There are more Betfairs in the pipeline, according to Neil Rimer, a partner at Index Ventures.
There are more Betfairs in the pipeline, according to Neil Rimer, a partner at investment firm Index Ventures which has backed the company from its early days. M&A gets the low-down on the deal.
How long have you been involved with the company?
We invested in Betfair around ten years ago when it was still an early stage start-up. We actually invested in a business called Flutter, which had the idea of not offering lots of different bets, but giving customers the opportunity to either back a bet or lay a bet.
Betfair is just scratching the surface in terms of popularising what it offers to customers. It’s a great example of what European entrepreneurs are capable of, and there are more coming, even in our portfolio.
What has driven Betfair’s rapid growth?
From the beginning the management thought about this business in the largest possible context and architected the systems behind it and the business model to make it scaleable. They also made some smart decisions in terms of what they would and wouldn’t do.
Early on Betfair decided that they didn’t want to participate in markets in which they weren’t properly licensed to accept bets, even if it meant giving up a huge portion of the market. Lots of vendors decided they would take bets from all punters regardless of where they were based, and if they got into trouble with a particular jurisdiction they would just move the business elsewhere. This means that the company directors can’t travel to those countries, and investors are in a difficult position when they come to exit.
What was the reason for coming to market?
The company can now use its own stock as currency in transactions. It’s really just taking the business to a new level of stature as a public company.
It was a 100 per cent secondary deal, as Betfair didn’t raise any cash in the transaction. Some shareholders sold a portion of their holdings to create a liquid market for Betfair stock.
What affected the timing of the IPO?
Betfair could have gone public five years ago, it had the scale and recognition, but it didn’t have to so it continued to build and consolidate the business until it had the scale and predictability that you really want in this market.
Do you think the Betfair management considered the £1.4 billion valuation fair?
They must have because they decided to do the deal. I think it’s a transaction they were willing to do because it offered a reasonable benchmark valuation for the company. The fact that the company didn’t sell any stock either means that they don’t need the cash or don’t feel like they should be raising cash right now.