Sale or bust for Bodugi10th March 2014 9:14 am GMT
People had high hopes for Bodugi but the Gambling Commission’s suspension of its licence highlights the perils of starting up.News of Bodugi's licence suspension in late February generated a surprising amount of interest for what on the surface seemed to be just another case of a social-style start-up going out of business. There are a few reasons for this. Firstly, the withdrawal of a licence suggests some sort of scandal. Secondly, a lot of people had fairly high hopes for Bodugi. People liked it and liked its founders Dave Nevison and Michael Wilson. There might still be a scandal waiting to emerge or a bankruptcy in the offing but the best-informed sources claim it is neither. Unfortunately a definitive answer was not forthcoming from the Gambling Commission or the company. The Commission has stated that the licence was withdrawn due to the concerns of customers, who were not able to withdraw their balances. Bodugi sources suggest this is all part of the normal order of things because the company is closing down its B2C operation to concentrate on an easier life as a supplier. However, this is not the end of the story. Since launch in 2011 the company has not been good at communicating with players, partners or with shareholders. It has continuously been scrambling around for money and not always good at paying its bills. Internal sources suggest the owners are negotiating a sale but they have not communicated this to investors. In fact, there has been zero communication with investors for over a year. It’s a curious state of affairs for a company that clearly needs more funds. Nevison is a former trader and professional gambler, who first worked with Wilson while the pair worked as television presenters on Racing UK. Both have deep knowledge and experience of the horseracing industry. They have worked their socks off to get Bodugi off the ground without ever managing to turn a profit. The problem with the B2C site is liquidity. Bodugi is a social betting game where you play against your friends or other Bodugi users instead of against the bookie. Obviously, like poker (which it modelled itself on), that needs liquidity. Bodugi never quite managed to get enough users. It tried morphing into a bookmaker proper before trying to leverage its technology into a B2B guise. William Hill is always happy to have a punt on a bright new idea and it agreed terms. But with the B2C product flailing, the UK bookmaker seemed to have second thoughts. If it does not work on its own, why would it work better on Hills’ site? Sportech got further down the line but the Bodugi white label for Vernons did not get beyond the test stage by the time Vernons was sold by Sportech. As part of this push, Bodugi cut a deal with Sporting Solutions to use its data for the white labels. It was never used. In 2013, Bodugi turned its attentions to Asia and the US. It managed to cut deals with Dafabet and with Bet16. It even went as far as setting up shop in Manila but these deals also seemed to flounder. Nevison turned his attentions to the US and was well-received but always seemed to be asking for too much money. Nevison has twisted and turned in numerous different directions, trying desperately to get a failing business off the ground. However, there never seems to be enough money or perhaps the operational and management nous to drive these deals through to completion.His story, unfortunately, is a familiar one. It is worth remembering that 75 per cent of startups fail and 90 per cent of tech startups fail. About a year ago, as entrepreneurs watched DoubleDown Casino and Playtika bringing in millions of slots players, there were a string of sports betting social sites. None of them have really gained traction. Buddybet sold its B2C brand and became skill gaming platform provider Cashplay. French social sports startup Sofun Gaming could not deal with the cost of French licensing. Betcafe seems to be struggling along while Paddy Power has gone exceedingly quiet about its BetDash app, which has been incorporated onto the main sports betting site. bwin.party took forever to launch its social sports app with Nordeus but Sportster has finally found its way on to Facebook. The jury’s out on that one although it does not seem to have a killer angle. The general consensus is that the social sports betting buzz has faded. Punters like to boast about winning but don’t really want people to know when they’re losing. And that is the crux of the problem - most punters lose. Otherwise operators would not have a business. David Sargeant of specialist incubator iGaming Ideas has more experience with startups than most. He has 14 companies on his books and is realistic enough to recognise that some will fail. He met 107 new companies last year and took on 12. He continues to see two or three new startups a week. “There are a lot of ideas out there but good ideas don’t necessarily make good businesses,” says Sargeant. CPA is a killer for B2C operators, he says. They have to be extremely well-funded. Suppliers tend to have a more successful hit rate in this industry. iGaming Ideas tries to pick companies with disruptive technologies. These are higher risk with more chance of failure but they are potential game changers. “Gaming operators are very risk averse and nobody wants to be the first to do anything,” he says. “You have to be a game changer. There is no point adding 1 per cent to their revenues because they can do a million things that will add 1 per cent.” If you have a look at the most recent additions to the iGaming Ideas stable, you will not find an operator among them. You will find some pretty innovative technologies though. Fresh8 Gaming makes intelligent adverts - rather than one-size-fits-all banners - to increase deposit rates. SmartPlus has a technology that automatically changes the adverts on a TV screen, thus avoiding the nightmare of Bet365 adverts in Ladbrokes, for example. Btwiice is a cashout provider, which Sargeant sees as sports betting’s next big thing. While GamCrowd is a crowdfunding provider for the iGaming industry. Industry-specific crowdfunding will become the norm, reckons Sargeant. The biggest problem that any of these companies will face is securing their first customer, says Sargeant. The first deal is make or break. It will prove your concept to others. Bodugi made enough deals. But it never quite managed to implement them. Now it is looking for the biggest deal of all - the sale of the company. Perhaps a new owner can make better use of Bodugi’s attractive technology than the current one. Perhaps.