Trading up: how "hybrid-exchange" BetConnect is disrupting sports betting

Betting exchanges have not always appealed to the recreational punter thanks in part to their own complexity and the relative simplicity sportsbooks offer instead. BetConnect is one company that is looking to change the perception of exchanges within the industry with its “sportsbook feel” and pull in those casual bettors to complement professionals and high-frequency traders.

Co-founder and CEO Dan Schreiber, who boasts a wealth of experience as a trader from his time at Sporting Index and outside the industry with finance firms, is looking to alter the landscape of the industry and has found backing from the likes of ex-Fox Bet CEO Robin Chhabra, Grand Parade founder Andy Clerkson, Tom Waterhouse, CIO of Waterhouse VC, and Yolo Group founder Tim Heath.

Since being set up in 2018, BetConnect has shifted from a hub for professional bettors to get their bets on into an entire ecosystem for all types of customers. With an eye on challenging the more established exchanges in the sector, Schreiber sits down with EGR Intel to tell all about his challenger brand.

EGR Intel: Where did the idea for BetConnect come from and why did you want to launch this product?

Dan Schreiber (DS): The original idea came from the financial trading app eToro which effectively allows retail traders to follow experts. There was clearly a demand from people who wanted to follow successful traders. Going back to my time at Sporting Index, there were a lot of good traders there and there’s probably way more professional gamblers in the market now than there ever have been.

So, we wanted to create something to mimic what eToro had done for financial trading but for sports betting. There was the idea you could follow professional gamblers that couldn’t get their bets placed with bookmakers because they were too good. It was a brand new idea in the betting space.

Through the initial six to 12 months, we were attracting recreational gamblers who wanted to be able to get the best price because BetConnect was amalgamating all the best prices in the industry. That gave us the idea to pivot the platform to target a bigger audience. Now we look to be like oddschecker but with the massive benefit that you can place the bet on our platform. One account, one wallet, but the best price in the UK.

EGR Intel: What did you learn from your previous industry experience when it comes to creating a betting exchange?

DS: I think it is more from being a user. When Betfair launched [in 2000], I thought it was a fantastic idea and at the time I thought the bookies would struggle and they did in the early years. Now I think they live side-by-side with one another. We ran a lot of focus groups when launching BetConnect and users said they’d love to bet at the best price on the market but would never dream of going through an exchange just because they don’t understand it.

We know there’s a big section of the industry who would love to get the best price, but to do that via an exchange can put the fear of God into some, so what we wanted to do was give them exchange pricing within the look and feel of a sportsbook so they’re happy and comfortable.

EGR Intel: How has the progression in usage and popularity grown over time as the product changed?

DS: When we first launched the product, it was very niche and was targeting a pretty knowledgeable audience. But now the platform has had a makeover, we’ve made it encouraging to the recreational user and we are now seeing regular customers opening accounts.

Our typical user has evolved from the province of a sophisticated gambler, although we still attract them because of our model, and it works for them. Our new interface has opened the door for people who want to put £10 or £20 bets on and want the best possible price.

EGR Intel: Moving onto the role of betting exchanges in the industry, with the product gaining traction in the US too, where do you see BetConnect’s and other exchanges’ role in the ecosystem?

DS: When exchanges were first launched, I think everyone went with the attitude that if you build a platform and offer people the best price, everyone will use it. What people didn’t appreciate was that some people would find them confusing and daunting. There is a place for them, definitely in terms of the liquidity they provide, but there are challenges to mass adoption.

In terms of the US, there’s a lot of action over there, albeit behind the scenes as no one has taken a bet on an exchange yet but there’s a couple of firms that are attracting a lot of public interest. You’ve got Sporttrade and Prophet in New Jersey. It will be interesting to see when they take their first bet and which will be the bigger operator out of the two, or if other exchanges will spring up.

I think the exchange knowledge in the US is powerful. The average person on the street is smart on betting, they know the lines, they are used to trading stocks and shares online, so trading on an exchange against other liquidity providers will be a natural thing to them.

EGR Intel: From the tech side of things, is everything run in-house? And how did you go about creating the platform?

DS: The original platform was built by a third party with BetConnect owning the IP, but we outsourced the work. Once we had that built and we were looking to redesign, we made the decision to bring it all in-house.

It has its advantages: it’s our own IP, we don’t have to rely on anyone else, we don’t have to pay a licence fee. The downsides are that it is intensive and pretty heavy work on our tech team, but it does make sense to build in-house, so we’ve got control over it. It was definitely the right decision.

It’s great because we could build it our own way, with our own look and feel and don’t have to rely on third parties to add to it. Any changes we make can be done very quickly as a business.

EGR Intel: Are there further platform and product innovations in the pipeline?

DS: We’re going to be releasing a match betting feature on the platform which will allow match bettors to access the ‘lay’ side more easily and appeal to them. We value them, they provide liquidity on the lay side and the product we are building for them will allow them to go about their business a lot easier.

We are also rolling out our API which is something we’ve never had before, so we can allow automated trading on the platform which will pump a lot of liquidity into the exchange. We believe there’s a lot of automated traders out there and their volumes are appreciating.

A lot of API traders are not interested in sport or which horses run at which races but they are experts in models, data and high-frequency trading. The more users we can attract, the better the liquidity on the lay side. We’ve been lucky enough to have a lot of these traders use us over the last couple of years on a manual basis. Now we’ve got the API, it allows for them to plug into their network and use automated trading.

EGR Intel: As a young company, are there fears over the stability of liquidity given the dramatic collapse of Football Index last year?

DS: I guess it is a fear that every exchange will have. However, we’ve been trading successfully for over three years now and our volumes have increased pretty much monthly since inception. We launched in 2018 from a standing start with no backers and no layers. As long as betting is around, there is always going to be a need for an exchange, as well as a need for backers and layers.

The exchange industry has struggled to attract the recreational user and over the last five years that has become even more apparent. We consider BetConnect to be a hybrid exchange because of its sportsbook feel. I think it’s about how you market the product. If you look at other traditional exchanges, they all pretty much look the same. BetConnect is still in the same ecosystem, but the look and feel should attract a wider range of customers which will help with liquidity.

EGR Intel: There are some huge names backing your company, including Tim Heath, Tom Waterhouse and Tekkorp’s Robin Chhabra. How big of a vote of confidence is this in BetConnect?

DS: It’s fantastic. In the small number of years that we’ve been operating, we know that it has caught the attention of a lot of industry people who are intrigued to see where the product is going because it was niche.

Just look at the investors who came in on the last round and they’re all proven industry experts. They’ve been in the space a long time, seen products come and go and once they invested in BetConnect it was a massive pat on the back to us, but also a chance to kick on to the next level. It’s great that it piqued their interest from a company that has only been in the industry a short time and in a section of the industry that is pretty competitive with the likes of Betfair, Smarkets and Matchbook.

EGR Intel: What is the investment going to be used for?

DS: Obviously, we’ve got our own tech team in-house, so the focus is going to be on product. We’re not looking to move to the US tomorrow; it is an interesting space, but we want to get settled in the UK first and really make a name for ourselves here.

It’s all about getting the BetConnect name out there. It is a very competitive market, and it is dominated by big names, so getting yourself known is actually quite tough. It is a sign of where we’ve come from to get noticed, especially by these big investors, so we are really pleased with it.

EGR Intel: In terms of M&A, if a big hitter came in for BetConnect, would there be a temptation to sell?

DS: As a business, we think that there is a big opportunity here. There’s been quite a lot of M&A in the space, and I believe it’s a case of if someone comes along with the right numbers, it is definitely something we would consider. However, at the moment, that is not our focus. We want to grow the business to a certain level and reward the shareholders we’ve got.

EGR Intel: What are your targets for the coming 12-24 months?

DS: No one would doubt that Betfair is the number one exchange in the pecking order. Would we like to topple them? That would be fantastic, but realistically it’s not going to happen within the next year. What we want is being known as the sportsbook-feel exchange where you can get the best price with a good app and fun platform.

A lot of apps are not that user-friendly; they are complex and a little bit clunky. These days, there are thousands of markets you would probably never even bet on, but you’ve got to get past them to find your bet. There is something to be said about a clean app without excessive markets.

Ultimately, it is about giving the user better value. For example, you could get the best price of 6/1, compared to if you only had a William Hill account with odds of 4/1. Hopefully that gives the user better value, making them more money. As more volume goes through, the better for the layers too.