Q&A: FSB CEO David McDowell on seeking outside investment and playing the US long game
The London-based sportsbook supplier talks about tapping into Clairvest’s vast network of contacts and why black market avoidance has led to slower growth
FSB Technology hit the headlines yesterday after sealing a £23m cash investment from Canadian private equity fund Clairvest Group.
FSB management, including co-founder and CEO David McDowell, had been in discussions with Clairvest for more than two years, ever since the US market opened itself up to legal sports betting.
Below, McDowell chats to EGR Intel about what the multi-million-pound cash boost will mean for the company as FSB prepares to invest heavily in its sales and marketing teams.
FSB CEO David McDowell
EGR Intel: What will this investment allow you to do that you might not have been able to do before?
David McDowell (DM): It is really simple. We have been focused on making sure we have great technology and have spent the last year and a half on our operational deliverability. We are now ready to scale up our sales and marketing team while looking at growth opportunities in regulated markets around the world.
We have heard a considerable amount of buyer’s remorse coming from the US market where speed to market was prioritised over all else. Too many companies have put sales and marketing ahead of operations and technology and then try to deliver the product after they land the deal. Our philosophy has been exactly the opposite because you only have one chance to ruin your reputation. We wanted to make sure that the technology was solid and we’ve now handled billions of dollars worth of transactions and we wanted to make sure the operations are up to scratch for what a tier-one operator would expect before expanding our market presence.
EGR Intel: Had you been seeking investment for a while?
DM: I met Clairvest almost two years ago when they were starting their investigation into sports betting. I was looking for the right growth capital provider that would allow FSB to remain independent and execute our strategy. They have a long and successful track record of investing into the gambling sector and they were specifically looking to deploy money into sports betting technology because they see it as an exciting growth area for both retail and online opportunities. I was looking to find some smart money investors that could open doors for us, and they were looking to get into sports betting. It took a long time for us to get the deal agreed and over the line, but we both had the same vision on how the market would develop.
EGR Intel: How much of the £23m will go on US investment?
DM: Being honest, the US is clearly on our radar but we haven’t determined that yet. We’ve always focused on regulated markets and we have grown more slowly from some of our competitors who have happily taken money from black markets and ploughed that into their B2B offering. We think that is wrong but it hasn’t come back to bite any of them. There are fantastic growth opportunities globally, so it is not just about investing in the US but selecting the right territories and going after them with the right product. We’ve got a nimble product that we can localise and deploy globally, so we are considering not just North and South America, but also evaluating opportunities to extend our presence in Europe, Africa and Asia.
Clairvest Group management
EGR Intel: Will that focus on regulated markets work to your benefit with regulators in the US?
DM: I wish that were true. If the regulators got their microscope out in detail, then fewer companies would be operating in the US today. But they haven’t and I understand it is difficult to become familiar with the history of these companies. It seems that regulators have taken the view that ‘if you haven’t broken the law over here, then who are we to slap your wrist?’ Integrity is such an important issue within sports betting and we think our approach will serve us better in the long run.
EGR Intel: Are Clairvest going to take a hands-on role in terms of strategy?
DM: They are not a hands-on private equity company, but they will be actively involved. The day-to-day operations will be management’s responsibility and they will obviously have a strong board presence. What I’m looking forward to is that they have a fantastic network of contacts through retail gaming across North and South America. Sales contacts and strategy is about as much as you can ask for from a board, because when it comes to the operations and the technology, that’s on management. We are going to take the next few months to make sure we’ve got the strategy right. Every regulated market has pros and cons, and America is very much a long-term play. We have taken the view that rather than rushing and getting things wrong, let’s make sure that when we do get there, we deliver an excellent product. That is what this investment will allow us to do.