Should I invest in friend's online casino start up?
Hi All,
I have a friend who recently started an online cryptocurrency casino (as an example, one of the leaders in the space is Stake). The start up is already funded by millions of dollars and he has offered me a good deal to invest in it much cheaper than prior private investors. The start up doesn't require my funds as it is already sufficiently funded - this is just out of friendship.
What are your thoughts on this space and chances of blowing up? This casino is not operational yet but the website and games have already been developed and they are onto the marketing phase with a huge budget.
How much would you be investing ?
Pretty bad idea considering you’re going against companies like MGM, DraftKings, Fanduel, etc, which are dominant market players that already have regulatory approval. Any edge your platform will have would basically come from illegal gambling since it’s hard to beat the billion dollar operators with huge balance sheets.
Yes an element of the edge will be from the grey area as its focused on the crypto payments niche (doesn't require KYC, appeals to the crypto degen crowd)
You are asking us our thoughts on investing in something that
1) requires none of your own capital
2) you have zero downside to losing money since you aren't investing any (unless this is illegal for whatever reason)
3) and you have unlimited upside
I'd say yes. Do you have to quit your job? If you have to leave your job to join a start up, then my answer might be a bit different.
It is requiring to invest my own capital though?
To your second point though, I was asked if I wanted to come on for equity and decent salary too - I did consider it due to flexibility of schedule and being able to work with friends but im guessing that would be too risky?
There's a lot in here and without knowing your financial situation and how much capital it would require, it's a tough call.
How's your job? Is there room for growth, mentorship, etc at whatever firm you work for or are you looking to make a jump anyways?
Do you have a family; a wife and kids that depend on you for a reliable pay check? I don't. I have a dog. So making the leap to work for myself and my partners was super easy.
Depends on the answers to those questions. If you are young, the time to take risks is now in my opinion. There are a million other analyst jobs to reapply for if things don't progress at this new startup in a year or two. Chances are, when you reapply, you'll be more valuable than you were before.
Lol bro wtf? How tf do you invest in smtg without any capital? What OP meant was that the friend didn't really need OP's money, he was just offering a stake to OP because he believes in the project and wants to extend this equity upside to OP as a homie
Genuinely one of the stupidest things I've read on WSO - someone thinking you can invest in smtg without putting in money.
I know you are also misinterpreting that the friend was inviting OP to join as a partner/ employee, but then people never say it that way (to 'invest'). Even if you thought an invitation to invest = an invitation to join as a partner/ employee, it's not 'zero downside' and 'unlimited upside'
Lmfao
It looks like I misread the question a bit. I probably wrote this on my iphone while listening to an audiobook while sweating it out in the sauna. I thought OP was asking if he should go work for this new startup in exchange for ownership in the company and without investing any of his own money.
Thank you for your feedback, intern!
Does it offer blackjack and high stakes poker and do you have a referral code for a nice sign up bonus?
No poker. Sports bets and thousands of other games
I would think about this question from the standpoint of your risk aversion. How much are you willing to invest and would you be comfortable if the investment went to $0? I think the latter consideration is the most important because there's obviously a chance of a regulatory crackdown on crypto casinos. I am involved in crypto as a retail investor and active enough on Crypto Twitter to know that attention has generally shifted from shitcoins to these crypto casinos exactly for the reason you mentioned: no kyc & crypto is in a bear market. Of course there are other advantages:
- gives crypto users, who are likely to intersect with the gambling demographic, something else to do in a bear market without leaving the ecosystem. There's a lot of "captive" cash & users that would prefer not to off-ramp
-"Withdrawal" process is basically instant
- No geofencing which at least makes TAM thought exercises slightly interesting
Drawbacks & downside considerations:
- The space is already competitive but it is still fairly early. I suggest you take a look at the likes of Rollbit, Sx Network, Thales (Overtime Markets). You mentioned that your friend has funding which is great but how bankrolled is the starup? Is it enough to incent users to choose that platform? He will 100% have to pay influencers to promote the product, dole out juicy rebates and referral bonuses to bettors (As an example, I saw some influencer stating that rollbit was giving a 10% (!) rebate for 6-figure bets).
- The odd offerings are just about the same or worse on what is essentially a vastly inferior platform (in terms of UX & other features). Seriously, most of these crypto casino platforms are just importing odds via API / data feed from odds provider services. Not much of a differentiator here if you ask me
- Regulatory risk - I don't think I can emphasize this enough. I don't know when the crackdowns will happen but you have to believe that it is inevitable. DKNG and the like did not go through the regulatory rigamarole of doing things the "right way" (getting betting licenses in states) to then lose business from shady crypto companies. Trust that when they get wind of this, they will (rightfully) complain and try to get these platforms shut down.
These are just my initial thoughts. I would try to have a conversation with your friend expressing some of these concerns and proceed from there. But if I were in your shoes, I would invest as much as I am willing to lose and with the assumption that the amount goes to $0. Beyond speculation, I would invest as a sign of support for my friend's endeavor. It sounds a bit charitable on the surface but if you actually think about it like this - your friend has demonstrated that he has the resources & network to get something like this reasonably funded. It probably will not work out but that he was able to do this would suggest that there may be other interesting ventures/opportunities down the line. So why not play the long game and show support? I would also try to get a sense of what else his investor base and those in his network are funding.
Thanks, this has been an incredibly insightful. Seem like you know the space well. The platform has a liscence is Curacao, as with most crypto casinos. And yes agreed on the differentiator point, most platforms including my friends one just buys existing games from a provider with little differentiation other than skinning. The platform will heavily rely on providing bonuses and promotions to customers to win competition. As you alluded to, he has millions currently budgeted for marketing including influences, affiliates, marketing strategies and so forth.
Three basic questions:
1. What valuation are you getting
2. What sort of steady state do they expect to achieve (revenue, profit, whatever)
3. Now that gambling can be done legally what's the point of using crypto. I used BTC when online gambling was banned in the US, but doesn't seem useful now. Tax evasion isn't compelling because if my winnings are small it doesn't matter, and if my winnings are big I can't afford the risk of evasion.
Super skeptical at first glance, but curious what the thesis looks like financially.
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