“We believe that in a gold rush, sometimes it’s more lucrative to sell the picks and shovels, rather than dig for the gold yourself,” says Tom Waterhouse of the ethos behind his investment fund Waterhouse VC. The fund aims to identify and support suppliers in the sports-betting industry who provide crucial components to operators. This strategy is influenced by Waterhouse’s experience in the betting industry, where he realized the importance of technology in gaining a competitive edge. He acknowledges that external suppliers play a key role in providing the necessary technology and innovation.
Waterhouse VC’s first investment was BetMakers, an Australian business leading the way in fixed-odds race betting in the US. They recognized the value of fixed-odds data for trading teams and the racing industry, as it enables wider distribution and compliance. The focus of the fund is to find sports-betting products and businesses that offer long-term value to shareholders.
In addition to their investments in smaller suppliers, Waterhouse VC has also invested in major companies like Playtech and Flutter Entertainment. Waterhouse views Flutter as an example of how an incoming operator can effectively operate in a regulated market, especially based on their success with Sportsbet in Australia. However, the fund finds suppliers more interesting than big operators, as they play a crucial role in the industry’s growth.
Waterhouse VC is particularly interested in affiliate marketing, as it presents an opportunity for emerging operators in the US market. The fund recognizes the high cost per acquisition in the US and sees affiliates as a critical component in acquiring customers. Esports and peer-to-peer solutions providers are also areas of interest for the fund, as they have significant growth potential in the coming years.
Differentiating the sports-betting offering is essential for operators to retain customers. Waterhouse suggests that innovative products and features, such as unique bet types, same game multis, or cashout options, can significantly impact customer retention. The fund believes that the value of suppliers dramatically increases when they partner with leading US operators, leading to accelerated growth.
Waterhouse’s experience in the Australian betting market, where there was a rapid influx of international operators, provides valuable insights for the US market. He recognizes the significant changes that have occurred over ten years in Australia and foresees a similar rapid transformation in the US, driven by the digital shift and the impact of COVID-19.
The user experience in the US sports-betting market is still evolving, offering an opportunity for companies to reshape the industry. Waterhouse highlights the entry of major players like Disney, ESPN, and sports leagues, as well as the emerging impact of technologies like voice commands and seamless transactions. The fund is particularly interested in companies that adopt emerging technologies and reshape the legal betting space.
