Luckbox CEO on Investing in Esports Betting

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

CEO Lars Lien and COO Quentin Martin of Luckbox, sit down with Midas Letter to discuss the opportunity for investment within the esports industry and how it is monetized. Luckbox is a fully licensed online betting platform for esports. Similar to traditional sports betting, players can use Luckbox’s platform to bet on esports teams in real time. Luckbox’s license currently allows for customers in Canada, Latin America, Russia, Asia and about half of Europe. As Lars and Quentin discuss, it is an exciting time for the esports industry as more and more states are approving sports betting legislation.

 

Transcript

James West: I’m joined now by Lars Lien and Quentin Martin, CEO and CCO respectively of Luckbox. Gentlemen, welcome.

Lars Lien: Thank you. Pleasure.

James West: We were having a conversation just before the camera rolled about thought leaders in the e-sports space, and thought leadership is certainly something that appears to be in short supply in this space. Why don’t you guys give it a shot and tell me if you can define what is e-sports for an investor, in the simplest terms.

Lars Lien: E-sports are competitive computer game tournaments. They’re exactly the same as traditional sports; it’s like the sport you don’t know. I always like to talk about cricket. No one knows anything about cricket. They know there are teams, athletes, money, tournaments; it’s the same with e-sports. It’s just 35 years and under.

James West: Okay, so e-sports is electronic games being played in tournaments? 

Quentin Martin: Correct.

Lars Lien: In stadiums, with fans, with coaches, management, brand, merch…the full sports experience. It’s just nascent, and is for the 18 to 35, not for the entire population.

James West: Right. I’ve been following Ninja lately…

Lars Lien: In pajamas?

James West: Well I, you know, weird as it is, I feel like I have to immerse myself in the space, and it doesn’t seem like there’s a lot of expectation or limitation on clothing, footwear, hairdos, or anything. So I’m running with it!

Lars Lien: Surfer culture.

James West: Yes, exactly! Luckbox: what does Luckbox do?

Lars Lien: Sure. In a sentence, we’re a fully licensed e-sports betting platform. 

James West: Betting?

Lars Lien: Yeah.

James West: For, like, real betting?

Quentin Martin: Real betting. It’s exactly the same as traditional sports betting, like, if you wanted to bet on the Leafs to beat the Canucks and you put $1000 on it, maybe you win $400 back. 

J.M.: Really?

Quentin Martin: The same model for betting on e-sports.

James West: So you’re fully licensed, and domiciled where?

Quentin Martin: Fully licensed, domiciled on the Isle of Man.

James West: Whoa!

Quentin Martin: One of the top licenses in the world. We’re live today in over 100 countries.

James West: I’ve never been to the Isle of Man. I’ve always thought, ‘I can’t wait till I have a reason to visit the Isle of Man’.

Lars Lien: You’re welcome.

James West: Apart from its very fascinating history, admittedly, but its financial sort of status is of more interest to me. Okay, so, sports betting – so, I can bet on, for example, the next Siege 6 tournament, I can pick the teams that are playing, and I can just – 

Quentin Martin: Exactly the same way you can bet on the person to win the tournament outright, which team to win a particular match, who’s going to get the next kill, who’s going to have the advantage with the goal in. Tt’s exactly the same as traditional sports betting.

James West: Wow. How much do you guys pay for acquisition of one customer?

Quentin Martin: The industry standard at the moment is approximately $80.

James West: $80? Well, that’s reasonable. And so, Luckbox is not a public company.

Lars Lien: No.

James West: Is it going to be a public company?

Lars Lien: There is intent to go public next year.

James West: Oh, very cool. Okay, so, this is interesting, because I know that the State of New Jersey has done, they’ve laid $3.8 billion in bets since June 2018, just New Jersey.

Lars Lien: Yeah.

James West: And so I’ve got to think that elsewhere in the world, where sports betting has been open and underway for quite some time, that there’s got to be a huge volume of.

Lars Lien: It’s huge. So if you look at the e-sports industry right now, it’s $1 billion US. Adjacent to it – this is what many people don’t know – is $1 billion in e-sports betting sitting right next to it. This is how e-sports is monetized. This is why, you know, if you look at a premier league, almost every single club, they have gambling sponsors all over, because this is how you monetize the audience.

James West: Yeah, right.

Lars Lien: It’s exciting for the audience. It’s something, you know, Quentin likes to say, is part of the human condition. People love to gamble; the game gets more exciting, right?

Quentin Martin: Yeah.

James West: You bet. So then, can a Canadian – 

Quentin Martin: Absolutely. So right now, you can go to Luckbox.com, you can register, deposit, and bet, and play and have fun.

James West: Really? Right now? 

Quentin Martin: Right now. When you’re mobile…

James West: And, US citizens?

Quentin Martin: No.

James West: US can’t.

Quentin Martin: No.

James West: New Jersey citizens?

Quentin Martin: There are four states in the US right now that have passed sports betting legislation, so if we had that license, then you would be able to bet.

James West: So you’d have to go there and get a license specifically for each of those jurisdictions. How hard is that?

Quentin Martin: Pretty tough.

James West: Oh, it is?

Quentin Martin: Yeah, pretty tough. One of our colleagues who’s a thought leader in the space will say there’s only two types of people operating in America right now: those who are going bankrupt, and those that have billion-dollar pockets and are looking to just get market share for the long term.

James West: Ahh, interesting. Okay, so then, what is your addressable audience currently?

Quentin Martin: So, our license allows us to have customers in Canada, Latin America, Russia, Asia, and half of Europe. 

James West: Ah, so, only about a billion people.

Quentin Martin: Only most of the world. 

Lars Lien: The reality, the US is opening up. You know, it’s fifteen months ago since PASPA, Federal prohibition on sports betting was overturned. The rights were given back to the states to issue their own licenses. Now we’re only talking about relatively small states; it’s early days. But, you know, California is going to come at some point, New York is going to come at some point, and that’s when it starts to get really, really interesting for us to get in.

James West: Yeah.

Lars Lien: But right now, the world is our oyster, so to speak.

James West: Sure. Are you guys raising money from investors?

Quentin Martin: Yeah, we’re about, we’re pre-round right now, but we’re looking to raise, probably next week, about 5 million.

James West: Oh, that’s right. You guys came through Gravitas, so that’s how we – that’s right. Okay, so, I’m already involved, I suspect.

Quentin Martin: Good.

James West: I’m going to be. Okay, well, this is very cool. So then, what are the, what’s the biggest gain that you could – like, what’s the most exciting action for a bettor?

Quentin Martin: Wow, that’s a great question. Probably the best market would be First Kill. You know, the game started – it’s the same with First Goal, but it’s going to happen in the first few minutes, so it’s a very quick, quick reward market, and then you can bet on the next one. So you can keep chaining that cycle, because you can watch all the live matches with the live streams embedded on our site and bet in real time.

James West: Huh. And so, as a sort of odds-oriented mathematics individual, which I’m not, I’m going to pretend to be for one second – statistically, is it, are the skill sets of the individuals and the teams that they are members of, are they statistically consistent in terms of level of skill? Like, so I saw a, basically an overview, and this guy said G2, this team, had come out of nowhere, suddenly were pro, won the top tournament, and then the next tournament, they finished last. It was either them or another one, I can’t remember. 

Quentin Martin: Sure. So in some of the games, they’re absolutely, like, the teams that are the best will be consistently at the top of the game. Some games, like Fortnite, for example, where there’s 100 people playing, it’s much harder to consistently do well.

But in most of the games, just as in traditional sports, you will get the big teams, the big franchises, will consistently do well. They will be favoured against whoever they’re playing, etcetera, etcetera. A very similar setup.

Lars Lien: But you do see that, to some extent. There’s a (unintelligible) team called Australis; they’re top of the game. They’re winning, you know, ridiculous number of tournaments in a row. All of a sudden, something changed. And then they stopped being, by far, the best team.

James West: Really? Was it loss of an individual?

Lars Lien: No. It was – 

Quentin Martin: Probably loss of confidence.

James West: Really?

Lars Lien: Yeah. Loss of firm, loss of confidence.

James West: Maybe they started doing the wrong drug. [laughter]

Lars Lien: Quite possibly.

James West: That’s usually the biggest responsibly for change of behaviour suddenly. Okay, so if I wanted to bet on e-sports, and I don’t know anything about any of the games and can’t even play pong without injuring myself, what would you recommend as a starting point for somebody who wants to sort of dip their toe in the water but not lose their shirt in the first go-round?

Quentin Martin: Sure. So I mean, I would start one step earlier: I would go and find a local e-sports tournament that’s going to be near you, maybe selling out the local arena, and go and buy a ticket and go down. That’s going to get you pumped for the game, it’s going to get you an understanding of what’s going on. And then, place a bet on whatever it is that you’re watching. Betting has been proven to enhance your enjoyment to something by about 60 percent.

So go along, place a bet. Just place on one team to win; who knows which team you’re going to pick – they’ve got the best name, whatever it is that you like – and then go from there.

James West: Very cool. Are you guys participating in the EGLX conference this weekend?

Quentin Martin: Not currently, but we may well go down. We’ll find out if there’s anything more developing. 

James West: Great. Well, we will see you there if you do. Okay, we’re going to leave it there for now. We’ll come back to you closer to go public date. This is a really intriguing proposition. I don’t even have to ask how it makes money, which is remarkable.

So, we’ll wish you the best of luck, and thanks very much for joining me.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.