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Investors are set to deploy more capital into the gambling sector than ever before in 2024, but will do so in an increasingly discerning manner.

That’s according to VC investors and start-up founders featured in Game Changers, a new free report produced by BettingStartups.com in partnership with NEXT.io.

The report features commentary from some of the industry’s most prominent VC firms and start-up founders, and delivers detailed data and insights on capitalisation, fundraising, revenue, profitability, and founder sentiment across various key areas.

Fundraising expectations for 2024

One of the report’s key themes is the economic and fundraising outlook for investors and start-ups in 2024.

After 2023 saw rapid increases in the cost of capital as interest rates soared, frugality became the order of the day for start-ups and investors alike.

One founder said in Game Changers that they expect it to remain “borderline impossible to raise capital unless you have leverage” in 2024. 

“Gone are the days of storytelling and raising. You need data pointing to customer satisfaction, a plan to breakeven, and a growth path beyond these two,” they suggested, pointing out that investors have become increasingly discerning and risk-averse in recent years.

VC investors quoted in the report appeared to back this theory up, as HappyHour.io CEO Robin Reed said founders should expect “a cautious and discerning stance from investors” in 2024.

Bookmaker turned VC investor Tom Waterhouse also gave some additional weight to the argument that founders need to prove themselves more than ever this year. 

He said that “to secure funding at favourable valuations, early-stage companies must demonstrate sustainable positive unit economics and the capability to scale profitably without substantial ongoing capital needs.”

Light at the end of the tunnel

While investors will inevitably be increasingly cautious this year, not all in the report is doom and gloom.

For those start-up companies that did make it through last year without folding, for example, one founder suggested fundraising in 2024 would be easier than in 2023.

“Both improving market conditions for capital and the fact that there are fewer start-ups that have made it through the past year make it much easier to present to VC in a way that suggests we can survive and thrive,” they suggested. 

“If you lived through 2023, you’ll probably be able to live through just about anything.”

That theory lines up well with investor expectations for the year, as VCs suggest that more money will be made available to a smaller number of outperforming companies.

“2024 will be one of the best-performing venture capital vintages,” said Lloyd Danzig of Sharp Alpha Advisors, for example. “Great teams uniquely positioned to solve important problems will continue to get funded.

“We will deploy more capital this year than any year since our firm’s inception, but in fewer and more concentrated bets. We expect other investors to similarly write larger but fewer checks.”

Bettor Capital’s Peter Heneghan backed this viewpoint up, suggesting “there will be a robust funding environment for exceptional start-ups, but that the bar will continue to be high for early-stage businesses to raise capital. 

“Strong founders with a leading or innovative product will always attract the interest of investors, but fundraising is never ‘easy’ and may take early-stage companies longer than anticipated depending on the market conditions,” he added.

Investor priorities for 2024

When it comes to identifying which start-up companies should qualify for their funding, VCs in the sector have a diverse range of views on who deserves access to their cash.

Still, there remain several common themes among investors when it comes to their priorities for 2024 and beyond.

Emerging markets, technological advancements and B2B suppliers that can make the lives of operators easier all feature heavily among the areas VCs are paying most attention to.

“We’re particularly enthusiastic about ongoing market regulation developments, such as in Brazil,” said Waterhouse, for example, while “in a broader context, the current excitement on AI is also applicable to our industry. 

“We anticipate a heightened level of personalisation of the player experience through AI. We also see AI-driven benefits for operators – for example, we foresee the utilisation of AI for risk management and trading functionality,” he suggested.

“We will deploy more capital this year than any year since our firm’s inception, but in fewer and more concentrated bets.”
Sharp Alpha Advisors managing partner Lloyd Danzig

Meanwhile, Danzig of Sharp Alpha Advisors said: “We see significant opportunity in delivering more entertainment, connection, and purpose to end users. Specific verticals of interest include streaming infrastructure, artificial intelligence solutions, fintech capabilities, and new media.”

Elsewhere, Reed gave some further insight into HappyHour’s investment strategy, pointing out: “We don’t necessarily focus on specific verticals, but rather on technology-driven solutions that align with our commitment to excellence and market disruption. 

“We prioritise companies with foresight in identifying and capitalising on emerging trends rather than jumping on established ‘bandwagons’,” he explained.

Bettor Capital’s Heneghan summed up perhaps best of all what makes for a compelling investment opportunity in the online gambling sector this year.

“Suppliers that can help operators add new products, elevate existing product offerings to improve the player experience, or increase operational efficiency will always have a place in the gaming ecosystem and represent compelling investment opportunities,” he said.

To view the whole Game Changers report, click here.

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