GAN targets ‘open goal’ of $500m revenue as US opportunity booms
Dermot Smurfit Jnr listed gambling tech company GAN on Nasdaq last May. It’s now ready to take the US by storm, writes Sean Pollock
DERMOT Smurfit Jnr, the chief executive of online gaming technology company GAN, has said he hopes the business can hit annual revenue of $500m within five-to-seven years.
The Nasdaq-listed company’s CEO, which supplies internet gambling software principally to land-based US casino operators such as those in Las Vegas, was speaking to the Sunday Independent ina wide-ranging interview.
GAN, which currently has a valuation of around $850m, recently announced the completion of its €149.1m acquisition of betting company Coolbet.
Smurfit said he hoped GAN could grow its revenue and become a bigger player supplying the rapidly-growing US online gaming market.
“The strategy is to roll out state by state,” he said.
“We think we have got an open goal towards $500m annual revenues within fiveto-seven years.”
GAN has got off to a good start with its strategy. Smurfit said the company is about to switch on its fourth US State, Michigan.
It will also help Churchill Downs, a US racing and entertainment company, launch its online betting product.
During the interview, Smurfit also spoke about advice he received from his family, which is behind paper and packaging giant Smurfit Kappa.
He also spoke about his business relationship with Dermot Desmond, who helped Smurfit validate the opportunity he believed GAN represented to his family.
“They were all super-cynical,” he says.
“‘What do we know about online gambling, we are paper and packaging guys?’.
“They all looked at me and said, ‘Can you not find somebody who can validate this for us because we don’t really believe you?’
“It took Dermot Desmond to come in,” he added. “He has made a lot of money out of his involvement in GAN. He has been super supportive.”
NOT many chief executives would choose to go spearfishing off the coast of California during their company’s first day on Nasdaq, but not all CEOs are Dermot Smurfit Jnr. The man who heads up GAN, which supplies internet gambling software principally to bricks-and-mortar US casino operators, was exhausted. Smurfit had spent much of his time out on a seemingly never-ending series of roadshows trying to attract investors into his gaming technology company as it prepared for its IPO on Nasdaq in May.
After Smurfit pre-recorded ringing the bell, a tradition for companies going public on the markets, he decided GAN’s first day on the US exchange was a time to relax.
“I would love to say it [listing on Nasdaq] was an incredible moment of self-reflection and humility, but I was just exhausted,” says Smurfit with a laugh. “The day we went public, I pre-recorded my bell ringing and went on a boat and went spearfishing 60 miles offshore and caught some fish. That’s what I did on the day we went public.
“I was wiped out,” he adds later. “I shot some really big fish. As far as therapy goes, floating in the cold Pacific with a spear gun is probably right up there in terms of Zen. That is as good as I get.”
Ever since GAN raised $62.4m (€51m) in gross proceeds from its Nasdaq IPO, Smurfit’s company has attracted a wave of opportunities. For GAN, hauling in the business wins over the past year has been more akin to shooting fish in a barrel than in the waters of Pacific Ocean. “The biggest single thing we have done in our corporate history was the listing on Nasdaq,” he says.
“We thought we would release maybe £50m of shareholder value,” he adds later. “In truth, we are now trading at the guts of $1bn. You can do some of the maths. As I always tell my kids, it’s important to be smart, but there are lots of smart people. You also want to be lucky. I think we got the timing exactly right without knowing we got the timing right.”
For the son of Dermot Smurfit, the former deputy chairman of paper and packaging giant Smurfit Kappa’s precursor Jefferson Smurfit, GAN’s IPO’s timing couldn’t have worked out better. Diving into the ocean of liquidity on the US markets has Smurfit excited for the future.
In January, GAN announced it had completed the €149.1m acquisition of Coolbet, a sportsbook betting company headquartered in Estonia. This followed a successful $105.3m follow-on public offering in December, which helped finance the deal.
GAN bought Coolbet to offer its proprietary sports-betting engine to its US retail casino operators looking to move online. Smurfit says Coolbet was the “last piece of the jigsaw” for GAN’s offering.
“Coolbet is a fantastic brand, it’s a fantastic team, it’s a great technology and it’s a great customer experience,” says Smurfit.
“Just as a standalone business, you’d want it, but then you layer on top of that the ability to integrate the sports capabilities into our existing technical systems in the US,” he adds.
An entrepreneurial streak has been ingrained in Smurfit thanks to the influence of his family, the founders of Smurfit Kappa including his high profile uncle Michael. But Smurfit says that this was not the only driving force behind his passion for business from a young age.
“If you grow up in a family like ours, every conversation is dominated by business,” says Smurfit. “You just learn business by osmosis.
“I was a bit more entrepreneurial. I always had a singular purpose to any entrepreneurial activities as a kid — it was to finance my love of video games. It was always about buying the latest video game, and these days I’m still as much of a video game nerd as I was 40 years ago.”
Before GAN, Smurfit trained as a lawyer in the UK, but working in practice didn’t suit him. He moved into investment banking in New York around 2000, with a focus on tech. His timing was off though, as the shift in career focus coincided with the dotcom bubble bursting.
“You walk into a party where you can hear the music, hear the dancing and everyone is excited, but then you open the door of the nightclub, and everybody has just left,” says Smurfit. “Half-empty glasses are sitting on tables with a couple of drunk guys passed out on the floor.
“That was my experience of going into tech banking; really exciting waiting to join, and then the moment I joined the bubble just popped.”
While the experiences in law and banking may not have worked out for Smurfit, he counts them as providing him with the resolve and industry know-how to stand on his own two feet.
Armed with his first investment banking bonus, an opportunity came along — albeit from tragic circumstances.
Following the terrorist attacks on the World Trade Centre in New York, investment giant Cantor Fitzgerald, which was based in the top floors of the centre, was forced to let go of some of its inhouse corporate development projects in Europe.
One of those projects was an online transaction platform for receiving money into an account that people could then use. Initially destined for the financial markets, the original developers approached Smurfit. He believed the product could be used for online gaming.
In 2002, Smurfit launched GameAccount Network, which would later be shortened to GAN.
While Smurfit felt he had struck gold with GAN, not everyone was convinced. Even his own family raised their eyebrows.
“They were all super-cynical,” he says. “What do we know about online gambling, we are paper and packaging guys.
“Excitable 28-year-old Dermot is knocking on the door saying ‘Guys, I’ve just put my one and only investment banking bonus into seeding a company as an independent venture outside of Cantor Fitzgerald, how about it?’
“They all looked at me and said, ‘Can you not find somebody who can validate this for us because we don’t really believe you?’”
Validation wasn’t long in coming. Businessman Dermot Desmond expressed an interest and soon put his money where his mouth was. He backed Smurfit, and the family was not long in joining in on the action.
“It took Dermot Desmond to come in,” he says. “He has made a lot of money out of his involvement in GAN. He has been super supportive.”
With some big-name backers on board, GAN was in an enviable position compared to many other startups. The company’s initial focus was on consumers, but it quickly refocused on developing games that could then be licensed to third parties for their websites.
The year 2007 brought one of GAN’s first significant milestones; the UK had regulated online casino games. GAN launched its first roulette game, which showed Smurfit the power of online casino games.
“It was a brilliant but awful experience,” he says. “Suddenly you have the information in front of you that roulette outperforms every single game you spent the previous five years developing.”
GAN secured its first customer, UK Betting plc (now SkyBet) and Paddy Power, Sportingbet and William Hill followed.
In 2009, it landed a deal with Lottomatica, the Italian lottery giant.
GAN’s real turning point was still in the works, and Smurfit, who became CEO in 2010, was starting to see the dollar signs.
Rumours were flying around that the US would soon become open to online gambling.
That potential in the US market — which had been expected to be worth $8bn by 2018 — convinced Smurfit and other GAN investors to turn down a takeover offer in 2013.
Soon after, GAN decided to float on the AIM market in London and the ESM in Dublin with a £75m (€84m) valuation.
When the expected opening of US online gambling didn’t occur, things got tough.
“We had a mirage,” Smurfit says of the rumours. “We had three States regulate internet casino in 2013.
“We spent a terrible period between 2014, 2015, 2016 and even 2017, in what I call the Sheldon Adelson [land-based-casino operator, who died last Monday] gulag, the wastelands of Adelson’s war chest, to try and keep the genie in the bottle of online gambling.”
In 2018, when the US Supreme Court broke the bottle and opened up online sports gambling, Smurfit and GAN felt ready, the company had already established itself in the US market and had the clientele to back up its ambitions.
But there was one thing holding GAN back, and so Smurfit kicked off a strategic review. He looked into selling the company to the US industry, but the bids that came in were below what Smurfit wanted. The company’s plan to list on Nasdaq, dubbed Project Jailbreak, soon followed.
“We felt like the UK was jail,” says Smurfit, talking about the plan’s name.
With Project Jailbreak complete, Smurfit is not the only one feeling bright about the future of GAN. The company now has a valuation of around $850m, way beyond AIM’s constraints. He says some industry analysts are tipping it to break the $100m revenue mark in 2021.
When including Coolbet, GAN employs around 400 people across London, the US and Estonia. It has helped Fanduel, the US online gambling industry’s market leader, launch its casino products Stateside. It is also working with US-racing and entertainment company Churchill Downs to establish its online gambling product — TwinSpires.
GAN’s growth will also bring about business challenges, says Smurfit, who believes it will have to consider who it can help across the US due to the level of demand and its ability to access talent.
“You are going to have to make some very selective decision on which clients you believe in,” he says. “A client like Churchill Downs is an incredible client for us because of their scale, their scope, the sports assets and the brand. Having the opportunity to bring them online nationwide is enormous for us.”
With GAN’s US growth set to shoot sky-high, Smurfit says he believes there is an open goal to move toward revenue of $500m in the next fiveto-seven years. GAN is also well-placed to take advantage of any moves to regulate online gaming in Australia and Asia.
It hasn’t always been plain-sailing for GAN or Smurfit, however. It’s only in the last few years that GAN started to cash in on its 2013 US gamble.
Reflecting on the journey toward success, Smurfit shares advice he received from his father and his uncle Michael when the chips were down.
In 2012, Smurfit was feeling glum about GAN. He was talking about his decision to keep the company’s “nose clean” and how tough a journey it had been in the legal online gambling market.
The elder Smurfits, armed with decades of business wisdom, were having none of it.
“They just laughed at me,” shares Dermot. “They said ‘come on Dermot; you just finished your first-decade building this business, come back to us when you are finished two decades, then you can have a legit moan.’
“I think they gave me great perspective – life is a long time,” he adds. “It’s about the journey. Don’t worry about short-term stuff, make decisions long term.”