Gaining a bookmaker’s licence at the age of 20 is hardly the easiest of achievements; being Australia’s most profitable on-track bookmaker before 30, with turnover exceeding $200m annually, is even more of a challenge. Yet, for Tom Waterhouse, Chief Investment Officer at Waterhouse VC, the challenge was one he was willing to take on. His family background and those in his life that guided him were a major driving force behind his success, he tells Gambling Insider...
Welcome to the family
“I grew up in a family with a great-grandfather who was a bookie in the 1800s and my grandfather who was a bookie in the sixties, seventies and eighties. My dad was also one and ran (and still runs) professional betting syndicates,” Waterhouse explains. “My grandfather was Australia’s leading group one trainer and my mum is Australia’s leading living group one-winning trainer.”
Despite being part of a family with historical ties to the racing industry, Waterhouse wasn’t particularly interested when he first went to the University of Sydney to study commerce. His eyes were on finance. However, after a conversation with his father, his opinion changed. “My dad said to me, ‘Look, do you want to work one day for me on a Saturday at the races?’ I worked for him and fell in love with it.”
He began by working as a bookie at the greyhound racing two nights a week in the early 2000s, a role taken on a suggestion from his father. After this, Waterhouse became a bookie at provincial races. He also partnered with his grandfather, Bill Waterhouse, who had just come out of retirement. It was “an incredible time” where he learned much about the industry. “I just loved it. I look back so fondly on that time.”
Still, being part of a family so deeply integrated with the world of competitive racing came with metaphorical hurdles. Waterhouse described his mother as “strict.” It was a trait necessary for her position as a horse trainer, but for a young Waterhouse, an understandable deterrent from following in the family’s footsteps. Working early mornings in the stables as a teen with his mother on weekends, when “all my friends are going to the beach and going out at night,” was hard work – though, it seems hard work runs in the Waterhouse family, from his parents to his grandparents and extended family.
“For the last 40 years my mum has woken up at 2:05am every morning and worked nonstop. Same with my dad; he’s up every morning at 3:30am doing the form. They’re hard workers, but they love it. And if you love what you’re doing, it makes it a lot easier.” While horse riding and horse rearing may not have been for him, the world of betting more than made up for it. “It’s funny, I never wanted my parents to talk about horses… Now my mum says to me, when I’m over at their house, ‘Please stop talking to your father about betting!’”
It all starts with a bet
Despite gaining his bookmaking licence in 2003, Waterhouse’s sports betting site, TomWaterhouse.com, was not launched until 2010. The journey to the launch goes back far beyond a decade, though. It goes back 60 years. “My grandfather was the biggest bookie in the world in the sixties. He used to take million-pound bets when you could buy one of the biggest houses in Sydney for £3,000 ($3,800).” Despite his grandfather’s history with big bets, Waterhouse’s initial idea was to stay small, to "be a small bookie and just win all the time," he told his grandfather.
His response? “Look, you’ve got a bet. You’ve got to gamble”
To Waterhouse, his grandfather was “right about nearly everything” and his comments here were no exception. “He transformed me into being a big bookmaker and by 2008, I was the biggest bookie.” At the time, Waterhouse held more money for the Spring Carnival than any other bookie, holding about AU$6m (US$4m) daily. With his dad’s form and access to Betfair (something inaccessible to bookies in New South Wales), Waterhouse could ‘bet big.’ High-value punters, combined with the Waterhouse name, gave him an edge. “I thought, well, I want to be doing this forever. It’s like playing poker every day. But high-stakes poker. It was just so fun.”
Waterhouse had become a figure of note outside of betting at this point, too. In 2006, Waterhouse competed in the fifth season of the Australian version of Dancing with the Stars. Despite being the second contestant to be voted out of the competition, it proved Waterhouse’s notoriety. He also shared the season with a pre-Marvel Chris Hemsworth.
It’s a real skill set. I was on a learning process for four years. I got a lot wrong in being CEO of William Hill Australia and I realised that it’s a big task. The bigger you get, the harder that challenge is... I take my hat off to the people who run these huge organisations successfully
The new frontier
Around 2008, advertising laws in Australia changed and online bookies were able to advertise. “[I] got a AU$500,000 cash out of the favourite on Derby Day 2008 and couldn’t get AU$5,000 out of it in the favourite in 2009 Derby.” This sealed the deal – it was the last time he worked the races, taking on something new to keep and grow his customers. The next year, TomWaterhouse.com launched.
The internet in 2010 was beginning to show its potential for sports betting. FanDuel had only been founded a year prior and DraftKings was still two years away, but operators including bet365, Ladbrokes and Paddy Power had entered the online space. They proved fierce competition, but the Waterhouse name held weight and allowed the site to grow.
Despite the site growing “from 100 customers to a quarter of a million in 18 months,” TomWaterhouse.com remained behind other big operators. “We found out early that live sport and advertising on live sport worked, but we didn’t have the scale to compete.” The solution? Find a partner. Starting the sales process in 2012, Waterhouse turned to William Hill. “William Hill did a $700m acquisition roll-up of Centrebet and Sportingbet and we were a small add-on as part of that transaction in 2013. Then, in 2014, they asked me to be the CEO of that business in Australia, so that was a big transition.”
The William Hill chapter
Becoming the CEO of William Hill Australia was a big leap for Waterhouse, but one he was able to navigate with his years of experience both as a bookie and online start-up manager. Managing operations in Australia, Tel Aviv and Manila, Waterhouse ran “a 500-person multi-brand part of their business,” despite never having had a corporate job before. Waterhouse found the role “an amazing experience. I’m very grateful for having that period working with William Hill for four years.”
The start-up experience Waterhouse gathered in running TomWaterhouse.com was particularly valuable in this new venture. “When you go into one role in a corporate, you can often get stuck in marketing for 10 or 15 years, or in the finance function for that period of time or trading.” Yet, when working in a start-up, Waterhouse tells Gambling Insider one must become a “jack of all trades.” “You see how all the different areas function and you’re going through a fast-track learning experience of understanding: What are you going to do for marketing? How does the trading function operate? How do all of the payments and finances function? It’s a different beast.”
With knowledge of multiple business facets, coming into the role presented a smooth transition. Yet Waterhouse makes the point that, despite the perks, a start-up environment is far from perfect. “Big corporates have some huge advantages with scale and talent that a start-up doesn’t have when it’s just beginning.” Reading that quote, you can perhaps see where this story goes... in 2018, William Hill Australia was acquired by The Stars Group.
I love the industry. I feel so lucky to have grown up in this industry because it’s high growth. It’s interesting
The business of investment
After the acquisition, Waterhouse focused on a new chapter of his career – and one he has fallen in love with, given his visible enthusiasm when discussing it: investing. He made note of a particular interest in brands with a high chance of succeeding that “can navigate their way from start-up to working with large corporates,” using the knowledge he has built up to date to see things from both perspectives.
Large corporate and independent start-up roles require different skills, most notably in staff management. The difference between managing 100 people versus 500 is vast. “I imagine it’s a completely different skill set you’d need to run an organisation with 50,000 to 100,000 people,” he adds. Small businesses have the advantage of familiarity. Aligning objectives “is very easy because you know how to communicate" with everyone; yet in a large business, a lot of time and effort must go into accountability and being “able to cascade those objectives and those priorities down to all the different people in the organisation.”
Being able to manage these large groups was a skill even Waterhouse admitted to being imperfect at. “It’s a real skill set. I was on a learning process for four years. I got a lot wrong in being CEO of William Hill Australia and I realised that it’s a big task. The bigger you get, the harder that challenge is... I take my hat off to the people who run these huge organisations successfully.”
Still, with the acquisition of William Hill, Waterhouse re-aligned his career goals. But, while investing became key, something else presented Waterhouse with questions: his re-acquaintance with TomWaterhouse.com. “I wasn’t quite sure I had TomWaterhouse.com back,” he explained. “I had a two year non-compete. I wasn’t quite sure what to do, because I got used to the corporate lifestyle and being part of a company.”
The re-acquisition of the site gave Waterhouse an interesting realisation. “There was a whole bunch of third party suppliers trying to get into the William Hill or other corporate ecosystems” with cash out, data provision, affiliate marketing tools and others trying to be placed in the product pipeline. “I thought, if you’re an investor in William Hill or Paddy Power or Tabcorp, it was somewhat easy to analyse the value of those co-companies in it. They’re very similar lines of P&L.”
Finding an edge
Here, Waterhouse brought a unique trait to his investments: an understanding of the value of both small-scale and large-scale businesses. The value of a large business, for example, is easily measurable. This goes beyond just turnover, gross win, cost of sales, marketing costs and headcount costs. It is also crucial to understand the team, the management and their tech skills, plus the company’s marketing and properties.
This was Waterhouse’s edge. “Understanding the technology suppliers and whether they could get integrated or whether they were needed by the operators was an area that most analysts and people outside the industry couldn’t understand and it was much narrower.” With this thought in mind, Waterhouse assembled his team: “a handful of the best developers I’ve worked with over the last 20 years,” with a mission to “analyse all of the tech around the world” to find the best suppliers with attractive deals and valuations. The venture began in August 2019 and has continued in the four and a half years since.
Attending conferences both in person and online, Waterhouse and co. met tech businesses supplying to the industry on the hunt for those with significant upside. “We’ve found some really interesting businesses so far thankfully; a lot of success,” he said, though stressed “you need a bit of luck.” “We had that luck to begin with and we’ve carried that on. Once you have a bit of luck it snowballs. My hope is that over the next 10 to 20 years, I can just focus on tech suppliers to the gambling industry and invest in some really great businesses.”
Given their similar career trajectories, Gambling Insider can’t help but compare Waterhouse’s journey to that of Tekkorp Capital Chairman Matt Davey. Davey’s “top-notch” team of people ran parallel to Waterhouse’s time at William Hill, having worked closely with him during that time for four years. The talent Davey was able to amass was “amazing.” “I feel the team I work with, trying to attract the best people you’ve worked with over 20 years in the industry... I feel he’s done the same; he has surrounded himself with talent and they’ve done some great deals.
I thought, well, I want to be doing this forever. It’s like playing poker every day. But high-stakes poker. It was just so fun
Finding the pot of gold
Investing is far from a simple task; the assessment necessary to conclude the value of a business is thorough and even when completed does not guarantee a return. Even having experience on the side of the operator, as Waterhouse does, does not equate to a home run. Being in the industry for 20 years, as Waterhouse has, does improve your odds, though. Waterhouse expressed excitement about several businesses with whom he and his team are working, noting three in particular. One, a listed odds data supplier, was the business that gave him “a blueprint” for structuring deals, setting him up for further investments in his developing career.
The second was a business that builds platforms for crypto betting projects. The third was a tennis syndicate, run by a young exec Waterhouse described as “one of the most talented people that I’ve worked with.” He has designed a tennis model Waterhouse believes will allow him a “huge opportunity to grow his business.” This is not the entirety of Waterhouse’s list. He also spoke of some of his emerging investments, with “a dozen or so really exciting businesses that I think have huge potential to be a success.”
Overall, finding businesses with a unique identity and selling point that can positively benefit operators is the centre of Waterhouse’s investment ventures. In simple terms, if a business has this, it could have the capacity to grow the number of operators it supplies to – and for Waterhouse, that is where things get interesting. He describes the whole process of picking suppliers as “political,” with a lot of “competing priorities” needing to be understood for a correct, collective decision that will boost revenue for both parties.
It’s funny, I never wanted my parents to talk about horses… Now my mum says to me, when I’m over at their house, ‘Please stop talking to your father about betting!’
Being the boss
Having been his own boss, the CEO of William Hill Australia and the current Chief Investment Officer at TomWaterhouse.com, Waterhouse is now well versed in leadership roles. To him, “business is so fun. It’s the best game in the world, isn’t it?” The joy he experiences in seeing businesses grow and working on business strategies makes hobbies like golf or football obsolete – Waterhouse finds his happiness here. As a CEO or business owner, “you don’t get to see lots of different things.” However, with investments, the doors for exploration are flung wide open; “You see so much different talent... You get to speak to amazing talent every day. When I was an operator, especially in start-up mode, I had the blinkers on. I wouldn’t even know what was happening in the news because I was just so focused on operationally getting through day-to-day. Now it’s like [having a] 30,000 ft view, which is a bit different, but it’s enjoyable.”
Even missed deals and missed opportunities have not dampened Waterhouse’s perspective on working in investment – the opportunity to just meet these individuals is enough. Of course, being the boss of an investment firm isn’t a perfect experience – nothing ever will be. When it comes to the businesses his team invests in, Waterhouse VC does not “take any management role, any board positions, any active involvement,” which can lead to confusion and frustrations when certain business decisions are made. Decisions that, as an investor with industry experience, create the feeling of wanting to “take the reins and urge the business to “move quickly. This needs to be done.”
Whether on the supply side or with operators, the need to remain passive can be a challenge. “Not every business is going to be a success, so that’s part of the learning also.” Another frustration experienced by Waterhouse is some executives’ lack of vision. Specialists, especially, are hyper-focused in their role, leaving little room for forward thinking. Conversely, executives with grand ideas for the future require a “a good team around them” to get the business from A to B. But if an executive cannot drive their team, the business will struggle.
Closing words
As our interview approached its conclusion, Gambling Insider asked Waterhouse what the future held for him. His goal, simply, is to spend the next decade or so becoming a specialist in the operating side of the gambling industry. The team already possesses expertise and understanding of the industry; but for Waterhouse, it is his history with the industry that keeps him coming back.
“It’s great to be in an industry that I enjoy, but also one I feel I have an edge in. I love the industry. I feel so lucky to have grown up in this industry because it’s high growth. It’s interesting... It’s been around since the beginning of time and I think people are going to be gambling and betting forever.”
