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NEWS 14 August 2019

Exclusive: Growing international focus main reason behind Nektan CEO departure

By Tim Poole

Nektan Founder and Executive Director Gary Shaw says the supplier may split its CEO role to cover Europe and Asia separately.

Lucy Buckley has resigned as Nektan CEO 10 months after her appointment was announced, with the company currently reviewing its leadership structure.

Shaw, who once again takes over as Interim CEO, has told Gambling Insider the company’s growing international focus was the main reason behind Buckley’s departure. Read our Q & A below:

Is there anything you can tell us outside what was discussed in your initial press release about Lucy’s departure?

Lucy’s been very good at helping with a very challenging UK market. Who knows what kind of events will occur in the UK market, with the potential ban on credit card gambling and also restrictions on stake levels? Lucy has been very helpful in the UK but, I’ll be frank with you, one of the things happening to our business is it is growing quite rapidly internationally. That’s something I’ve been involved in for quite a while, spending time in Taiwan, Africa and Latin America. The returns there are way higher as a technology supplier than a B2C white label in the UK.

We won’t abandon the UK as we have a very good business there. But the truth is we see returns in terms of partners moving quickly into markets where you have hundreds of millions of people as opposed to 11 million, like in Sweden. We’ve got a partner in India with a database approaching 26 million people. So I think what’s happened is Lucy has done a good job in terms of looking at what we can do in the UK market. The reality is our international expansion plan is where we’ll be spending most of our time. That isn’t really UK-centric, where Lucy is based.

It was one of those interesting conversations where we’re going to be spending 80-90% of our technology elsewhere in the next six to nine months. The big markets for us are going to be India, Taiwan and Africa. Our Africa business is our fastest-growing business. The Playtechs are much more accustomed to a GVC account than an operator in Kenya, for example. We are much more suited to newer operators who need to get to market quickly. So I think Lucy felt she probably had a little less to offer in that area, as our company moves to markets like India and Africa, where we’ve seen our growth.

Bearing this international development in mind, what qualities are you looking for in Nektan's next CEO?

What we’re going to do is look at what we might do to split the role between Asia and Europe. We may have somebody that focuses very much on Europe and we may have someone who focuses on Asia; we’ve got a very strong leader in Jaydeep Chakravartty. He’s a very, very solid operator. I think what we probably need is someone in Europe to play a similar role, knowing in the medium to long term, it probably won’t be as big a business. Playtech is so ingrained across Europe so it’s hard to compete with them. But in some of these emerging markets, it’s all mobile, it’s all speed and we have a lot more content to offer.

What kind of partners are you looking for in these international markets?

We’re looking at people we think in the medium term will become license holders. We’re really looking at where there’s a large populous and where we can apply our technology quite quickly. We don’t want to get stuck into too big a cycle in terms of time of contract and things like that. We’ve got one partner launching in India in September and we’ve only known them a few weeks.

Our focus is going to stay on casino; we have partners who want us to supply sports but we would do that in conjunction with someone we already work with – we’re integrating into BetVictor and other people. We’re seeing the globalisation of our business going far quicker than we saw even four months ago.

To be honest with you, it’s a hard fight in the regulated market. I’m not sure anyone’s even making money anymore in Sweden, based on the cost per acquisition (CPA). The CPA in India is currently very low compared to a much higher return. It’s not like the UK, where CPAs are constantly going up.

How confident are you Nektan’s next financial report will show improved results?

I think we’ll focus more on improving our B2B line. We’ll probably report numbers that are similar but with actual retained margins going forward. We make four times more with a solution we’ve got in India than we do in the UK. We’re making 12 pence ($0.14) in the pound in the UK; we’ve made 40 odd pence in the pound in India with a similar solution. That gives you a scale of the magnitude of the difference in what we get as a return. Let’s say you make £100,000 top line, you’d retain £40,000, whereas in the UK you’re retaining around £12,000.

Top line probably won’t  grow as much but we will become a far more profitable business. We want to really scale that into large populous markets, such as Tawain. We’ll see improvements in some areas; it’ll look odd from the outside because you’ll see the business is a bit flat. But what we’re doing is focusing on where we get a much bigger return. Everyone knows turnover’s vanity and profit’s sanity.

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DISCUSS THIS ARTICLE
IN-DEPTH 16 August 2019
Roundtable: David vs Goliath – Can startups really disrupt the industry?

(AL) Alexander Levchenko – CEO, Evoplay Entertainment

Alexander Levchenko is CEO of innovative game development studio Evoplay Entertainment. He has overseen the rapid expansion of the company since it was founded in early 2017 with the vision of revolutionising the player experience.

(RL) Ruben Loeches – CMO, R Franco

Rubén Loeches is CMO at R. Franco Group, Spain’s most established multinational gaming supplier and solutions provider. With over 10 years working in the gambling, betting and online gaming industries, he is skilled in operations management and marketing strategy.

(JB) Julian Buhagiar – Co-Founder, RB Capital:

Julian Buhagiar is an investor, CEO & board director to multiple ventures in gaming, fintech & media markets. He has lead investments, M & As and exits to date in excess of $370m.

(DM) Dominic Mansour – CEO, Bragg Gaming Group:

Dominic Mansour has an extensive background of nearly 20 years in the gaming and lottery industry. He has a deep understanding of the lottery secto,r having been CEO at the UK-based Health Lottery, as well as building bingos.com from scratch, which he sold to NetPlay TV plc.

What does it take for a startup to make waves in gaming?

DM: On the one hand, it’s a bit like brand marketing; you build an identity, a reputation and a strategy. When you know what you stand for, you then do your best to get heard. That doesn’t necessarily require a TV commercial but ensuring whatever you do stands out from the crowd. Then you have to get out there and talk to people about it. 

AL: Being better than the competition is no longer enough; if you’re small, new and want to make a difference – you have to turn the industry on its head. Those looking to make waves need to come up with a new concept or a ground-breaking solution. Take Elon Musk, he didn’t found Tesla to improve the existing electric cars on the market, he founded it to create the industry’s first mass-market electric sports car. It’s the same for online gaming; if you want to make waves as a startup, you have to bring something revolutionary to the table.

JB: Unique IP is key, particularly in emerging (non-EU) markets. As does the ability to release products on time, with minimal downtime and/or turnaround time when issues inevitably occur. A good salesforce capable of rapidly striking partnerships with the right players is vital, as is not getting bogged down too early on in legal, operational and admin red tape.

How easy it for startups to bring their ideas to life? How do they attract capital?

AL: It depends on the people and ideas behind the startup. Of course – the wave of ‘unicorns’ is not what it used to be. Some time ago the hype was a lot greater in terms of investing in startups, but that’s changed now. Investors now want more detail – and even more importantly, to evaluate whether the startup has the capacity (as well as the vision) to solve the problem it set out to address. That’s not to say investors are no longer interested in startups – they certainly are – but now more than ever, it’s important for startups to understand their audience as well as dreaming big.

JB: To get to market quickly, you need a great but small, team. If slots or sportsbook, the mathematical engine and UX/UI are crucial. Having a lean, agile dev team that can rapidly turn wire framing and mathematical logic into product is essential. Paying more for the right team is sometimes necessary, especially when good resources are scarce (here’s looking at you, Malta and Gibraltar).

Building capital is a different beast altogether. You won’t be able to secure any funding until you have a working proof of concept and, even then, capital is likely to be drip fed. Be prepared to get a family and friends round early on to deliver a ‘kick-ass’ demo, then start looking at early-stage VCs that specialise in growth-stage assets.

How do you react when you see startups coming in with their plan for disruption?

RL: We welcome the innovation and fresh thinking startups bring. This is particularly the case in Latin America, with a market still in its infancy. One area we’d especially like to see startups making waves is in the slot development sector. Latin America is a young market that needs local innovation suited to its unique conditions – especially in regard to mobile gaming.

Operators eyeing the market have Europe‐focused core products, which creates a struggle to work to the requirements of players and regulators. To succeed there, it has become more important than ever to work with those with a knowhow of the local area to adapt products and games to besuitable from the off; we welcome the chance for local talent to develop and grow.

Do you think it’s easier for established companies to innovate and establish new ideas? 

AL: From a financial perspective, yes. It is without a doubt easier for incumbent companies to establish a pipeline of innovation via their R & D departments, as well as having the tools to hand for data gathering and analysis.

But it stops there. Startups hold court in every other way. Not only are they flexible, they can easily switch from one idea to another, change strategy instantly as the market demands and easily move team members around. Established companies know this – and this is why we’re seeing an emerging trend for established companies to acquire small, innovative online gaming start-ups. They have the right resources and unique ideas, as well as the ability to bring a fresh approach to businesses’ thinking.

RL: For me, it’s always going to be established companies. Only with the resources, industry experience and know‐how can a company apply technology and services that truly make a difference. Of course there are exceptions. But when it comes to providing a platform that can be approved by regulators across multiple markets – as well as suiting an operators’ multiple jurisdictions – it is simply impossible for a couple of young bright minds with a few million behind them to get this done.

DM: I actually think it’s harder for established companies. It’s key to differentiate between having a good idea and executing one. That’s where the big corporates struggle most. They’re full of amazing people with all sorts of great ideas but getting them through systems and processes is nearly impossible.

Is it essential to patent-protect innovative products?

AL: It’s a very interesting subject. If we take IT for example – patents can actually become a block to the evolutionary process within the industry. Of course, getting a patent future proofs yourself from the competition copying your concept but, having said that, if you’re looking to protect yourself from someone more creative, smarter and agile, you’ve probably lost the battle already!

In our industry everything is moving faster and research takes less time than the development itself. No matter how good you are at copy pasting, you can’t copy Google or Netflix. The most important thing is not the tech itself but rather its ‘use-case’ – or in other words, does it solve what it’s meant to solve? Competition is healthy and the key to innovation. If you spend your whole time looking behind you, you’ll never be able move forwards.

JB: Tricky question, and one that depends on what and where you launch this IP. It can be difficult to patent mathematical engines and logic, mostly because they’re re-treading prior art. Branding, artwork and UX is more important and can easily be copied, but the territories you launch will determine how protectable your IP will be once patented. US/EU/Japan is easy but expensive to protect in. But China/South East Asia is a nightmare to cover adequately. Specialised patent lawyers with experience in software, and ideally gaming, can help you better.

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