• Home
  • News
  • Features
  • Why asking for funding too early can hurt your start-up journey
igamingnext photo
Raising funds in the current investment climate poses significant challenges for iGaming start-ups, but it’s far from impossible, industry leaders said at NEXT Summit Valletta.

Former Pinnacle CEO turned angel investor Paris Smith emphasised that timing and preparation are critical for funding success.

Smith highlighted that if start-up founders don’t secure the desired funding initially, they shouldn’t be disheartened.

“A lot of them go back, dig a little bit deeper, and then they get to a point where they’re more enticing to an investor,” she explained.

Smith also noted that many start-ups often seek funding prematurely. “Sometimes I think start-ups ask for the money too early,” she said.

By refining their strategies and timing their funding efforts appropriately, start-ups can significantly enhance their attractiveness to investors.

Smith made those comments during a panel discussion titled “Standing out as a start-up”, moderated by former BetonSports CEO David Carruthers (pictured).

Keep that conversation going

Meanwhile, Betmate founder Ryan Lawrence emphasised the importance of ongoing relationships with potential investors through regular updates.

He advised creating different versions of investor updates, one for stakeholders in the business and one for the general investment community.

“You might have just been too early, or the timing wasn’t quite right,” he agreed with Smith.

“But if you keep them engaged, you can still have a conversation in the future when you’re preparing a new round, want some advice, or are launching a new product that they may be interested in at that point in time,” Lawrence added.

Be specific

All panellists agreed that the fundraising climate has become harsher.

“We’re coming out of a time where there was a shortage of ideas and an oversupply of money. Today, money is not that easy to come by any more, which means the ideas are even more important,” said Ulrik Bengtsson, chairman of Raketech and former CEO of Betsson and William Hill.

“I think in our industry for many, many years, to some extent, everything was growing. You know, the tide lifts all boats. That’s probably changing.

“So I think as a start-up you have to be much clearer on the purpose of this particular business. What are you actually going to solve?” Bengtsson added.

Playstar Casino CEO Peter Ekmark echoed those sentiments, pointing out that start-ups need to specify the value they bring to investors.

He warned against focusing too much on long-term exits and suggested concentrating on immediate needs.

“You have to stand out; you have to be very specific about what you’re offering,” Ekmark said.

Handling valuation questions

Lawrence recommended viewing questions about valuation positively, as they indicate investor interest.

If founders and investors disagree on valuation, he advised justifying the desired valuation by providing a clear rationale.

He shared that his company successfully persuaded an investor to align closer to the founders’ valuation.

“We explained the situation. Since they weren’t heavily invested in gaming, we highlighted various exits and examples within the sector.

“We demonstrated how they could achieve a return on investment and how this aligns with the overall thesis of their fund,” he said.

Learning from failures

Bengtsson also highlighted the inevitability of failure in some projects and the necessity of pivoting. He stressed that start-ups should be ready to redeploy resources as needed.

“In business, you always need to pivot to find a solution or you close down… make sure you deploy your capital where you get most use of it,” he advised.

Ekmark also recommended avoiding high fixed costs and focusing on variable costs to buy more time.

“Time is critical in the early stages. And that’s perhaps the most expensive resource that start-ups need to seek,” he said.

Challenges in scaling

Bengtsson elaborated on the challenges faced by start-ups when scaling operations and planning exit strategies.

He noted that while initial seed funding might be more accessible, securing capital for scaling is significantly more difficult these days.

“The difficulty is really the next level where you have to start scaling things… the requirements are much higher to get any funding in the scaling phase,” he explained.

Bengtsson also highlighted the uncertainties surrounding exit strategies, such as IPOs and acquisitions, which are now less predictable than in previous years.

Active versus passive investors

Finally, Lawrence stressed the importance of understanding the involvement level of investors.

He recommended having open conversations to determine whether investors will be active or passive and ensuring their involvement aligns with the start-up’s needs.

“You can’t have 100% active investors because you’ll have no time in the day, but also you don’t want 100% passive investors because you want support and guidance,” Lawrence said.

“Don’t be scared to have those open and honest conversations,” he concluded.

Similar posts