Investing in ZenSports
The following excerpt is from Allied’s original deal memo to investors. To review investment opportunities in full, please consider joining the syndicate at Allied.vc/join
Since its inception, our core thesis at Allied Venture Partners has been to diversify Western Canada’s technology ecosystem for entrepreneurs and investors. Specifically for investors, by providing added portfolio diversification through a proprietary mix of high-potential outside deal flow from established venture capital markets, like the United States.
We achieve this mandate by choosing to invest in highly talented, motivated and proven teams focused on disrupting antiquated global industries (at scale). Additionally, we look for venture-scale companies capturing increasing marketshare within a rapidly expanding and large target market.
Enter ZenSports
ZenSports is a mobile peer-to-peer sports betting marketplace where anyone can create and accept sports bets with anyone else in the world, without the need for a centralized bookmaker.
Customers can quickly and easily create their own bets with their own odds and terms, or accept bets that others in the marketplace have created, all at a fraction of the cost that traditional bookmakers charge, and all right from their phone.
As a decentralized marketplace for sports betting, ZenSports is eliminating the need for a bookmaker altogether and giving bettors a cheaper, faster, and more trustworthy process for wagering on sports.
ZenSports has also created its own cryptocurrency utility token called SPORTS, which consumers can use for placing bets, earning discounted betting fees, getting cash back, bonuses, and other rewards. Betting with SPORTS tokens gives consumers a more exciting and rewards-driven experience for wagering on sports than what traditional bookmakers offer.
Why we are thrilled to support Mark and the team at ZenSports
Mark is one of the most determined individuals we have had the pleasure of meeting. He has built multiple companies throughout his career, most recently as co-founder of Reesio, which was acquired by Realtor.com in 2015.
Moreover, aside from his talent & resiliency as a founder, one key signal we look for among founders is the velocity at which they attract other talented individuals to join their mission.
As such, Mark has built a highly impressive team of individuals with a wealth of experience from various organizations, including 500 Startups, Comcast, the Dallas Mavericks, numerous E-sports & gaming companies, casino CEOs, gaming commission experts and blockchain specialists. And if that’s not enough, simply look at the impressive list of Angels and VCs who have invested in the company!
As for the market opportunity…
Historically, as a result of the Professional and Amateur Sports Protection Act (PASPA) of 1992, sports betting in the US was restricted to a very limited number of organizations that had to be located in the state of Nevada. For 26-years, Nevada enjoyed a stranglehold on the US sports betting market, with the only alternative option requiring fans to use black market vendors and offshore sportsbooks.
However, on May 14, 2018, the US Supreme Court struck down the long-standing PASPA law, allowing any state (if they wish) to legalize sports betting.
As of November 2020, 20 states have now legalized sports betting, with six more states recently passing bills and nearly two-dozen currently working through the bill approval process. By 2024, 50% of US citizens are projected to live in a state which has legalized sports betting (see ESPN’s Sports Betting Bill Tracker for the latest update).
As highlighted in a recent research survey conducted by LegalSportsBetting.com:
“In 2019, Nevada handled a total of $5.32B in sports bets. Most of this money is being bet by tourists who fly in from all around the world to play at Las Vegas’s famous casinos. In 2018, the most recent year with available data, 42.12 million people visited Las Vegas. If we add that figure to the state’s population of 3.03M, we get a per-capita betting handle of $117.81. If we focus on only sports fans, statistically making up 60% of the American population, that number jumps to $194.79.”
With a per-capita betting handle of ~$195, a total population of 328M (50% of which will live in states with legalized sports betting by 2024), and 60% of said population being sports fans, this gives us a domestic target market of ~98.4-million people (i.e. ~$19.2B in Total Domestic Sports Betting Volume).
Now, it’s important to note that not just anyone can get a gaming license and establish a sportsbook; there are still many state-imposed regulatory hurdles.
For example, all states except Virginia and Tennessee require mobile/internet sports betting operators to either own or partner with a brick-and-mortar land-based sportsbook to operate in those states.
ZenSports, however, recently signed a deal in July 2020 with Strategic Gaming Management for the option to purchase the Big Wheel Casino in Lovelock, Nevada. This partnership will allow ZenSports to operate their peer-to-peer mobile sports betting app anywhere in the state. As a result, we believe such high regulatory barriers to entry will only strengthen ZenSports’ competitive moat, giving the organization a strategic competitive advantage over new entrants, essentially forming an oligopoly.
Given the massive size and defensibility of the market opportunity, incredible team, and the velocity at which ZenSports has managed to grow its raving customer base, we are thrilled to announce our investment in ZenSports’ Series A, partnering with Mark and the team to democratize the world of sports wagering.
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