Wanted Down Under: Tekkorp's Matt Davey on exploiting a gap in the market with News Corp

Thinking of new challenger brands in well-established markets conjures up images of plucky underdogs; a close-knit crew ready to take on the big boys. The result regularly ends as a smidge of market share and a firm pat on the back. ‘Well done for trying, tough market conditions, you did your best’, could come the commiseration. Instead, Australia’s new kid on the block, a JV formed of Rupert Murdoch’s News Corp Australia, former BetEasy CEO Matt Tripp and Tekkorp Capital duo Matt Davey and Robin Chhabra, is melding financial muscle, brand legacy and industry expertise to make more than a dent Down Under. The market, dominated by Tabcorp and Flutter Entertainment’s Sportsbet – which absorbed BetEasy in April 2020, and littered with the likes of bet365 and Entain’s Neds and Ladbrokes brands – has been historically difficult to crack for newcomers. For Davey, talking to EGR Intel from his hotel room in the early Australian evening, there is no need for an immediate financial return, despite having plunged “significant investment” into the venture. He says: “We’ve been looking at the opportunity to bring a challenger brand into the market after there’s been significant consolidation in the industry. We’ve had these kinds of deeper relationships for some time so when News Corp was in the market, looking to leverage its own media and assets, it became quite a natural combination.” Davey dismisses fears over attacking the well-established order of a calcified market, instead arguing the better option for investment in some cases comes from stability, rather than diving headfirst into the potential quicksand of fast-growing markets such as the US. He notes: “Consolidated, mature markets can be a great opportunity; fast-growing emerging markets can be a great opportunity, but they can also be terrible opportunities. You’ve seen a lot of capital get destroyed in the US market with everyone chasing that growth.” Davey goes on to highlight the “market gap” in Australia that has presented itself due to mass consolidation, a glimmer in the thicket, that he is more than ready to push through with his consortium partners.

First impressions

Market share – a tangible, quantitative definition of performance – is also something that Davey is not thinking too deeply about, kept awake late at night at the thought of carving out a space for the newly formed, as-yet-unnamed operator. “We haven’t tied ourselves to a certain market share. I think we would be comfortable growing within the environment where there are some phenomenal competitors. We have enormous respect for those businesses, but if we grow organically and by acquisition, I think we’d be comfortable above 5% and targeting further growth,” he says. Davey reveals the new platform will launch this year, with the team having already done “a lot of work behind the scenes”. The platform will be powered by BetMakers Technology, having inked a 10-year full-service contract with the consortium, and led by Tripp as CEO, who Davey lavishes praise on, arguing that one would be “hard pressed to find anyone who doesn’t know him or doesn’t hold him in high respect”. A combination of an established third-party provider, heavy capital investment and revered industry figures leading the brand still requires work to encourage new users. A wave of the magic wand won’t suffice. News Corp’s US-facing venture, Fox Bet, has failed to take off despite similar brand legacy and clued-up heads working on the project. Davey is aware of this fact and points to a weak point in his rivals’ arsenal, combined with customer behaviours that he has observed in the market. “I think [other operators] have their own technology platforms with history and legacy, but also perhaps technical debt. We can come in with a fairly fresh platform and some interesting ideas around product. Second to that, our experience is that customers tend to have four or five different accounts. We just need to be one of those. We will offer exceptional customer service and variation in the product, but we don’t need to be the sole account for customers.” Australian affection   The venture evidently holds a sense of personal pride for Davey, and in turn Tekkorp. He lauds the “entrepreneurial spirit” of Rupert Murdoch as part of the consortium’s legacy, championing his fellow Antipodean while singing the praises of both BetMakers and Tripp throughout, a sense of countryman camaraderie sprinkled over a multi-billion-dollar plan. Coupled with Davey’s commitment to involving Tekkorp in its investments at a base level, rather than watching from afar and raking in future ROI, paints a picture of an investor who wants this to succeed equally on both a deeply personal and professional level. He notes: “We like to take large material positions in the businesses we invest in, and then we look to be as helpful as we can. In this case, we don’t have to offer a lot in terms of operational help as the team are really well connected. “If there are people we know, that can help fix things or add value, then we will use our network and connections to do that. And obviously, we’re very comfortable in the capital markets, both the private capital and the public capital. As the company looks to scale and raise more capital or do acquisitions, we can be helpful there as well,” he adds. And on a potential expansion into the US, the land where burning cash as if it were a Guy Fawkes effigy is commonplace, operators are fighting tooth and nail to capture the attention of the market. While the big three – FanDuel, DraftKings and BetMGM – hold the podium places as it stands, with big foreign players like Kindred, 888 and bet365 languishing, is there really an appetite, or need, for another News Corp-backed challenger brand to dive in? Davey muses: “Clearly there’s a strong relationship and nexus in the US. But I don’t think that’s an area we’re going to spend a lot of time thinking about at this point. I think there’s an enormous amount of work to be done in the Australasian market, and that’s where the team will have the biggest bang for their buck. But obviously, we wouldn’t shy away from international expansion.”

Latam love-in

Davey highlights Australia as a fast-developing sports betting market, with online growing at 15% to 20% per year, but he also has his interest piqued by developing markets, including the “enormous growth” potential for Latam, not only in terms of operators and suppliers but adjacent industry opportunities too. With Brazil edging further towards regulation, and Mexico already proving a fertile trading ground, Tekkorp is set to tackle the region in more ways than one, through investment of an ambidextrous nature. “We think there’s enormous growth for Latam. We also think there’s enormous growth in some adjacent sectors within the industry such as regulatory technology. There’s also fintech. We’re actively looking to deploy capital into those aspects, and we’ve got some interesting opportunities in front of us.” Expanding on the potential melting pot of opportunities in the region, Davey reveals the firm is in active discussions with several companies, with Brazil as a key market. He points to the benefit of flexibility when approaching a nascent market, indicating a typical operator investment would not be the ‘be all and end all’ of Tekkorp’s hopes in the region. He continues: “Brazil does have legislation in place, and we are waiting for the regulations to drop. But Brazil, along with several other countries in Latam, is exciting. There are different ways to skin the cat in that you don’t just necessarily have to invest in an operator. There is payment processing, KYC and AML. There’s a range of different ways to get into those markets.”

Worth the hype?

An all-or-nothing approach could be used to describe the sports betting sphere in the US. It is either the best thing since sliced bread or the scourge of society. The share prices will be astronomical and absurd or a crushing low after an ecstasy of giddy heights. One only has to look at DraftKings’ 52-week high of $64.58 in stark comparison to its 52-week low of $10.82 as an example. Davey, privy to the markets and overlooking developments, proposes that this absolutism need not be feared. It instead presents an unearthed opportunity to capitalise on volatility posed by a nascent market, with investors fumbling in uncertainty before striking gold. He says: “I think there’s been a step back from that kind of euphoria that we saw back in 2020 and 2021. Most technology companies today are down 20% to 50%. There’s a bit of a reset happening now but I think that makes acquiring businesses easier. There are cheaper assets out there, so it may encourage consolidation and M&A. I think that’ll continue to go through even as the market gets excited and depressed, and we need to keep clear eyes on and just focus on what we think are valuable businesses that we’d like to be part of.” Away from the wider world of US sports betting investment and capitalising on developing markets, Davey’s attention returns to Australia and what the future holds for the project set to send ripples through a languid pool of stability. Davey, as an investor would be, remains bullish on the chances of success. And bullish might be putting it lightly. “Multi-billion-dollar venture” falls from his lips as casually as ordering a takeaway. The capital being injected into the sportsbook of course comes with risk, but similarly with how an immediate market share snare isn’t pertinent for the time being, a ROI to investors is not a requirement with a looming deadline. Davey says: “I think the venture will be a multi-billion-dollar venture, I think we’ll be patient and sensible about it. I think we’ll be open to acquisitions to get there over time. But this is a multi-billion-dollar deal. I feel very comfortable with that over the next four or five years. We’re very patient. We don’t need to return capital to investors at this point.” And from a Tekkorp perspective, having hired industry expertise like former SG Digital CCO Steve Schrier and ex-William Hill Online CEO Crispin Nieboer to its advisory arm, it is clear Davey isn’t standing still. With fingers in several pies and irons in many fires, it remains the case that any old investment won’t do. There has to be that spark, that attraction, similar to the pull of making a mark in his home country, to drive Tekkorp onwards. “We want to be involved in interesting projects,” Davey remarks. “We tend to like complexity. We don’t shy away from that. We are very much focused on doing really interesting things with great people in areas that we know and understand and we’ll continue to do that.” The new consortium in Australia ticks off each of these points Davey marks out. Now he must wait and see if this amalgamation of capital, brand legacy, technology and industry experts can make its presence felt.