CEO Spotlight Series: Exclusive Interview With CEO and Co-Founder Francesco Borgosano and CFO and Co-Founder Jesse Wachtel of Huddle Tech
Very simplistically, for our more generalist industry readers, can you explain where Huddle Tech sits within the B2B sports betting ecosystem? How does your technology help sportsbooks operate more efficiently and profitably?
Huddle provides best-in-class market making capability combined with industry-leading betting operations. Our market making expertise is built on the strength of our data management and proprietary algorithms that enable us to price more markets than competitors (core, derivatives, micros, player props, alternates, SGP) with greater uptime. This is achieved without sacrificing accuracy. Our leading data architecture and algorithms allow us to maximize our trading operations efficiency via automation.
The next step for Huddle is to develop other services that can leverage the data infrastructure we have built to help operators provide a better experience and more relevant content for their customers; ultimately driving more profitability.
What was the genesis of the company, and can you give us some more color on your respective backgrounds that brought you to this opportunity? Some of the team came out of Simplebet, and the merger with DeckPrism seemed like a transformational event for the business; please tell us more.
Francesco has been working in the iGaming industry for more than a decade for leading B2C and B2B companies. He has first-hand experience with the widening gap between technology solutions and product demands in the industry, which has been further highlighted by the repeal of PASPA. Jesse was the initial validator of the vision, as he had been investing in the iGaming space and had built several successful enterprise software companies.
The merger with DeckPrism accelerated our product development significantly. At that juncture, Huddle had constructed a cloud-native data infrastructure that prioritized scalability and flexibility, in addition to employing a collection of algorithms aimed at automating trading services. DeckPrism had developed algorithms focused on being able to set opening lines and keeping markets open with pricing accuracy for books that welcomed sharp bettors. The two systems were therefore incredibly complementary, and by leveraging Huddle’s infrastructure, we are able to complement those odds with more recreational propositions and deliver a full suite of products in a more scalable way.
What is the product market opportunity for Huddle in comparison to existing sports betting pricing and odds management products that are currently out there? What are the economics of your business model, and are your revenues subscription-oriented?
Our current product is best suited for customers who want to provide a) a greater number of markets (player props, micro markets, alternates, etc.), b) an SGP product with full-market combinations, as we are a one-stop-shop that can provide all the underlying markets, c) new products or games, d) markets with greater uptime, or e) pricing that adjusts to your risk strategy. Our revenue is typically a profit share structured as a percent of revenue.
As we have learned more about Huddle Tech, it’s clear that you are able to leverage sophisticated technology to operate efficiently with a very lean team, particularly versus incumbent providers; how are you able to do this? Are you leveraging a lot of AI in your day-to-day operations already?
Our ability to innovate is driven by a data-first approach to engineering unshackled by the constraints of legacy technology. This gives Huddle an edge versus incumbent providers who face the massive challenge of trying to bolt in data solutions to systems not built to handle it. The areas where we predominantly use algorithmic solutions are pricing and risk management. And, thanks to the high level of automation, we are able to operate efficiently with a lean team.
The sports betting ecosystem is a lot bigger than just traditional online sportsbooks, especially with the growth of daily fantasy sports (e.g., PrizePicks, Underdog) and now players in sweepstakes (e.g., Fliff). How are you serving all these communities, and what is your outlook for the daily fantasy sports and sweepstakes categories?
We believe these products, such as daily fantasy sports and sweepstakes, are innovative ways to package betting markets into new games and that developing new games is a great way to both acquire customers and retain them. Our probability engine can price these types of games and serve these communities the same way we traditionally price online sportsbooks.
From a consumer-facing perspective, as the U.S. sports bettor gets more comfortable with the gaming experience and evolves from classic pre-game bets on their favorite sports into higher volatility bets (multi-leg parlays), props, and in-game action (e.g., “Will the next football outcome be a run, pass, turnover?”), how quickly are players transitioning, and how will this ultimately benefit Huddle Tech? What do you think the timeline for in-game betting and wagering on different form factors and games will ramp?
In-play wagering represents a majority of the handle wagered using Huddle prices. In-play markets are far more technically challenging to price. Our clients are demanding that markets stay open to provide the best experience for their customers but at the same time don’t want to get caught having mispriced a market. This becomes even more challenging when you are offering a greater variety of markets for a greater variety of sports. The solution is core to Huddle’s product offering. Huddle’s offering sits on a technology stack that enables it to process and manage data with minimal latency. This allows Huddle to keep its markets in sync while maintaining industry-leading uptime.
We believe in-play wagering will continue to grow as a percent of overall wagering, especially if the user experience continues to improve with more markets offered and available for a more significant portion of the game.
We are now through the early part of the NFL and NCAA football seasons. How are industry trends ramping versus your initial expectations? Clearly, if football could last 52 weeks a year, the industry might love that; how do you see betting momentum building for the NHL and NBA seasons?
The betting dynamic is quite different for each sport, and the hype around the NFL is significantly higher given the short season and the media coverage, which makes it the biggest driver for revenue. That said, the NBA and the NHL have built loyal fan bases in the betting community, and as the product matures, we expect steady growth for both. Given the length of the NBA and NHL seasons, the betting activity tends to be slow early on, and it ramps up as the playoffs approach.
You have gone through the gaming licensing process in 10 states so far. What does the pipeline look like for you to scale into all the regulated U.S. sports betting jurisdictions, and how important is this for you to onboard more operating partner clients?
Licensing is both time-consuming and expensive for a startup. We are following our customers’ licensing roadmaps and making sure Huddle can serve them in every market where they are live and operate.
We have license applications already submitted with many other states and will be licensed almost everywhere by early 2024.
You are currently raising a B round; how are you navigating the capital markets currently, and what has the investor reception been? Are you benefiting from the overall M&A backdrop, specifically with some notable exits like Angstrom/Flutter, where it appears B2B tools are in strong demand? How do you evaluate an exit in the next 12–18 months versus continuing to execute your plan?
Series B rounds provide a certain challenge within the iGaming industry. There are only a select number of VCs who are willing to go through the licensing process connected to the 5% ownership threshold. Therefore, startups like us raising significant capital do not have many places to go. We either turn to strategics for larger checks or collect/pool smaller checks to complete such a round.
Acquisitions like the Angstrom deal are obviously valuable benchmarks as we discuss valuation with investors. We think B2B tools will remain in strong demand, and the M&A market will stay hot. U.S. operators are likely to bring tools in-house to help differentiate their products from the likes of DraftKings and FanDuel in order to gain market share. Also, larger B2Bs will continue to acquire smaller B2Bs if they can accelerate innovation and add new revenue streams.
With your competitor Angstrom effectively being internalized by Entain, does this create an opportunity for you to onboard more tier 1 and tier 2 sportsbooks as clients? What does the timeline look like to ramp up more clients? Also, while your efforts are heavily geared to the U.S., what does the market opportunity look like internationally including Europe, which is a mature market but could benefit from more modern tech, or South America, which is seeing considerable growth?
Anytime a supplier like Angstrom gets acquired, it creates a race for suppliers like Huddle to win over its previous customers. We are already ramping up a number of new customers, and we have dramatically simplified the integration process to make it much easier for clients to onboard Huddle.
Also, just to add a minor correction, our efforts historically have been primarily focused on U.S. sports and leagues, but we see international demand for those markets. We have a strong pipeline of business in both Europe and South America. We have competition-agnostic models built for international sports, like tennis and soccer, and have plans to go live with those in the months ahead with several customers.