Tim Heath recently stepped down as CEO of the Coingaming Group to focus on its fast-growing venture capital (VC) fund. He explains how Christmas musings brought lift off for the group and how its VC fund opens doors for Bitcasino.io and Sportsbet.io, before discussing his “new baby” and first of its kind for the industry – the Bombay Club.
You can also click here to see Heath’s presentation at the recent SBC Summit Barcelona – Digital, or watch the video embedded above.
SBC: How did it all start for the Coingaming Group?
TH: It was back at Christmas dinner 2013, I said two things. Firstly, we’re an extremely smart bunch of people doing really great stuff. We can do many things we dream of if only we can control the money. And we wouldn’t be reliant on third parties. And then the second thing was, why don’t we use bitcoin?
We can be our own bank. So, we furiously went and investigated, then within a month we had a bitcoin poker network up and running. We put some casino games up on the side of that, and people started playing those games.
Within three months we’d turned the poker off and launched Bitcasino. From there, the rest is history. We’ve pushed forward the whole way through in terms of running the two B2C brands – in 2016 we launched the sportsbook (Sportsbet.io).
In March 2016, I woke up one day and thought ‘we need a sportsbook for the Euros’. So I said ‘guys you’ve got three months’, and they got it done. We took our first bet at 5:30 on 10 June 2016, half an hour before kick off.
I think that really epitomises how we go about things; we work out what we need to do, and take a very agile approach to doing so. We know things might not be launched at 100% perfection, so be it, but if the concept is proved right we can go and further improve it.
SBC: What are your key target markets for Bitcasino and Sportsbet.io?
TH: Look, it’s crypto, it crosses the world. It’s very much gone from a jurisdictional basis to a horizontal basis in terms of what parts of the world enjoy using crypto. Obviously there’s lots of Asian countries who’ve taken a mass adoption approach to it, specifically Japan and South Korea. Not as much China as we initially thought, interestingly enough, although that is changing now with the hardship people have had with moving money out of China.
Japan, South Korea, Vietnam and Indonesia, India is going extremely well ever since the decision to withdraw all those Rupee notes. Then we’ve got African nations too. So you have all these subsets of jurisdictions; we’ve got a lot of action in Paraguay, Brazil and Argentina because their trading cross-border in bitcoin has become their benefacto, go-to currency.
South America is growing rapidly for us, Central America too, Canada is doing very nicely. Then Germany, Finland, Norway. It’s not like you’re going after a single big market – like, for example, Sky Bet goes after England, Parimatch for Russia. We’re not like that at all, we’re sporadically looking for that half percent in many different jurisdictions where people are very crypto-focused with what they’re doing.
SBC: So it’s just about marketing to crypto popular areas?
TH: If you look at the sponsorship deals we’ve done with Flamengo, as well as with Southampton and Watford too, they were done because of the global appeal of football. And it was a way for us to really get our name out.
Interestingly, we had Chinese characters on the Watford one, but as soon as we did that there was a copycat site in China just 30 days after. We’ve actually taken the characters off this year, because we’re not looking for it just to be a vehicle into Asia specifically, but more for that global reputation, trust and understanding from these deals.
SBC: How important was the timing of the Flamengo deal?
TH: Absolutely. We will be getting a licence there (Brazil) as soon as the tender becomes available. From what we’ve heard, it will be Q1 or Q2 next year, and it’s one of the markets we believe very strongly in. We want to be fully licensed and ‘white’ for when it opens up.
SBC: What have you seen in terms of relative growth of Bitcasino and Sportsbet.io?
TH: Exponential. One of the things about Bitcasino is we have a lot of high rollers and we’re not scared to take a bet. With crypto, it is very easy for a player to deposit half a million and play, and his bets might be €20,000 a hand at baccarat. So that’s 25 bets. It’s like putting in €100 at blackjack and playing $5 hands, it doesn’t feel like much but for some of these guys this is normal. You can’t do that in a traditional banking network, it’s just not going to happen.
We have a lot of high rollers and we’re happy to satisfy their action. The money can come in and out 20 times a day, we don’t care. One of my biggest things is that in the seven years we’ve been going our average withdrawal time is 2 minutes 14 seconds. We’re fun, fast and fair.
If I’m in a casino and I win, I’m given the chips. It’s a representation of value, so in the digital world you do exactly the same thing. Now, whether you can buy bread and milk with a bitcoin, that’s a different question, but the bottom line is if you win the first thing you want is your money. And we don’t mind if this goes back and forth. There’s no charge-back, there’s no payment processing, there’s no fraud.
SBC: Is it the same on the sports betting side in terms of high rollers? And for the same reasons?
TH: It’s the same thing. Our average bet size on the sportsbook is €242. These are the sorts of players we’re attracting, and so we’re happy to satisfy that. But again, we’re looking at players across multiple jurisdictions who enjoy betting a bit higher than normal but enjoy the VIP experience, the speed of the site and the ability to get paid straight away. That’s where our marketing goes towards.
SBC: Does the cutting of third party costs enable you to set more attractive prices?
TH: Of course. If we don’t have payment processing, and we don’t have fraud, then all of a sudden we can go a bit sharper on our lines, which is attractive to the punter. Further to that, one of the next steps – through our VC fund – is we’ve just invested in two banks.
We’re building our own crypto layer on top of this sort of framework using the Lightning Network. The bitcoin network did eight transactions per second, while the Lightning Network does 60,000 transactions per second. So this is getting to a Visa Mastercard level of speed around the world.
We’ve got the platform and product which works for these punters – if we can give them the fintech facility or vehicle to use this as well, who knows what’s going to happen. Well, I do!
SBC: You mention this VC fund; can you explain how this all ties together in terms of the Coingaming Group, and some of the doors it opens for your B2C sites?
TH: So we have our strong B2C sites, and we’ve then looked at how to create efficiency and innovation around them. The first was making game studios to provide ourselves with our own slots. Now, whether we own them 100% or have invested in say Kalamba or Green Jade Gaming, we can help grow their business by giving them instant distribution to our network. You’re helping on both sides of the equation.
We then made another one called Hub88 which is an aggregator, but instead of just building for yourself – where you might become lazy – we actually have to build for externals which in turn improves the efficiency of our internal work as well. The only way to get on Coingaming B2C brands is through Hub88, but it’s got 50 B2B partners as well.
Then you look at doing banking, we’ve just invested in an Australian sportsbook with a Northern Territory licence, we’ve gone into insurance companies, we’re in a couple of big blockchain-type businesses, we’ve got a travel agency, we’re building our live chat communications platform, we have accounting software for the gaming industry.
We always treat our start-ups as nurtured businesses who get investment capital from the group, go off and start their business satisfying our internal structure but also can be used on an external basis. Very similar to what Amazon web services did.
Then if there’s markets we’re not touching ourselves, we invest in other B2Cs. There’s a monopoly in Paraguay we’re looking to invest in because we believe if we put our learnings from the casino into another operator’s methodology we can really increase their value, but we can also supply them with new deals through Hub88. Every part adds to the value chain in terms of increasing the valuation for these invested companies.
We’ve invested so far about €70 million in 44 investments and there’s a net asset value of about €175 million already over the last three years.
SBC: Are you looking for particular services, or just where opportunities arise?
TH: We get about 100 pitches a week now from people looking for money. I understand the gaming ecology, and the ecosystem, so that’s obviously where my heart is. So we’re looking at what we can invest in to help our B2C brands. But it’s also the corresponding services and value businesses around that, whether that be innovation in things like live streaming, data, warehousing, business intelligence, accounting, banking or payment processing.
We’re invested into a company in China just listed on the Hong Kong Stock Exchange – the biggest merchant aggregator of point of sale (POS) software in the country, a company called Yeahka. It’s innovating fintech which I get a kick out of, but it’s also expanding our network of relationships in the Asia VC area as well.
SBC: Just taking it back to the sponsorship deals with English football clubs, how successful have these been so far?
TH: It’s an interesting one. People always say what’s your return on investment (ROI), but that’s the wrong way to look at – it’s got to be a return on objective. This might not be bottom line financial, although we are of course in the business to make money. For us, the objective with the Watford one was to announce to the world that we are big enough, secure enough, ready for high roller action, trustworthy and stable.
We also put a bitcoin logo on the sleeve, so taking bitcoin to two million eyeballs every weekend. There was a guy called CZ, CEO of Binance, who tweeted: ‘I wouldn’t normally give a shout out to a gaming company but these guys are so cool that they’re helping in that movement of taking crypto to the world’.
It’s us doing our part for the community, not just an ultra-capitalistic sense of trying to get every dollar out of every single person. We are trying to grow cryptocurrency adoption throughout the world, and if we play our part 5% who have crypto will gamble and hopefully we are a part of the fabric of the conversation that they will come to us. We have confidence in our product as the best in the market so we’re happy to indirectly advertise our services.
SBC: What are your goals or expectations for the year ahead? Are there any other big projects we should be aware of?
TH: We keep understanding where the puck is going, where Gretzky is skating to. For example, we’ve got a huge amount of live dealer action – I think we’re one of Evolution’s biggest partners. So, how do we improve on what they’re doing, or build our own? We’ve built our own live dealer studio in COVID times (in just five weeks) and we’re building a land-based casino in the old town of Tallinn, where we’re going to mix online and offline.
So we will fly our VIPs in to play in the land-based environment using their wallet from Bitcasino (scanning the QR code), then they return to Tokyo, open the site and guess what? They’re playing live dealer but with the same dealers who they’ve just spent a weekend with.
So we really build that personal relationship. In my opinion, why would they go elsewhere? Given this feeling and association they have with the brand. That’s the Bombay Club. We’re taking investment from some of the biggest operators so it will work like a B2B white label land-based casino – any of our partners can use it, so you can run your own VIP event and brand the casino as yours for the weekend.
Everyone would have the Bombay Club as the software on their website, but then you can come to the actual land-based club which can be branded by the operator. They give their VIPs an amazing weekend of action, then they go home, pull up their live dealer again online and keep playing with the same one.
SBC: So it’s about diversification? And building the whole ecosystem around your core businesses?
TH: We started out as a casino and sportsbook, but we’ve always looked at how we make it more efficient, how do we work smarter not harder, what supporting services do we need.
We are basically peeling back the onion – and actually becoming a fintech company so that’s where the VC arm comes into play about providing those services into the cash cow, or the casino sites we’re operating. And we’re transitioning away from just being a casino, or just being a sportsbook, into being a full service Amazon if I can call it that.
If we can do it well for ourselves, others can benefit from what we are doing so we are willing to on-sell the services that we are internally billing ourselves for as well, which grows the value of those supporting services. It’s a massive ecosystem but everything works in sync.