Where to start? The challenges facing gambling entrepreneurs

The online gambling industry was founded on innovation. From the decision to launch the first casinos and sportsbooks, right through to some of the diverse offerings we see these days from operators and suppliers alike, it thrives on invention and reinvention.

However, as the big operators get bigger, it is becoming harder and harder to get cut-through when you’re starting from nothing. The challenges faced by newcomers can be significant. But the good news is that the rewards are worth it.

The cost to operators of acquiring customers is often in the hundreds of pounds. This acquisition expense is well below what the average customer is worth to an operator over their lifetime, of course. But the difficulty for start-ups is that this initial spend required to stand out in the market and appeal to customers is significant and can be a major obstacle. Many don’t have the deep pockets needed to take on the big boys.

As a result, they need to be incredibly creative to compete. In particular, communication needs to be concise but colourful to cut through the noise. This can be difficult, as even the slightest miscalculation or lack of relatable narrative can prevent them from grabbing the attention of their intended audiences.

Another significant challenge is regulation. While this is vital to a market functioning safely and responsibly, it takes significant time, understanding and cost to get yourself in a comfortable operating position. While established companies can put significant manpower behind conforming to regulations, start-ups often struggle, particularly in strictly controlled territories such as the UK.

Although there are third parties that can assist with regulatory procedures, it is so important that companies take ownership of their own regulatory requirements, as any discrepancies can have a catastrophic effect. All of this is incredibly time-consuming, needless to say, and can have a substantial impact on a start-up’s launch plans.

Finding funding

It is also costly. Like most avenues in business, creating a company that disrupts the online sports betting sphere requires plenty of money.

We were lucky to achieve investment from several firms, but even this can be challenging. Sports betting is a niche market for venture capital funds, so investors see plenty of similar start-ups. Being able to differentiate yourself from the competition and selling your vision is that much more difficult as a result.

All of these issues tie into what is probably the biggest challenge for every company in the industry, but especially start-ups: creating a well-known brand. Turning an idea into a fully functioning, highly recognisable product is demanding and requires lots of work from lots of people.

This is where the drive and determination of founders come into play, as well as the difference that their products could make. Look at how the exchanges, such as Betfair, have made a considerable change to the way online sports betting works. Now they are a hugely recognisable brand and part of the massively successful Flutter group.

The same rags-to-riches story applies to many of the big players in the industry, which gives hope to us all. At one point, they were start-ups or tiny operators with just a few shops but they have since grown to become household names through a combination of luck and judgement.

Some didn’t make it, of course, and are now just footnotes in the history of the industry – innovation alone is no guarantor of success. The trick is to harness that innovation and to understand the commercial realities required to exploit it.

Jake Benzaquen is co-founder, COO and head of product at Prophet, a technology company whose mission is to provide fair cash-outs and customised liquidity to online sports bettors.