What makes a start-up a great investment option

iGaming Future caught up with Myroslav Sorochenko, Chief Financial Officer at BETBAZAR, to hear his thoughts on what makes a start-up a great investment option, and how the experience of the investor can accelerate growth.

BETBAZAR has been fairly public in announcing its plans to invest in a couple of new start-ups over the coming year. Without necessarily giving anything away, what sort of businesses are you interested in and how do you go about determining whether they’re a sensible investment for you?

“Given BETBAZAR’s strong understanding of the iGaming industry, this is naturally the market we focus on when it comes to identifying new collaborations. Before investing in a potential start-up, however, we consider the legal and regulatory landscape in its target market along with any potential ethical concerns, as well as the start-up’s approach to responsible gaming – so we always ensure that we do our due diligence. In terms of the areas that particularly interest us, I’d say companies that use data analytics and AI to enhance user experiences and those that introduce gamification elements into traditional casino games are currently right at the top of the list. That said, our industry is a dynamic one that changes all the time, so we’re always open to innovative solutions, even in unexpected areas.”

Choosing which start-ups to invest in can undoubtedly be a bit of minefield for a business looking to expand its operations through acquisition. With so many new companies out there vying for attention, how do you go about identifying who’s a flash in the pan and who’s likely the real deal?

“Identifying promising start-ups for investment or acquisition requires a comprehensive strategic approach if you wish to distinguish potentially successful ventures from those that may be short-lived. First you need to consider the start-up’s position within its market and its unique value proposition – does it offer something different from the competition and is there the potential for future growth? Next, a strong leadership team with a track record of success if often indicative of a more reliable venture, as is having technology that offers a sustainable competitive advantage. Of course, things like scalability and long-term financial security are both critical to enduring success, but you must also ensure that the start-up is compliant with all relevant regulations and legal requirements in the industry. Finally, having clarity over the business’s founding vision is also essential for us as investors.”

After investing in a start-up, what are the key business decisions that need to be made? Is there a balance to be struck between steering their operations to align with your objectives but also giving them the creative freedom to carry on doing the things that attracted you to them in the first place?

“When investing in a start-up, a delicate balance needs to be struck between guiding the company towards your shared objectives and preserving its creative autonomy. Strategic decisions must be aimed at fostering growth, financial stability and market success and the investor must collaborate closely with the start-up’s leadership to define a clear and cohesive vision. Initially, financial management may become a focal point, with the investor working hand-in-hand with the start-up to establish sound fiscal practices, but over time market expansion and customer acquisition and retention will soon take centre stage. Throughout this collaborative journey, communication and transparency are paramount; the investor should acknowledge and respect the start-up’s creative freedom and entrepreneurial spirit while simultaneously supporting it with sound strategic guidance.”

Are there any particular technical hurdles that also need to be overcome when choosing to invest in a start-up? Do you generally take a hands-off approach and let them continue working in the way they have previously, or is there a need to align processes so they work across the entire business?

“There can be various hurdles to consider, especially if the start-up’s technology needs to be integrated with existing systems or there’s a plan for technology upgrades in future. Investors may need to assess the feasibility of integration and any potential disruptions that could occur, so collaboration with the start-up’s technical team is vital. If the start-up deals with customer information, protecting sensitive data is critical, so reviewing and enhancing data security measures to ensure you remain compliant is also important. Beyond that, you need to ensure that the start-up’s technology infrastructure is able to scale as it grows and this may mean allocating resources to reduce technical debt and incorporate emerging technologies like AI, blockchain or IoT. In terms of whether to take a hands-on or hands-off approach, this usually depends on the start-up’s needs, but as always, striking the right balance is key.”

From the start-up’s perspective, what do you think the main benefits of receiving investment from a larger business are? Does the additional financing allow them to scale at an accelerated rate and can the industry knowledge and experience of the investor also help to guide them going forward?

“The infusion of additional financing usually provides the start-up with the necessary resources to scale its operations at an accelerated rate by helping it hire intelligently, invest in research and development and implement its strategic growth initiatives. However, beyond the financial aspect, the added industry knowledge and experience brought by the investor is often just as valuable. By taking advantage of the investor’s insights, the start-up can better navigate industry challenges, refine its business strategies and identify future opportunities for expansion – all while benefiting from the extra mentorship and credibility afforded to it by being attached to a larger business. Additionally, the start-up may also be able to take advantage of already-established networks, potentially creating collaborations, partnerships and distribution channels it might not have had access to independently.”

Do you notice any specific trends in the industry in terms of the types of start-up that are currently attracting the most interest? For instance, are those that work in emerging niche sectors like data intelligence, AI and machine learning becoming more attractive to investors without this know-how?

“In terms of investment opportunities, the fate of AI in 2024 will definitely be one of the most intriguing developments to keep an eye on. Although this year witnessed many funding rounds that surpassed $100 billion, discussions among investors suggest a possible market pullback as escalating valuations raise questions about the number of successful ventures that will emerge in the generative AI market. Nevertheless, we predict there will be a greater integration of AI in the entertainment industry over the coming months that will be primarily driven by escalating data volumes, advanced analytics and data-driven decision making. Essentially, as the daily generation of data continues to surge, it will be necessary to adopt more sophisticated approaches to breaking it down, with this in turn paving the way for AI and machine learning to identify the main trends that facilitate informed decision-making.”

What are the main advantages of investing in a start-up compared to developing a particular aspect of your business in-house? Does working alongside another company give you access to fresh perspectives, skills and technologies that would otherwise be difficult for you to build organically?

“Any external partnership can bring innovation and expertise that an internal team might not possess, which in turn fosters a more dynamic and diverse approach to problem-solving and development. On top of this, investing in a start-up often allows for faster and more cost-effective implementation of new technologies or solutions, as start-ups are – by their very nature – agile and quick to adapt to industry change. This can provide a speedier route to incorporating innovative ideas into your business and the collaborative effort made with a start-up also minimises the risks associated with internal development as it allows you to share your responsibilities. All in all, this means you have greater flexibility to find new openings without the full burden of development costs and potential setbacks.”

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