to. When I had my own business, one of the biggest mistakes I made was not letting a smart investor in.

 

"We do not need more thinkers; we need more doers. That is what it all comes down to."

 

How do you see Malta as a place for start-ups?

Malta has a thriving iGaming community, and it has many other benefits such as its EU membership, the English-language and the great weather. While the Maltese authorities are seeking to attract new companies to the island, I don’t believe they will succeed by just offering them some €10,000 in seed funding. It is not enough to entice incubation in Malta. While for start-ups the money they can get is important, they are looking for other things too, such as the network they can be supplied with and the office space. Unfortunately Malta is not London, but we are seeing new initiatives, including the creation of a lobby group, ‘Silicon Valletta’, and the KPMG eSummit. We do not need more thinkers; we need more doers. That is what it all comes down to.

The iGaming industry is in consolidation mode. What are the prospects of investing in start-ups?

The large conglomerates need to buy start-ups because they do not have the flexibility of grand innovations in-house. They simply do not have the models to nurture innovation. The innovation within these companies is stagnant and they really struggle. They must think about their day-to-day bread and butter. Start-ups are agile enough to work on their own ideas and thoughts and maybe take some advice. In fact, it would be wonderful if C-level staff of the large gaming companies such as Unibet, LeoVegas, Cherry and Betsson could visit start-ups once a month. Just to walk around and ask them what they are working on. This could lead to healthy innovation.

Do you have plans to invest in more iGaming companies?

We have invested a lot in iGaming companies, and we are pretty saturated in this sphere. We must respect the competitive nature of the companies in our portfolio. However, there are three areas that are of interest to us: game content providers, data/AI platforms and eSports. The reason I believe specifically in eSports is because I see volumes and how different iGaming needs to be for upcoming users.  

Carla Maree Vella is the CEO/COO at Optimizer Invest. Her entreprenurial and innovative drive is supported by 10 years' experience in online marketing, and 5 years in iGaming. She specialises in digital marketing, user experience, technology, operational efficiency, data and CRO.

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