CEO Interview: Andrew Black, Betfair
Will they, won't they? Betfair founder Andrew Black on flotation, investments, motivations and bugbears
JUST over 10 years ago, Andrew Black helped preside over the ‘death of the bookmaker’ fake funeral procession through the City of London. The guerrilla marketing stunt secured the front page of The Times‘ business section.
It is hard to imagine the more mature Betfair adopting quite the same approach to generating interest in an initial public offering.
When the much-mooted Betfair IPO happens, assuming it does, Black’s journey with the company will presumably be nearing the final furlong. Since writing the exchange’s core code back in 1999 and launching the site with Ed Wray in 2000, Black’s figure has loomed large over proceedings.
Detached from Betfair reality
In recent times his role has become more arm’s length, with the purpose of making himself entirely redundant, he says.
He atÂtends board meetings, the occasional prodÂuct away day, leads the odd strategy sesÂsion and still owns 24% with Wray. He continues to care deeply, but has very deliberately distanced himself. “I don’t think a big corporate entity should have people who are too big, sort of floating around,” Black says, “and I don’t think I fit well into those businesses anyway.”
David Yu, Betfair’s chief executive, clearÂly has his confidence. Strong operationally, having ascended to the role from chief opÂerating officer, Yu has introduced an AmeriÂcan internet mindset that was lacking in the early stages of the business, says Black. “He has taken the company and given it real scope and shape. He’s corporatised it in a slightly American way, although I think he’s very sympathetic to the cultural differÂences over here.”
This may have been at the expense of marketing, but Black argues that designing and producing the strongest product possiÂble is the guarantor of success. While he has not coded himself since 2001, claiming the role is so specialised now that it does not suit his way of working, product remains the area he likes to be consulted on.
“Product was always my big thing. That said, the company churns over so fast one quickly becomes detached from any team really. I go in these days and find the vast majority of people I don’t even know, which is a bit terrifying. So, I’ll probably look to spend a bit more time at the company in the next few months,” Black says.
The key, he repeats continually over the course of the conversation, is to keep the thinking long-termist. Almost diaÂmetrically opÂposed, egamÂing compaÂnies tend to be marketing led and think in the short term, not that anyone will ever admit it, he says. Much of this is a reÂaction to the whims of the City. Black acÂcepts that the internet is something of a land-grab, “but I think you are in a stronger long-term position if you build your busiÂness around strong technology than good marketing. But obviously you really want to have both.”
In the early days of the business, Black forced all the senior executives to learn the database computer language SQL, so they could query the site’s back-end, something they embraced, he says. It will, of course, be interesting to see how a publicly listed BetÂfair would remain true to such principles and rally against market demands.
Silence is golden 
Understandably, Black is cagey about the timing of any prospective flotation. You sense he has become practised in playing a straight bat to such questions. “I can’t answer that,” he responds when pushed on whether it will be this year, claiming he wouldn’t even know the answer and nothÂing’s certain in the current market.
This may well be true. Of course, we have been here before. In 2005 a much-anticipatÂed flotation did not happen, which precipiÂtated the departure of then-chief executive Stephen Hill. This time, the company has enlisted the help of investment banks GoldÂman Sachs and Morgan Stanley to explore the move.
Asked about Softbank, which owns 23% through a deal that valued the company at £1.5bn in April 2006, he claims he is not aware of any pressure being applied.
“I think the investor base collectively would want us to make money available to them at some point and we have an obligaÂtion to do that. Now and then we have share sales, we have share buy-backs. We have never paid a dividend, but that’s something we could do.
“But we have to get money back to invesÂtors and we do have people who are saying ‘well, hang on a sec, I think you guys have done a great job, I’m pretty happy I invested in you, but actually I’ve been sitting here 10 years waiting for my money back and you haven’t given it to me and while I’m pleased that you’ve grown my little investment to something quite meaningful I would like to get my hands on the dosh’.”
As for Black, what would an IPO mean? “It would probably ruin my life,” he says, tongue at least partially in cheek. “I would spend all day, every day staring at a compuÂter screen to see what the share price was doing and every time it moved a penny I’d have a heart attack. Aside from the obsesÂsion that it would bring upon me, it would be a big moment, if that ever happened, because it would somehow be the point at which one has pressed the ‘collect’ button.
“The day a company goes public is almost the end point. It is saying ‘we make our company over to the general public’ and we collect on some of the money for the work that we have put into it. So it would be a big emotional point for me.”
As for Betfair, Black talks vaguely about “big corporate opportunities, big takeoÂvers” the access to capital would enable as being the other main purpose for a flotation, before quickly adding “I think we’ll think about those things if and when we get to that situation”.
Aside from obsession with the share price, he is also fearful the event would be a catalyst for a change in psychology at the top and returns to his bete noire.
“I think that all of the pressures that bear down on any business are to make that busiÂness think in the shortest-term time horiÂzons possible because every investor is only thinking about the next set of numbers and he’s thinking that ‘if I have great numbers I can trade out’ and nobody sees themselves being an investor in 10 years’ time and do not care what the share price is going to be in 10 years.”
He asserts that resistance must not be futile and, revealingly, adds it is something the Betfair board discuss “all the time”. David Yu is likely to have his work cut out.
Money has already made a material difÂference to Black’s life, but you suspect that while he lives a far from ostentatious existÂence, he would certainly find ways to spend.
Speaking to eGaming Review from his home in Surrey, Black also owns a 330-acre farm a few minutes up the road, which he is busy renovating. He has a string of racehorses, owns stables with footballer Michael Owen, a stake in Swindon Town FC and has made around 25 angel investments.
Egaming firms GameAccount, FSB and Bettor Logic are among them, plus investments in property, US healthcare, genetics and an online X-Factor-style site.
“I think I am a bit like a child in a sweet shop who’s been given a bit too much money. I drive my wife crazy. If Betfair ever does float and I get handed another huge wodge of cash I’m just going to go out and spend it on all sorts of stuff, because that’s my nature.
“I’ve got that gambler’s urge to press the double button every time. It might be bad financial management, but it is good fun and keeps me interested.”
Equally, Black is a man who acts on instinct more often than not, getting a quick impression of whether someÂthing’s worth doing. As something of a mathematician and expert in probÂability, a skill he now deploys through his studies of genetics and interest in horse breeding, he is nevertheless well aware that good ingredients do not always make haute cuisine. “You can put the best two horses together and come up with the biggest donkey that’s ever stepped onto a racecourse or you can come up with something that’s abÂsolutely perfect.”
Similarly, the lust for mergers and acquisitions in the sector carries no guarantees. Despite the success of the deal with Flutter.com in 2001, Black suspects many will end in tears due to cultural differences and because one or both parties may have a “serious cash problem” that leads to the union.
He adds: “I think the reasons should be different to that. They should be, we can work together, there are economies of scale in bringing these companies together and we believe we can extract the best value from the combined manÂagement team.”
If Betfair applies such exacting princiÂples to a flotation, the omens are surely good. So, one last try: will it happen? “I hope it will be a public company because I feel an obligation to our investors. In a way it puts a lid on it, but if it isn’t, so be it. I am happy to go with the flow. I am not the sort of person who tries to direct things too much.”
———————–
For more from Andrew Black, see our exclusive four-part video series…
1) Andrew Black on a Betfair IPO
2) Andrew Black on the Betfair story
3) Andrew Black on egaming
4) The psychology of Andrew Black
…or read his Andrew Black: the quickfire round answers.