An article late in 2015 from Pascal Bouvier, a venture partner at Santander InnoVentures made for some interesting reading for anyone looking to launch a business in the gambling space.
The posting on the CB Insights website (https://www.cbinsights.com/blog/ten-reasons-fintech-startups-fail/) was looking at some of the reasons why start-ups in the fintech sector fail. When reading the piece it struck us at GamCrowd that there were certain aspects of the article that applied to the gambling space, so we thought it worth examining what Bouvier had to say.
The first point that Bouvier highlighted – and the reason why the article truly caught our eye – was reason one. Namely, that fintech companies don’t pay enough attention to “proper licensing”.
Says Bouvier: “You think you are a tech company. You think you are only building software. But if you are focusing on a business-to-consumer model, chances are you may require some type of license.
“At the very least you may need to talk to your local regulator. Many a start-up has tripped up by forgetting that the financial services industry is heavily regulated — sometimes maddeningly so, sometimes rightly so, sometimes both.”
It’s an obvious point, but all of this can be said about the gambling industry – we particularly liked the last point. Anyone who enters the industry blind will soon be disabused of the idea that they don’t need to talk to regualtors. As with the finance industry, the whole of the gambling industry, top to bottom, business-to-consumer to business-to-business, is thoroughly enveloped with regulations. To get on in the industry, you will need to get on with the regualtors.
The good news is that they are, generally, way more approachable than the financial regualtors and nowhere near as scary. If you are looking to get regulated there are any number of choices for a domicile, from Gibraltar to Malta, from the Isle of Man to the Philippines. Of course, depending on your business and where you will be selling services into, you may well need to have a local regualtory licence. But take each step as it comes, and if you choose the right domicile for you, then your regualtor will be willing to help and advise on further steps.
Bouver’s third point is related. As he puts it, a big danger for start-ups is “regarding compliance as a pesky annoyance”. Doing so “may actually be your death sentence,” he adds.
“If you do not comply, if you cannot prove that you intend to comply. If you are late hiring a compliance officer and/or are late to develop a compliance rule book that you abide and operate by, you may end up dead meat.”
This might be slightly overegging it – it is written with the financial world in mind after all – but the point stands in the gambling industry. Compliance isn’t an afterthought – indeed, it is at the very heart of the most successful gambling companies in the world.
As Bouvier says elsewhere in his article, compliance can often be confused with legal, but we will cover how start-ups should look to avoiding mistakes in terms of legal in another article.
But before we leave Bouvier, there is some last advice that he imparts that is worth reading. As he says: “Do your homework. Study the space. Seek expert advice from law firms that specialize in financial services law, regulatory work, and compliance. Seek and hire specialized team members early. Learn from these specialists and include their advice in your business plan, your product or service offering, from the start. Specialized fin tech planning is different than mainstream business planning.”
That is advice that is worth bearing in mind whether you are looking at fintech or gambling.