Smarkets CEO Jason Trost on becoming the exchange for “sophisticated” bettors

Smarkets is a company on the up. After posting a 429% year-on-year increase in revenue in September, the firm came in fourth in Deloitte’s ‘Fast 50’ list of the UK’s fastest-growing technology companies.

By the turn of the year, Smarkets expects to have doubled its headcount in just 12 months as the company continues to hire in several positions, with a focus on tech and engineering.

The exchange now has around 40 engineers in place and a total headcount of 80, with plans to open up a Los Angeles office imminently. The company is also beta-testing a new app with plans to launch in the New Year.

In this exclusive interview, Smarkets founder and CEO Jason Trost tells EGR Intel how he plans to maintain this meteoric growth and take on the mighty Betfair.

EGR Intel: Who do you see as your main rivals? Are you the biggest challenger to Betfair?

Jason Trost (JT): In terms of size I think we are twice as big as Betdaq and I would say we’re bigger than Matchbook although they don’t publish figures. But we have a very different philosophy from others in the industry because we don’t see ourselves as a betting or gambling company, we see ourselves as a financial technology company. Where our rivals come at it from the entertainment angle, we come from a financial utility angle.

EGR Intel: So how does that affect your product and the user experience?

JT: We’re one of the only sites just to have betting. We don’t have casino, poker or whatever. That’s by design. If you log onto Betfair, and there’s a roulette wheel, I think it’s a bad branding. We just have events trading on our interface because we’re after the top 10% of the market, the most sophisticated bettors and that’s the message we’ll be sharing even more in 2017.

EGR Intel: So will you try and compete on sports or do you think you could find an edge in political or financial markets for example?

JT: I would only offer financial markets if we could offer innovation and I don’t know about that at the minute because I’ve not really looked into it. We have a significantly tighter spread than most bookmakers in the world on sports and if we could do the same on financials, I would be interested in that.

We’re a nimble team but we’re also small – we have 40 engineers now – but we’re laser focused on nailing the sports betting experience before expanding our projects. We’re still getting to feature parity with Betfair. But we have some features in the pipeline that will be better than them. One of the main things will be charting – visualising the history of the price and trades etc. Betfair has that to an extent but they’re not very good and we can do a much better job than Betfair. We also have an app on the way very soon.

EGR Intel: How does that ethos affect your marketing strategy?

JT: Our marketing strategy starts with building the best product. We don’t spend as much on marketing as our competitors do. We do some affiliate stuff and we sponsor QPR but we’re mainly focused on building the best product.

EGR Intel: Can you explain the thoughts behind the commission model – 2% on net winnings in a market – which you say is the lowest in the world?

JT: Well it’s the same as Betfair’s model, but obviously lower, because we are trying to re-segment Betfair customers to Smarkets. Our innovation is around low commission so we copied theirs for now. Matchbook is a bad user experience because if your commission plus your stake is more than your balance you can’t make the bet which can be frustrating.

I’d much rather do a fixed commission rather than one like Matchbook but I don’t love our current model so we’re still looking at that.

EGR Intel: You said in your recent financial report that you’re looking to open an office in the US. How’s that coming along?

JT: It will just be a satellite office. I want that partly for personal reasons – I’m American – and partly for the talent there. I view us a as a financial tech company and I think it’s just good for a tech company to have an office in California. We’re looking at LA specifically. It’s an hour flight to Silicon Valley and a lot of exciting stuff is happening there, like Snapchat for example. I’m not opening a US office to get into the US gambling market. I think that’s still years away.

EGR Intel: You’ve been involved in some controversy, with the IBAS recently ruling you wrongly cancelled a bet on your exchange and you’ve taken some criticism for your terms and conditions. Do these things concern you?

JT: I can’t comment on the details but we take those allegation seriously. It hurts my feelings that the people making those allegations, that they don’t think we treat customers fairly, because we entered this industry to clean it up and I’m passionate about being an example company in an industry that doesn’t have always have the best reputation.