Quick Win For Banach Technology Quartet
Gambling delivers quick wins, and at the back end of the industry it was a quick win too for the founders of Banach Technology, a Dublin venture acquired by Aussie plc PointsBet Holdings in March 2021. The four founders, all of whom jumped out from Paddy Power, became multimillionaires for five and a half years of endeavour, and no doubt they now enjoy handsome salaries at their new employer, too.
The Banach experience highlights that, for the right idea with upside potential, there is a pool of private capital in Dublin consisting of individuals who are prepared to have a flutter, and – mostly in the €50,000 to €100,000 range – they are willing to fund an enterprise.
Banach Technology was established in October 2015 by Mark Hughes (35), Alex Zevenbergen, Hadrien Lepretre (36) and Rob Reck (51). The quartet’s expertise is trading models and platforms to manage the risk that face bookies (who don’t like to gamble). Banach’s proprietary risk management platform supports ingame betting, which has exploded in popularity in recent years.
To get where they wanted to go, the four lads had to hire other people to build out the product. In 2018, after Reck and Hughes each invested €100,000, the company raised €2.2m from private investors. Twenty investors parted with €1.7m for ordinary shares, while ten investors chipped in €500,000 through an EIIS scheme. The return for these latter investors on the company sale was limited to their original investment plus 10%.
The hat was passed around again in September 2019, when €1m was raised from 18 investors, some of whom were following on. By that stage, Banach was profitable. The company booked a €400,000 profit in 2019, after a €570,000 loss the year before. In 2020, Banach’s net profit was €1m and its headcount was 33 people.
PointsBet listed on the Australian Securities Exchange in June 2019 and raised €46m, with the promise of expansion in the US market. The shares listed at AUS$2 and had run up to AUS$14 when the company came calling for Banach. The Australians paid €34.9m for the Irish startup, of which €20.2m was cash and €14.7m in PointsBet equity. In addition, PointsBet paid €3.3m to fund conversion of equity options.
According to filings, the founders’ shareholdings in Banach were Mark Hughes 21.8%, Rob Reck 21.8%, Hadrien Lepretre 20.2% and Alex Zevenbergen 10.8%. Their share of the proceeds amounted to
€26m, though for the founders only two thirds of the transaction consideration was in the form of PointsBet equity, with one- to threeyear lock-ups. Since the deal went down, the PointsBet share price has halved in value, after the company announced a loss of €118m on revenue of €123m in the year to June 2021. For investors who bought Banach shares at €960 each, the exit price was c.€2,560 in cash and shares.