August 8, 2024 • 51 mins
Sean Brace & Evan Davis sit down with Davis Catlin from Discerning Capital.
With over 15+ years as a private investor in growth companies, Davis now leads the charge with Discerning Capital, an investment firm focused on gambling-related technologies.
Key Topics Discussed:
With over 15+ years as a private investor in growth companies, Davis now leads the charge with Discerning Capital, an investment firm focused on gambling-related technologies.
Key Topics Discussed:
- Proper ways to pitch your business
- Working & building with investors
- Why the sports gambling space
- Previous & current investments
- Global vs Domestic regulations
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
You are listening to Behind the Vague, a podcast mini
series that takes you beyond the bets and strategies and
more into the business of the sports betting industry. Now
Here are your hosts, Sean Brace and Evan Davis.
Speaker 2 (00:16):
That's right, you heard the Man, Episode five Behind the Vague.
We are off and running. Sean Brace, Evan Davis with
you and Evan fantastic job of lining up all the
great guests we've had so far and if you miss anything,
once again, get all of our podcast at Foxpho Gambler
dot com. Be sure to subscribe. But Evan Davis Catlin
from Discerningcapitol dot com looking forward to having this conversation
(00:39):
with him because he's definitely behind the scenes, but Man
has a lot of influence in the sports gambling industry.
Speaker 3 (00:46):
Yeah, I'm really excited for this conversation too. You know,
I think the investor side in this industry is something
that most people don't really know a whole lot about,
but it's obviously what sort of you know, the fuel
that makes everything work, and it gives He's got a
really really broad wide, interesting perspective on the industry, not
(01:10):
just the brands that you've heard of, but you know
the ones that you haven't as.
Speaker 2 (01:13):
Well, and just started Discerning Capital. We're gonna hear a
lot more. But Davis is global, He's been all around
the world and then some, so this is a great
conversation coming your way right here. I'm Behind the Vegue.
Today's guest ev been super excited as always. He's going
to take us behind the scenes over at Discerning Capital.
They could be founded at discerningcap dot com, straight out
(01:36):
of the home of it all in beautiful Las Vegas.
There's a lot going on in Vegas this week, so
excited to hear a little bit more. Maybe he'll be
venturing his way over to to join the folks with
Bette Bash. But on this episode of Behind the Vegue,
we are joined by Davis Catlan, who is one of
the co founders over at Discerning Capital. Davis an amazing resume.
(01:57):
Can't wait to talk about anything and everything in the
sports gambling space. As always, thank you for joining us, man, thanks.
Speaker 4 (02:04):
For having me.
Speaker 5 (02:04):
I'm excited to be here talk a little about where
sports betting meets business meets investing.
Speaker 2 (02:11):
Yes, we're gonna talk obviously a ton about Certain Capital
and everything in as far as the sports gambling space
in the ecosystem, I know Evan has a ton to
get into, but as always, we never like to dive
into people's you know, personal history, their age and where
they grew up and all that. We just like to
ask one general question and in our listening audience and
(02:33):
myself and Evan can sniff it out a little bit there,
and that question is simple, what is your favorite childhood
sports memory?
Speaker 4 (02:40):
Sir? Of my sports or of watching sports, you.
Speaker 2 (02:45):
Tell us your favorite childhood sports memory, because, like you know,
some people get out here and talk about Jordan ninety one.
I'm like, all right, I was a Jordan kid growing up.
We had somebody joining us talked about the two thousand
and eight World Series. Yeah, he was young. The Phillies
won the World Series. Then, so your favorite childhood sports memory.
Speaker 5 (03:05):
Well, so I grew up in Jacksonville, Florida, which is
just down the road from Gainesville, and I grew up.
We don't have to go old, i am, but I
was there before the Jaguars had fully taken off, and
so I grew up a Gator fan.
Speaker 4 (03:20):
So for me, the only thing I cared about, if
we're being honest, was how the Gators did in that
given year versus the Seminoles and the Bulldogs. That was
my entire life. When you are from Jacksonville, that's it.
Speaker 5 (03:41):
We're the world's largest outdoor cocktail party there, the whole thing.
But you know, I think those are probably my best
memories are going to those games.
Speaker 4 (03:48):
My parents, you know, would take us. I had an
uncle dat tickets and so we would go to those games.
Speaker 5 (03:53):
And Spurrier running out on the field and just sort
of the visor and throwing the visors.
Speaker 4 (04:00):
You know, it's interesting.
Speaker 5 (04:01):
I'm a sports guy, but I'm more of a sports
are about the experience and less about like I follow
the stats closely and so like the other thing that
jumps in my head just to give like some context
is like I remember my dad used to start a
fire and we'd watched the forty nine Ers because I
was a Joe Montana Jerry Rice guy, and you'd start
(04:22):
a fire and you put up these little TV. It
was like back when TV's where you know, the size
of a suitcase and like, you know, the screen was
four inches and we'd tip by the fire and watch,
you know, the forty nine Ers.
Speaker 4 (04:34):
Verus Cowboys was like the big playoff game.
Speaker 5 (04:36):
So for me, I don't remember thinking about those games,
but I remember watching them with my dad, and so
that's sort of all of my memories. They're not interesting
to sports fans, but it's more about who I was
with than the culture I.
Speaker 4 (04:48):
Was in at the time.
Speaker 2 (04:49):
That's great, And my follow up wild be how many
cocktail party games have you been to? Off the top
of your head if you had to give us a number,
because I've never been. That's definitely on a bucket list.
Speaker 5 (05:00):
Ten.
Speaker 2 (05:01):
Oh, that's awesome.
Speaker 4 (05:02):
Probably about that. So, I mean, it's a fun game.
The experience on Friday night, it's changed a lot now.
You know, when I was going on I was.
Speaker 5 (05:11):
In college, My experience was a little different than it
would be if I went today.
Speaker 4 (05:15):
But yeah, it's a wonderful game, and you know, the
whole time split down the middle, it's pretty special.
Speaker 2 (05:21):
Talk a little bit about Discerning Capital and you just
created this co founder what two and a half three
years into us, Yeah.
Speaker 4 (05:28):
A couple of years in.
Speaker 5 (05:29):
So Discerning Capital is an investment kind of fund and
strategy where we focus on investing primarily in sort of
regulated online gambling businesses. My background is I've been a
professional investor for seventeen years now, always into growth companies.
Speaker 4 (05:51):
The first fourteen years I was with.
Speaker 5 (05:54):
A firm that focused initially on all public markets and
sort of one of the biggest buyers Facebook at the
IPO sort of find generational change and invest in it
for take big positions or really believe in what you do.
Speaker 4 (06:07):
And then I went from.
Speaker 5 (06:09):
There to going in house at one of the large
casino companies, and that really refined me from sort of
generalist consumer investor that also did gambling to you know,
really being focused fully on online gambling.
Speaker 4 (06:22):
And s for of regulated gambling and where that meets investment.
And then we went out on our own a couple.
Speaker 5 (06:27):
Of years ago, and what we do is is we
go find companies that supply the growth of online gambling
and that can be regulated.
Speaker 4 (06:35):
That could be daily Fantasy, that could be sweepstakes or whatever.
But what we want to do.
Speaker 5 (06:42):
Is kind of offer our investors access to the fast
growing market of gambling.
Speaker 3 (06:47):
So who are like, who are these investors? What did
you go out and you say I'm going to start,
you know, a fund or I'm going to start an
investment group, And are are you putting up your own money.
Are you going out and convincing you know, your friends
and family to invest with you.
Speaker 4 (07:03):
How how does this all get started? Well, it's hard
to get started, is the short answer. Right.
Speaker 5 (07:11):
The asset management excuse me, the asset management business is
one we're scale but gets more scale. So starting out
is very hard. You are knocking on doors of people
that know you and then know your background and that
kind of inherently trust you. And when I walk in
and go hey, I think this is a good idea,
if they agree, or maybe if they don't think it's
a terrible idea, they start investing with you.
Speaker 4 (07:33):
And so there's a few different sort of models you
can use to make.
Speaker 5 (07:37):
These investments, but the one that we currently operate in
is we find investment opportunities and then we go out
to I think it's about three hundred and thirty investors.
They're all sort of accredited investors, and we say, hey,
this is this deal we've.
Speaker 4 (07:51):
Sourced, this is why we like it. We run investment
memo and we kind of take it out to them
and then they commit their capital and we pull it
together and we invest in the companies.
Speaker 5 (08:01):
And what we do, which is just worth noting is
you know, we're not buying the whole company, We're normally
buying a minority.
Speaker 4 (08:08):
Piece of it.
Speaker 5 (08:08):
So say kind of twenty percent is probably a pretty
good estimate of what our goal is.
Speaker 4 (08:12):
So we're pulling together, you.
Speaker 5 (08:15):
Know, we would say between three and twenty million dollars
to go try to buy the minority.
Speaker 4 (08:19):
Pieces of companies.
Speaker 5 (08:20):
We haven't done any of that, we're that big yet
on the high side, but we've gotten close a few times.
Speaker 4 (08:25):
So but that's how we work. It is.
Speaker 5 (08:28):
It is out there selling the dream, which is honestly
the part I like least because I'm an investor. I
don't like the selling. I like talking about the risk
and I like the how.
Speaker 4 (08:39):
Big could it be? But what could go wrong?
Speaker 5 (08:40):
And the truth is is this business is a lot
about investing and then spending half the time convincing everyone
else that you're right.
Speaker 3 (08:49):
So so when you're like talking to people about investing
money into these deals, is this something? Are these typically
like you know, higher net worth individuals that are looking
for a way to just diversify their investment strategy. And yeah,
maybe they've got their you know, money markets and they've
got their mutual funds and their stocks and all their
(09:11):
securities and maybe some real estate and and hey, like,
I'm going to take what might be a good trust
check for most of us, but for them it's a
little bit of a smaller percentage of their assets. And
say it's maybe this is a little bit more of
a lottery ticket.
Speaker 5 (09:28):
Yes, So there's this whole part of the financial markets
that most of us don't talk about, called family offices.
Speaker 4 (09:35):
I'm not sure if you guys are familiar with that.
Speaker 5 (09:37):
It was a phrase I knew when I was at
this large institutional firm, but it is Its essentially reflects people, right.
Everyone thinks like, oh, if I get a couple million dollars,
his own best, or if I get to ten million.
Speaker 4 (09:48):
Is sell best?
Speaker 5 (09:49):
You know, once you reach a point a certain one,
you kind of start having your own firm. You might
not hire Morgan Stanley meant to pick a Morgan Stamily,
but you might not.
Speaker 4 (09:57):
Hire them and go, well, what mutual ond to me?
Speaker 5 (10:00):
And you're gonna go, I want to have people that
are allocating my capital between real estate, venture capital, private equity,
money mark.
Speaker 4 (10:07):
So it becomes very complex.
Speaker 5 (10:09):
They think a lot about taxes and so once you
reach that level of sort of wealth and awareness of
your investment strategy, you often then make allocations towards.
Speaker 4 (10:23):
You know, the same way we're taking real estate.
Speaker 5 (10:25):
Maybe it's a venture capital or growth equity, and so
within that you might have some big funds like a
Carlisle or someone in a Blackstone who's really big, and
they might get I'm going to make up a number
one hundred million dollars because that's a good general fund.
But then they might go, you know, I really think
that there's some growth happening in AI or growth happening
in sports betting, and growth have another place, and they go, Okay,
(10:45):
well we're going to find a more kind of niche
manager and give him a half million or a million
or two or three and sort of create a pool
where you might have a general pool of capital, and
then you've got sort of these satellite managers along the
edge to help drive some your performance based on your
own intuition experience.
Speaker 3 (11:02):
So when you're finding opportunities to invest in because you're
going out and you're finding stuff in online gaming and
sports betting, what like, what do you look for what?
Because I mean, you must hear a million different pitches, right,
and everyone's got the best idea and everyone's got this
figured out and they just need some money to get started, right.
(11:24):
And so so when you're hearing this what sets want
a part for you? Are you looking at the people
behind it, their experience, the idea itself? Like what what
makes you take one of these pitches and say, you
know what, there might be something here.
Speaker 4 (11:40):
I think the answer is a lot of what you
just said.
Speaker 5 (11:42):
But I will tell you the first place I always
have to start for what I do, since it's in
the gambling industry, is is this illegal.
Speaker 4 (11:50):
Or is this illegal? It's amazing how profitable.
Speaker 5 (11:55):
Your business can be if you forget to pay your
gambling taxes, get licensed, and so sort of our first
step is always what's the legal framework here? And does
it make sense? Does it fit within that kind of
law or construct they're using? And just as a quick aside,
that's actually where we see a lot of people like
privately they make investments and like, oh I invested in this,
(12:17):
you know, daily fantasy company and it's super profitable. It's
like whoah, Like everything about that is that's a that's
actually a sports book, Like, so you don't realize it
or you know this is this is this, and it's like,
oh no, actually that's.
Speaker 4 (12:29):
Online lottery law should apply.
Speaker 5 (12:31):
And so what we find is sort of when genurnalists
investors show up like this is the greatest thing ever,
it's like, did you really spend any time to understand
what you're getting yourselves into from a legal standpoint? So
some interesting stories there, for sure, but I would say
once we passed the hurdle of it is legal, it's
in a part of the market that's interesting, or it's
(12:51):
a product that's compelling, you do have to diligence the team.
How big is the market. We have a very concentrated
market get here in the US with sort of the
fan duels DraftKings, Bet and GM Caesar sort of having
a lion share.
Speaker 4 (13:07):
So if you're trying to sell B to B software.
Speaker 5 (13:10):
And it's let's just say it's risk management software so
that they can offer more lines, you got to be
very clear, like how many customers are going to have
in the US?
Speaker 4 (13:17):
Is this better internationally? So we start kind of using
the context.
Speaker 5 (13:20):
That we have for the industry to say, well, where
does this product fit it? Does it allows people to
gamble more gamble more stuff or the sportsbooks being more
profitable kind of as an idea.
Speaker 4 (13:30):
If it's a B to B solution.
Speaker 5 (13:33):
And if it starts checking those boxes, that's where we
start getting interesting for us. Specifically, I'm not a big
startup guy, Like if you call me with an idea
and a pitch deck.
Speaker 4 (13:42):
I'm not your guy.
Speaker 5 (13:43):
I'm sort of the guy like we've gotten the three million,
five million, ten million.
Speaker 4 (13:48):
In revenues and we think we get to fifty or
one hundred.
Speaker 5 (13:50):
That's really where I feel comfortable sort of dellocating capital.
And so there is a big network of people that
do the startup side, just not where I said. I
look for the phrase investors like to use, even though
it's a total throwaway, useless comment, So prepare yourself for
industry jargon. It's sort of this idea of product market fit,
Like if you just google that, you'll find every investor
(14:11):
in the world using it.
Speaker 4 (14:13):
And if somebody can.
Speaker 5 (14:13):
Really tell me exactly what it means, you know, I'll
play you a dollar.
Speaker 4 (14:17):
But I think what in.
Speaker 5 (14:18):
My head what it means is is is this really
a business and a product you can sell? We just
like to say word product market fit to make us
ourselves feel better about.
Speaker 2 (14:27):
It as far as well. First of all, let me
ask you, Gus, how many folks work for you at
Discerning Capital.
Speaker 4 (14:33):
Just three of us. We're a small team, you know.
Speaker 5 (14:37):
It's sort of one of the things I've learned is
you can outsource a lot of this. So if you're
running a really big firm, you have to have your
own compliance, you have to have your own account administration
and thinks. For firms like us that are sort of
the new generation and actually multi billion dollar funds run
this way.
Speaker 4 (14:54):
Now, you just need the investment team on one side,
and then everything else you can outsource.
Speaker 2 (15:00):
And then the follow up to what you were discussing,
not to say that everything is saturated, but you know,
Evan and I when we created this this Behind the
Big mini podcasts series, one of the things that we
discussed right from the beginning was when you talk to people,
they think of DraftKings, fan duel and bet MGM, and
that's it when it comes to the sports gambling space
slash ecosystem. So you know, you said startups, possibly I'm
(15:23):
not your guy, and then you threw a couple numbers
out there. How many of those opportunities are out there?
Is there just endless? Are there people that we have
never heard of that maybe we never will? You know,
when it comes to knocking on your door, does it
happen a lot?
Speaker 4 (15:38):
Yeah?
Speaker 5 (15:39):
So I think the number is we've seen roughly two
hundred companies in the last year, so it's a much
bigger market than you'd think. And from the consumer standpoint,
let's just we'll pick on bet MGM.
Speaker 6 (15:53):
You know, say you're in Michigan and you're on bet
MGM and you log in and you you know, fund
your account and then you they you know, they say
you're good to bed and all that, and then you
go fine and you start playing blackjack or whatever you're playing,
or slots because I picked Michigan because it allows eye
because you.
Speaker 4 (16:09):
Know, then you switch you over anyone who plays the
sports bet and it's all on the same app. You're like,
this is great, there's just one company involved.
Speaker 5 (16:15):
But what you're missing as the consumer is when you
first fire up that app, they're paying a company.
Speaker 4 (16:21):
It's not usually this group GEO comply. I think it
is for BETMGM, and they.
Speaker 5 (16:24):
Check where you are right, and that company charges for
the ping to the cell phone tower and they get
their fees, and then when you put money into the wallet,
you know, and maybe someone else runs their wallet. I
think I betam GM as their own, but for some
they might outsource their wallet others, you know, then they
have to do know your customer kind of are you
trying to launder money for a cartel?
Speaker 4 (16:46):
Yes or no? Sort of.
Speaker 5 (16:47):
There's all these banking services before your accounts even open, right,
so you might think, oh, there's just a few players,
but there are groups that are like, oh, we can
do you know, know your customer called KYC, you know
better than anyone else. We can do it cheap, you know, faster,
we can go more global with our searches. Then when
you get to playing the games, let's just say the
slot section, right, you've moved over.
Speaker 4 (17:07):
You're now an I casino.
Speaker 5 (17:09):
You go on that page, you seal the slot games.
Oftentimes those are made by hundreds of slot studios around
the world are designing.
Speaker 4 (17:21):
Those slot games.
Speaker 5 (17:23):
There's even this weird thing of distribution which we call aggregators,
where like there might be a thousand slot houses in
the world that will make slot machine games for online,
lot of them in Europe, but they don't know how
to get in front of bet of GM. So there's
like whole groups that will say, well, we'll take one
hundred and fifty group of you, we'll put you together,
and we'll give you one pipe in the bed of gym.
(17:44):
But the consumer just logs in and it sort of
feels like Netflix. It's like what game am I going
to play? And then what's really interest about slot games?
Like if you play those games, it's like Netflix, they
stay at the top longer, right, so they get more play,
and then you can re skin those games, and those
slot manufacturers get paid based on reskinning means like you
take it from there's the Gator version till you make
(18:06):
it the Jaguar version or whatever, and each one of
those you normally kind of get a percent of whatever
people win or lose on those games.
Speaker 4 (18:14):
Let's just say you have a jackpot functionality over the top.
Speaker 5 (18:17):
You can kind of see like when you expand this out,
you know if betem GM says you win ten million
dollars across or things like do they do themselves? They
have a software provider who's doing the jackpot? Is it
like brought to you by the slot manufacturers? The aggregator.
I mean the complexity then when you do the same
thing in sports betting, like you think, oh, I'm just
I'm in DraftKings now and I'm looking at who's going
(18:39):
to score in the first quarter, you know, and I
want to parlay that with someone else of who you
know is the next pitch going to be a strike?
You're actually going across multiple different suppliers, and then oftentimes
you build a parlay of those things have to be
built in house or by another third party. So while
the user experience is very centrey Aid, the supply chain
(19:02):
to this industry.
Speaker 4 (19:05):
Is a mint.
Speaker 5 (19:07):
And we should probably spend some time at some point
just talking about regulated gambling and why it's just so difficult.
But I mean, I think in this industry you've got
all these barriers to entry, so you end up with
a dispersion of suppliers. The question in my head and
where I spend all the time is does that make sense? Well,
we ultimately move to the suppliers all sort of come
(19:29):
together and you have an oligopoli there. I don't know,
but it's just sort of an amazing feature of this
industry where when you go to Google and you Google
something you're just getting Google when you go to DraftKings,
you're not just experiencing Google.
Speaker 4 (19:42):
It is. You know, our DraftKings it is. I would
be I'd love to know the number.
Speaker 5 (19:47):
I don't think it's ever been disclosed, but I would
bet DraftKings probably has two hundred two thousand people that
are kind of a two thousand groups that are built
up into their unit.
Speaker 3 (19:59):
One of the interesting things that you can do is
go on like a gaming board's website and pull up
the list of their licensees and you can see right,
you know, and depending on the state, they're all going
to do this differently. But you have licensed operators like
so you'll have the DraftKings and Fandles of the world.
(20:20):
But then you have all sorts of different suppliers and
they and they're gonna give it, Like I said, every
state's gonna give them different names in different categories.
Speaker 4 (20:28):
But when you just start to see the.
Speaker 3 (20:29):
Volumes of people that are or of companies rather that
are in there, and and you can actually look and
see what this licensing entails because you mentioned it and
it is, it can be a significant barrier to entry
in time and cost, in aggravation in it you know,
the private the types of things you need to do.
(20:50):
I tell people this all the time, Sean. I think
I've told you this, Like I had an individual license
when I worked in Pennsylvania for for a gaming entity,
and I had to go into the bank and get
eighteen months of my kids savings account statements printed out,
so I could. I mean, it's you know, if you
(21:11):
ever want to really pissed off a bank teller, I
highly suggest doing that. I mean, it's crazy, but that's
what the licensing process and tails for better for worse.
And so when you're talking about starting up one of
these companies that's going to be a supplier to the industry,
you know, that's what you're signing up for.
Speaker 2 (21:29):
Excellent stuff. Well, I'll tell you what. There's a ton
to learn. And the regulated gambling came up on our
last podcast, and of course there's new hurdles in every
single state, and our friends over at Sports Trade I
think just got approved in Arizona if I'm not mistaken.
NO want to hit the gas pedal on that one,
but I leave that was breaking new. So why don't
(21:50):
we go there. Let's talk a little about the regulated
gambling space and the hurdles that exist, Davis, As far
as from state to state, it just seems like it's new.
But you know, and one thing that we talk about
often here is did they actually care about the sports Gambler?
Speaker 4 (22:06):
You know?
Speaker 2 (22:06):
And I know that we have some people out there
that want to be the voices for the Sports Gambler,
and one of those is actually hosting bett Bash in Vegas.
But as far as where we're moving into that direction,
do you feel like the Gambler's voice is now being
listened to a little bit more or is that maybe
just on the surface level, Davis.
Speaker 5 (22:25):
Well, I think there's a lot of parts of your question.
So going specifically to whether or not I think the
state regulatory bodies are necessarily there for sort of professional
betters and to kind of make the markets highly efficient.
Speaker 4 (22:42):
I don't think that's their number one goal, just to
be fair.
Speaker 5 (22:47):
I know a few of them, and I had a
great call with one of them a couple months ago
about something else, and they're very clear of like, our
number one goal is to protect the consumers, then number
two is to revenues. So if that's sort of your
true north, you're not necessarily getting concerned about you know,
(23:09):
are we getting the sharpest odds for our customers?
Speaker 4 (23:11):
And how easy is it to move money in and out?
Speaker 5 (23:14):
Because what you're really focused on is avoiding letting your
customers be fleaed or your constituents in your state. So
I think the idea that they are there for professional
betters is not right. I do worry that if we
go too far into regulating gambling and taking tax rates
too high and making it just ultra cumbersome, we're actually
(23:38):
going to make it easier for gray markets or black
market operators to continue operating in the US.
Speaker 4 (23:47):
And it's interesting. I've met a lot of people.
Speaker 5 (23:49):
As I've gone to start my own business, and when
you meet people outside of the gambling industry, so we're
going to move over to sort of your average affluent
or dentist or whatever if they just like to throw
a couple hundred bucks.
Speaker 4 (24:04):
On the game over the weekend.
Speaker 5 (24:06):
I've been shocked at the percent of those people that
I'm I'm meeting that currently use a bookie or some
sort of a legal site to do it. And the
number one reason that I hear is sort of access
to credit and it's easier to do right. The guy
that you knew in college still runs it for fifty
(24:29):
guys and a sort of a side thing, and he's good,
you're you know, you're good for it, and you pay
at the end of the football season. I think there's
lots of reasons that that doesn't allow for consumer protections
and what happens if it doesn't pay you.
Speaker 4 (24:40):
And all of that. But I do think that.
Speaker 5 (24:44):
That model is going to remain fairly healthy in the
US until we can be more fluid, and so I
think the regulators thus far done a pretty good job
of I mean, right, I think go back six years,
seven years, I think we got nothing right.
Speaker 4 (24:59):
So we've come a long way.
Speaker 5 (25:01):
But I do believe that, you know, the regulators are
not there necessarily to make betting ten thousand dollars on
an NFL game very efficient and easy to move your
money in and out and you get the best possible
line guaranteed, Like, that's not their concern. Their concern is
if you take that, if you find a way to
get that bet in, you accept the odds they're publicly posted.
(25:23):
Does that sportsbook follow its rules in terms of service
and follow the laws in their state and then pay
their taxes?
Speaker 4 (25:29):
I think that's sort.
Speaker 5 (25:30):
Of the reality of regulated gambling today.
Speaker 3 (25:35):
So let's talk for a minute about you were talking
about sort of the wide variety of companies that are
out there, because you know, while there might be a
relatively smaller number of operators, the number of companies that
supply them and flow into them is really significant. So
over the the last three years or so that you've
(25:56):
been doing this, you know, with your own company, what
what are some of the companies that you've looked at
and invested in that you think are sort of, you know,
on on track to be really successful. But more interestingly,
I think you know why, like what what set them
apart and what is so exciting about them for you?
Speaker 5 (26:15):
Yeah, so I'll probably just take like a more general
view because under the Discerning brand, we've only.
Speaker 4 (26:20):
Done one thus far.
Speaker 5 (26:21):
It's public, so that's a little less exciting to talk about.
Speaker 4 (26:25):
And unless your listeners in Australia.
Speaker 5 (26:28):
You know, if you are in Australia, go log in,
you know, make your pickle that account and you'll love it.
Speaker 4 (26:34):
Are you'll likely love it.
Speaker 5 (26:35):
Obviously some concerns I can sell in Australia. But so
that's the only thing we've done is in Australia. But
what I would say is going generally the deals that
we have done or looked at and gotten very close to.
It's sort of I use this phrase form of these
sort of micro services. Like I think it's really hard
in this industry to be good at a lot of
(26:55):
things all at once. It's probably a truism for most industries.
But the things that I really love to look at
are the companies where they found sort of this part
of the market that no one else was paying attention to.
They identified the problem, they built a solution, and now
they're executing well, you know one that we we were
involved with and we led their last round of financing.
(27:18):
We mentioned briefly kind of a warm up, but is
you know US Integrity now called IC three sixty, but
they exist. I kind of describe them as the Securities
Exchange Commission for sports betting, right the same way the
sec Today's a terrible day in the stock market, but
you know if people were trading yesterday or two days
ago news and all of a sudden this comes out
(27:40):
or what do they know? They oh, they work for
weapons manufacturer? Where are those missiles going to? Did they
know something? They do that same thing for sports betting.
They become somewhat popular now that they had some very
public or the NBA issues that they identified also things
like an SEC baseball coach betting on himself. But they
sort of are a suit regulator in a lot of ways.
(28:01):
And I hate to say it, but as we move
into things like nil paying college athletes, the prevalence of
issues of sports integrity will rise. So we did that
deal and it was a much earlier stage business when
we did it a few years ago, and we did
that at a different employer. But that business to me
(28:25):
is like undoubtedly going to grow. It's a sad reality,
you know. On that same side, just to give a
shout out to a company we know, well, you know
there's a company Kinbridge. They offer responsible gambling help to people.
They partner with the sportsbook so that when you go,
I've got a problem, you know, the customer service agent
at DraftKings or BETTMGM doesn't doesn't know what to do.
(28:47):
They might be trained a little bit, but groups like
Cambridge is sort of the place where they can step
in and go, hey, we've got people that are certified
in a licensed to help treat problem gambling.
Speaker 4 (28:59):
And so I picked those as two examples. But this
is an industry where.
Speaker 5 (29:07):
These small solutions can actually become massive.
Speaker 4 (29:11):
Right you pick your number? Is this one hundred billion
dollar industry is one hundred and fifty billion? I was like,
you know, I was joking, like we can't even get.
Speaker 5 (29:17):
Consensus on how big we are, but it's a massive industry.
So if you can just be a small service provider here,
you can have a fifty one hundred million dollars revenue
business pretty quickly. And we love the ones where they're
sort of they've identified they're part of the market, they're
focused on it, and they don't want to be all
things all parties, but they're just we're going to do
this really, really well. And when I can look at
(29:39):
it and go, like I was saying this, you know,
listeners aren't on video, but like as I said, responsible gambling,
it's like YouTube are not in your head because like,
what are the odds that we don't need good responsible
gambling the.
Speaker 4 (29:51):
Next five years? They're very low.
Speaker 5 (29:53):
So my view is that's you know, the question is
what do you pay for? What's worth a nonprofit? How
profitable are they? Those are the questions I like to
wrestle with, because I want us to sort of find
the things where it's an obvious answer to sort of
they're going to be growth businesses, just a question of
how big do they get.
Speaker 3 (30:13):
I want to ask you about one of the things
that you said almost is a throwaway line though at
the beginning of your answer, where you were talking about
your investment in Australia or this Australian company rather because
I think one of the things that well, maybe Americans
might be guilty of this across the board, but certainly
when it comes to sports gambling, you know, we forget
(30:35):
that this is an industry that has existed for quite
some time outside of this country's borders as well. And
you know, to that extent, what sort of synergies are
you seeing. Are there companies that are either doing business
outside of the US that are you know, looking to
come in or vice versa, companies that might have some
(30:55):
you know, issues sort of navigating the US regulatory world,
but are far more successful in other jurisdictions.
Speaker 4 (31:02):
Yeah, well, touch on the last one first.
Speaker 5 (31:05):
Is actually really easy because if you operate what we
you know, there's like sort of black businesses which are
definitely legal there's sort of fully regulated white markets and
then there's gray. So the most profitable sports books in
the world that I've seen operate in black and gray
because they'll pay taxes then take So, yeah, they don't
(31:27):
even worry about the US because why would you ever
come here if you make you and you.
Speaker 3 (31:32):
Can't when you're operating illegally, you're not getting regulated.
Speaker 5 (31:37):
So you know, I'll just take that because that was easy.
Thanks for teeing that part up. But then you know
the truth is, and you know, I've got a lot
of buddies, right, I'm not like a gambler by nature,
like the I'll bet on some golf if I'm watching it.
Speaker 4 (31:51):
I'll bet on the Super Bowl a hundred bucks river.
Speaker 5 (31:53):
But when I talk to my friends, are sort of
outside of my gambling network, right, they're only Oh Fanduels
run away with It?
Speaker 4 (32:00):
Right?
Speaker 5 (32:00):
Who owns FanDuel Flutter Flutter is used to be Patty
Power Betfair. Right, that's when I first met them. They
were a UK based entity that maybe they're Irish, but
I met him in England and I saw their trading
team in Ireland and probably twenty fifteen really interesting in.
Speaker 4 (32:22):
iOpening for what's worth it.
Speaker 5 (32:26):
But you think FanDuel I would tell you that's a
global business. You think, okay, next up DraftKings, Yeah, they
are a US business. Then you start looking who's next,
Caesar's US Bet, MGM, who's that right, that's MGM brand,
and then all the technology from in Taine, which is
a large global sportsbook and I.
Speaker 4 (32:45):
Casino based out of the UK. So I kind of
just point this.
Speaker 5 (32:49):
Out of like, it's not like we're already living in isolation.
Much of what's happening in this country is already international.
Points bet, Who's now you know Rip in the US
and al fanatics. You know that was an Australian sports
book they came over, So sort of a lot of
this is already international. A lot of the suppliers, so
(33:09):
the groups that supply the lines to these sports books,
or the data rights companies. Like if you want to
hear something crazy, it's how this is something everyone's always
intrigued about.
Speaker 4 (33:21):
So I'm sorry, I'm gonna take a quick aside here, right,
Sports Radar and Genius.
Speaker 5 (33:27):
Most people don't know who these are, but they are
actually the people that create the data that says whether
or not you win your bets or not. So you
might be betting on DraftKings, right, but when they decide okay,
did you know, going back to the story from earlier,
so on Jerry Rice, like did Jerry Rice, how many
yards did you have?
Speaker 4 (33:42):
Well, they use the official data provider. Who's that is that?
The NFL? No, no, no, the NFL doesn't want to.
Speaker 5 (33:47):
Touch sports bet so they have sold off their rights
to Genius. Right, so Genius Sports has now said we'll
spend billions of dollars take what's happening on the field.
Speaker 4 (34:00):
They literally have people like iPads in the stands clicking
like you know, Patrick mahomes through at seven yards. So
this guy goes from the stands to a data center.
Speaker 5 (34:11):
As long as it all matches, it becomes the global
truth of what happened on.
Speaker 4 (34:14):
The betting lines.
Speaker 5 (34:16):
So even though we're talking about like, oh it's DraftKings,
it's like Genius and Radar European companies, so like, you know,
it's sort of the industry is already inherently global. But
I always love that because people think there's like some
sort of you know, vision is you know, robotic vision
is telling you like, oh, this is who caught that
(34:36):
or it's like, no, there's some guys with an iPad
sitting there watching that game, and if they disagree, it
goes to someone in a video surveillance room who goes, yeah,
that was you know this player. But it's sort of
amazing how unsophisticated that business is.
Speaker 2 (34:51):
So do we have his social handle? Can we tweet
at him instead of at DraftKings to get that refund
when Mahomes gets that incomplete pass next time?
Speaker 5 (35:00):
Yeah, I mean you can, Yeah, you can tweet it anybody.
Just good lucky in your response. I love the way
now that when you tweeted a companies they like it.
Have you seen this, like if you just like I
was sweezing it tweeting a Breeze Airlines, you mess something
up for me and they just like it so that
they like auto log And I'm like, this is sort
of weird that I'm complaining and I saw somebody get
saying that like DraftKings was doing that. Enough you tweet
at them and they like it so that they have
(35:21):
a system of like it's sort of weird.
Speaker 4 (35:23):
So you know, you need a dislike button or we'll
follow up, We'll talk to Elon about it.
Speaker 2 (35:30):
Thank you, he doesn't have much on his plate these days.
Speaker 4 (35:32):
You're right.
Speaker 2 (35:35):
Go for it, Evan, are you so? I wanted to
ask you, Davis, as far as you know, we continue
to just see these numbers online gambling just continue to climb,
and you're the right guy for this question. Eventually, where
they will we just continue to grow and go north
a year after year in the online sports gambling space,
(35:58):
or will there be a moment kind of things plateau
or will there be continuing flow of these new opportunities
that present themselves to you and then improve things and
then more betters come to the space and it continues
to just increase these numbers, because year after year, quarter
after quarter, it just through the roof and it's eye
(36:18):
opening for people like myself.
Speaker 4 (36:22):
So I don't believe it's stopping. Right.
Speaker 5 (36:25):
The story of how I even got into this industry
is probably just worth sharing here because I think it's
it'll it paints my view. So when I was a
generalist growth investor, I was actually we were one of
the largest public markets investors in casinos. We own casinos
in Cambodia. I was flying on Philippines. It was look
at all these casinos Vegas McAll you name it. And
(36:47):
I was in the back of a black taxi cab
with a colleague in England and it's probably like twenty fourteen,
twenty fifteen, twenty sixteen, something like that, and I just
kept looking at my wind and I kept being like, Wow,
all of these ads are like, you know, aight a
and a bet three sixty five download bet on your
app on your smartphone and in the back of that
(37:10):
taxi cab when my iPhone was is still fairly new.
I think back then it was like you could pull
up the data and online gambling goes up into the
right and physical world gambling starts sort of a decline
or flattening out, and so that for me was sort
of the Aha moment. I was like, I'm one of
the largest shareholders in these big casino companies and I'm
(37:33):
looking at this market showing what technology can do.
Speaker 4 (37:38):
So then I went back and we did this big.
Speaker 5 (37:40):
Survey through professional survey group, and we said, I asked
people like, do you bet, do you not bet?
Speaker 4 (37:44):
All these questions we can understand people's use cases.
Speaker 5 (37:47):
And when you get to the people that bet or
are willing to bet or bet. The last few years
and you ask them at the end and you're like,
in the future, if it was readily available in your smartphone,
would you bet more at your house on your smartphone
or in a casino?
Speaker 4 (38:05):
And the answer.
Speaker 5 (38:06):
I believe the first one was ninety four percent of
people said I'd.
Speaker 4 (38:10):
Rather bet on my phone. And then we did it.
Speaker 5 (38:13):
I mean it was ninety two that time that we
did it again, like a year and a half later,
it was like, went to ninety four. And I point
that out because at that time I started looking at
the gambling industry in.
Speaker 4 (38:23):
The US and it was about seventy.
Speaker 5 (38:25):
Billion dollars for tribal plus commercial casinos.
Speaker 4 (38:29):
And that's when I started flying around the world saying
the US was going to be huge.
Speaker 5 (38:33):
This was you know, I was meeting back with Patti
powerbet Pair back then and being like, the US is
gonna be huge.
Speaker 4 (38:38):
And the response to me with was actually they were like,
isn't it still illegal there? We don't have a strategy yet.
Speaker 5 (38:43):
So I felt like I was a little bit like
a positive chicken little running around Europe.
Speaker 4 (38:47):
Trying to find somebody that was interested in how big
the US could be.
Speaker 5 (38:51):
So but the number I picked back then was I
was like, the US gambling and wagering market will be
seventy billion dollars online, and you know, we're still online
sports betting and gambling. I think it is about twelve
billion last year, as the number saw the other day. Again,
these numbers are always squishy, but so I.
Speaker 4 (39:08):
Think we're still sort of in second or third inning.
Speaker 5 (39:11):
The questions that I struggle with at this point are
how much go to sort of regulated gambling so FanDuel, DraftKings,
bet MGM, caesars, how much goes to the daily fantasy players,
how much goes to the sweepstakes.
Speaker 4 (39:26):
Guys, how much goes to eyeladder, you name it.
Speaker 5 (39:29):
It's a little unclear to me, but I think the
point is it's gonna be massive, and it might take
a year where it goes sideways and no new states open,
but I think we are on an inevitable march to
allowing people to wager for fun on their phones, whether
it's sports, whether it's eye casino or whatever. And that's
(39:51):
been my view for years, and honestly, that's how I
went from sort of partner at big investment firm to
in house of a casino and now doing this full time.
Is because I'm a believer that this isn't changing.
Speaker 3 (40:04):
Yeah, And I think to your point, when you look
at the I casino margins for the operators in the
in the handful of states where it's legal, and you
know it, when you see that proliferate, which I think
it will right over the next whatever decade or so,
it's that that's going to be a real potential game
(40:25):
changer because now you're going to take these numbers that
are already big and they're going to.
Speaker 4 (40:30):
Look small by comparison.
Speaker 3 (40:32):
You know, we talk a lot about when are we
going to see sports betting in Texas and California, and yes,
that'll be material as well. But when we see I
casino proliferate beyond the you know seminar eight states where
where it's legal and and sort of match where sports
betting is from a digital perspective, yeah, talk about a
game changer, right, Yeah.
Speaker 5 (40:53):
I think people are just inherently looking for more ways
to like do more interesting stuff and have a have
a sweat.
Speaker 4 (41:01):
Right.
Speaker 5 (41:02):
It's like I said, I'm not a better but if
I'm going to watch a golf tournament and I say,
it's like the Masters, what's the Masters every year. It's
like I want to have somebody I'm cheered for for
even if it's you know, I bet one hundred bucks
in the whole thing, right, it's the fun in the
engagement is what people are chasing. And I don't think
that's going away anytime soon. I actually think that's what's
going to drive the growth in this industry.
Speaker 4 (41:23):
Is how do you get the sweat? Is that? You know?
Speaker 5 (41:27):
I always say, it's like I don't. Actually you want
to hear something funny. If my interview question, ask anybody
as an investor, if I'm like interviewing somebody can work
for me, ask them if they play the lottery. And
the vast majority of people and I'm ruining my interview
question here, but the vast majority of kids on interview
coming straight out of college, when I worked at this
(41:47):
big fund, they'd be like, well, you know, statistically the
math is this, and so unless it's a produced amount,
like you should never play because then as a positive
ev I'm like, I don't want to work with you
because you don't play the lottery for twenty dollars, which
is what most peop are doing.
Speaker 4 (42:04):
Because you're worried about the statistics, What do you why
are you playing? You guys? Ever played the lottery? Yeah?
Speaker 3 (42:09):
When I ask people a similar questions, I said, I play.
Do I play the lottery?
Speaker 4 (42:13):
No?
Speaker 3 (42:14):
But when Powerball hits a billion dollars, yeah, I throw
twenty bucks on it.
Speaker 5 (42:18):
And it's about sitting down with your wife and going
what would you do your buddies and you send the
one hundred million dollars yacht and go see you boys
and Monaco on this thing?
Speaker 4 (42:28):
Right when I win, it's like, that's the point.
Speaker 5 (42:31):
And so it's just like I think people it's inherently
a social thing, Like I have a question of whether
or not, and it's something we've been exploring over the
last few years. Is there ultimately like a social network
for betting, like where there's a better place to share.
Speaker 4 (42:45):
Some people have different versions of it, but right now
it just goes into your tech, your text chains with
your your buddies or whatever. But I think this growth
in entertainment, sharing the joy, sharing.
Speaker 5 (42:57):
The sweat is fun and that's why I believe this
industry is going to be big.
Speaker 4 (43:02):
Now is it all regulator? Where I don't know?
Speaker 5 (43:06):
I can just tell you it's I believe it's an
inevitability that this industry keeps growing.
Speaker 2 (43:13):
Well, Davis, this has been a ton of fun. Man,
extremely bright and uh yeah, you got a lot going on.
Of course, love the sweat And I'm definitely gonna be
stealing that question for our future guest, who Evan, what's
the question you're going to ask during interviews? And yes,
I do play the lottery through my mother. She plays
every day, so technically she wins. I win. Correct. You
(43:36):
can find Davis on Socials Fantastic, Twitter or x platform
here for Davis Dcat seven and he asked the question
about college football n C double A football dynasty mode?
Is that going to be increasing the divorce rate in
this country? Are you do you play on PlayStation? Have
you been dialing up the n C double A?
Speaker 5 (43:58):
So it's so I've been on the road for six weeks.
I just got back last night. But I'm like, I
am going to refire up the Xbox down, let's go
and get on there. I mean, I it was such
a big part of my youth was night spent like
four in the morning. So I went to a very
small school called Washington Lee, and I like, you know,
(44:19):
I did the thing where I made the team as
like a D three D three team, and you know,
the recruiting is brutal, but you take it on a
national championship and you're like, what didn't I just do
with a month of my life? But you know, so
I don't know if I'm gonna play as much as
I used to, but I am definitely excited. My wife
is already upset, and then I'm even.
Speaker 4 (44:38):
Considering getting it, which is what sort of sparked the tweet.
Speaker 3 (44:42):
So this is like the best or not the best.
But one of the better parts about having kids is
like I've got fourteen and twelve year old boys who
now get these video games and it's like, oh, well,
you know, they bought them, so maybe I'll play them
and or yeah, or we'll play with and this is
a you know, father son bonding activity and that's really
(45:04):
really hard for your wife to yell at.
Speaker 5 (45:06):
Well. The number one question that like that jumps into
my head is can you beat your children?
Speaker 4 (45:11):
Oh? Absolutely not, No really.
Speaker 5 (45:13):
Oh see, I grew up playing enough all the way
through college that you know, my kid, my oldest is
nintend now, but I you know, they like to daddy's
daddy smokes him stuff.
Speaker 3 (45:23):
So give it a couple of years until they're they're
slightly older. But these like eight thousand button controllers are
sort of my downfall. I grew up playing you know,
Sega Genesis had a B and C. I can still
dominate that, but when you get into like L one
and L two and Triangle Circle, no.
Speaker 4 (45:41):
No, I'm I'm a disadvantage.
Speaker 5 (45:43):
I'm forty, so I was in college for that South
So like me and my buddies are playing on Xbox
in college.
Speaker 2 (45:49):
So yeah, saying you're lucky at those timesty recruits to
Washington Lee or is that the name of Yah.
Speaker 4 (45:55):
Washington And that's very good.
Speaker 5 (45:57):
It might feel a little harder based on what I've
watched about Dynasty Mud.
Speaker 4 (46:01):
But we're gonna see.
Speaker 2 (46:01):
What a great video from Scott van Pelt the other
day where he was crying basically saying what you guys
are just saying, He's like, I can't beat my kids.
I used to be good at this game and it's
just rough. But good luck on that. I hear great
things about the game. Davis can't thank you enough for
stopping by once again discerning cap dot com for more
information over there, and man enjoy bet bash and I
(46:23):
know you said you're possibly gonna squeeze over and see
what's happening with the guys in the industry. There's a
lot of stories being told, a lot of smart brains
over there. And as I said, can't thank you enough
and we'll catch up down the road, sir.
Speaker 4 (46:35):
All right, thanks guys for having me on. Looking forward
to next Monday.
Speaker 2 (46:38):
Well that was a conversation. Again, we do these podcasts,
Evan and I come away with just a full yellow
page of a lawyer pad and I know that's your
term there of notes and nuggets and just learning tidbits
every single episode. Davis Catlin extremely bright, as all of
our guests are connected and then some being in Las
(47:02):
Vegas in the the industry. Just a great conversation there
and learned a lot.
Speaker 3 (47:07):
Yeah, I think Davis really highlights, you know what, just
how how deep this industry goes, right and while people
he said it better than I can. But people are
betting on their phones, and they're aware of like one brand,
the consumer facing brand, but there are dozens of companies
that are going into making that product work and and
(47:30):
and it's why this is such a complex industry. But
a really interesting one to be involved in from the
business side, so thought he gave us some really great insights.
He obviously knows a ton about this industry and looking
forward to seeing, you know, how how the starting capital
takes off over the next couple of years.
Speaker 2 (47:49):
There's no question that it's going to take off. Even
more so, it's off and run. And this is our
post podcast recap, as we always do here, a little
post game. So some of the highlights for me, first
and foremost the guy in the stands with the iPad.
That was incredible to learn that. You think that that's
how it plays out, but I've never really heard that before.
(48:10):
That was new to me.
Speaker 3 (48:12):
You got to fight the latency issues and you know,
have the data coming in in real time before you
see it on TV. So that's one of the key
ways it gets done.
Speaker 2 (48:22):
And then as far as with you know, hey, you
got it. He said, what two hundred pitches in the
last year, I want to say that he heard yeah.
And then you know, the first question is are you
llegal or not? You know, how many people in your
mind have this great concept and whatever, like we heard
(48:42):
it could be on the whole sports gamble. It could
be something that is just from you know, working with
these sports gambling, you know apps, whatever it may be.
But how many people do you think have a great
idea but then at the end of the day it's
not exactly legal.
Speaker 3 (48:58):
Yeah, or it needs to be tweaked in some fashion, right.
I think the one mistake that people make is that
they see something that exists and they assume that just
because it's on the internet, it must be legal and therefore, well,
if they can do it, obviously I can do something similar.
And the answer is not necessarily. So yeah, Look, that's
(49:23):
a decent chunk of what I do day in and
day out is talk to people about those sorts of
complexities and ways that they might need to adjust their
ideas or what's gonna trigger licensing or what might be
okay in certain states or certain countries.
Speaker 4 (49:39):
And not others.
Speaker 3 (49:40):
Yeah, there's it's there's a lot of complexity that goes
into it. I thought it was fascinating that Davis is
forty I'm forty three, and his experience on multi button
video games seems to be significantly outsizing mine for that
three year age gaps.
Speaker 2 (50:01):
So that was a great tweet to pull up at
the right time at the end, just to plug his
socials and he's he tweets a little bit. He's he's
out there, he's active. And when I found that tweet,
I just started cracking up. I didn't see it till
we were just live there. But of course a lot
of people are playing that game. It is it's it
was the game from back in the day, some childhood,
(50:21):
some teenagers, some twenty year olds, whatever it may be.
It was a great game and it's great to have
it back, but definitely a little bit more difficult for
folks our age these days.
Speaker 3 (50:32):
Yeah, both from a dexterity standpoint and also from a
time standpoint. I seem to have a little bit less
free time these days than I did when I was
in high school or college.
Speaker 2 (50:41):
But there's no four am games going off in the
Davis household, huh.
Speaker 3 (50:45):
Not that my wife knows about it, So try to
keep it down.
Speaker 2 (50:48):
Lift Evan. That was fantastic Davis Catlan once again discerning
capital and it was a great listen. And as always,
if you missed anything, folks, once again subscribe, tell a
friend behind the vegue. You can get it over at
FOXPHL Gambler dot com
You are listening to Behind the Vague, a podcast mini
series that takes you beyond the bets and strategies and
more into the business of the sports betting industry. Now
Here are your hosts, Sean Brace and Evan Davis.
Speaker 2 (00:16):
That's right, you heard the Man, Episode five Behind the Vague.
We are off and running. Sean Brace, Evan Davis with
you and Evan fantastic job of lining up all the
great guests we've had so far and if you miss anything,
once again, get all of our podcast at Foxpho Gambler
dot com. Be sure to subscribe. But Evan Davis Catlin
from Discerningcapitol dot com looking forward to having this conversation
(00:39):
with him because he's definitely behind the scenes, but Man
has a lot of influence in the sports gambling industry.
Speaker 3 (00:46):
Yeah, I'm really excited for this conversation too. You know,
I think the investor side in this industry is something
that most people don't really know a whole lot about,
but it's obviously what sort of you know, the fuel
that makes everything work, and it gives He's got a
really really broad wide, interesting perspective on the industry, not
(01:10):
just the brands that you've heard of, but you know
the ones that you haven't as.
Speaker 2 (01:13):
Well, and just started Discerning Capital. We're gonna hear a
lot more. But Davis is global, He's been all around
the world and then some, so this is a great
conversation coming your way right here. I'm Behind the Vegue.
Today's guest ev been super excited as always. He's going
to take us behind the scenes over at Discerning Capital.
They could be founded at discerningcap dot com, straight out
(01:36):
of the home of it all in beautiful Las Vegas.
There's a lot going on in Vegas this week, so
excited to hear a little bit more. Maybe he'll be
venturing his way over to to join the folks with
Bette Bash. But on this episode of Behind the Vegue,
we are joined by Davis Catlan, who is one of
the co founders over at Discerning Capital. Davis an amazing resume.
(01:57):
Can't wait to talk about anything and everything in the
sports gambling space. As always, thank you for joining us, man, thanks.
Speaker 4 (02:04):
For having me.
Speaker 5 (02:04):
I'm excited to be here talk a little about where
sports betting meets business meets investing.
Speaker 2 (02:11):
Yes, we're gonna talk obviously a ton about Certain Capital
and everything in as far as the sports gambling space
in the ecosystem, I know Evan has a ton to
get into, but as always, we never like to dive
into people's you know, personal history, their age and where
they grew up and all that. We just like to
ask one general question and in our listening audience and
(02:33):
myself and Evan can sniff it out a little bit there,
and that question is simple, what is your favorite childhood
sports memory?
Speaker 4 (02:40):
Sir? Of my sports or of watching sports, you.
Speaker 2 (02:45):
Tell us your favorite childhood sports memory, because, like you know,
some people get out here and talk about Jordan ninety one.
I'm like, all right, I was a Jordan kid growing up.
We had somebody joining us talked about the two thousand
and eight World Series. Yeah, he was young. The Phillies
won the World Series. Then, so your favorite childhood sports memory.
Speaker 5 (03:05):
Well, so I grew up in Jacksonville, Florida, which is
just down the road from Gainesville, and I grew up.
We don't have to go old, i am, but I
was there before the Jaguars had fully taken off, and
so I grew up a Gator fan.
Speaker 4 (03:20):
So for me, the only thing I cared about, if
we're being honest, was how the Gators did in that
given year versus the Seminoles and the Bulldogs. That was
my entire life. When you are from Jacksonville, that's it.
Speaker 5 (03:41):
We're the world's largest outdoor cocktail party there, the whole thing.
But you know, I think those are probably my best
memories are going to those games.
Speaker 4 (03:48):
My parents, you know, would take us. I had an
uncle dat tickets and so we would go to those games.
Speaker 5 (03:53):
And Spurrier running out on the field and just sort
of the visor and throwing the visors.
Speaker 4 (04:00):
You know, it's interesting.
Speaker 5 (04:01):
I'm a sports guy, but I'm more of a sports
are about the experience and less about like I follow
the stats closely and so like the other thing that
jumps in my head just to give like some context
is like I remember my dad used to start a
fire and we'd watched the forty nine Ers because I
was a Joe Montana Jerry Rice guy, and you'd start
(04:22):
a fire and you put up these little TV. It
was like back when TV's where you know, the size
of a suitcase and like, you know, the screen was
four inches and we'd tip by the fire and watch,
you know, the forty nine Ers.
Speaker 4 (04:34):
Verus Cowboys was like the big playoff game.
Speaker 5 (04:36):
So for me, I don't remember thinking about those games,
but I remember watching them with my dad, and so
that's sort of all of my memories. They're not interesting
to sports fans, but it's more about who I was
with than the culture I.
Speaker 4 (04:48):
Was in at the time.
Speaker 2 (04:49):
That's great, And my follow up wild be how many
cocktail party games have you been to? Off the top
of your head if you had to give us a number,
because I've never been. That's definitely on a bucket list.
Speaker 5 (05:00):
Ten.
Speaker 2 (05:01):
Oh, that's awesome.
Speaker 4 (05:02):
Probably about that. So, I mean, it's a fun game.
The experience on Friday night, it's changed a lot now.
You know, when I was going on I was.
Speaker 5 (05:11):
In college, My experience was a little different than it
would be if I went today.
Speaker 4 (05:15):
But yeah, it's a wonderful game, and you know, the
whole time split down the middle, it's pretty special.
Speaker 2 (05:21):
Talk a little bit about Discerning Capital and you just
created this co founder what two and a half three
years into us, Yeah.
Speaker 4 (05:28):
A couple of years in.
Speaker 5 (05:29):
So Discerning Capital is an investment kind of fund and
strategy where we focus on investing primarily in sort of
regulated online gambling businesses. My background is I've been a
professional investor for seventeen years now, always into growth companies.
Speaker 4 (05:51):
The first fourteen years I was with.
Speaker 5 (05:54):
A firm that focused initially on all public markets and
sort of one of the biggest buyers Facebook at the
IPO sort of find generational change and invest in it
for take big positions or really believe in what you do.
Speaker 4 (06:07):
And then I went from.
Speaker 5 (06:09):
There to going in house at one of the large
casino companies, and that really refined me from sort of
generalist consumer investor that also did gambling to you know,
really being focused fully on online gambling.
Speaker 4 (06:22):
And s for of regulated gambling and where that meets investment.
And then we went out on our own a couple.
Speaker 5 (06:27):
Of years ago, and what we do is is we
go find companies that supply the growth of online gambling
and that can be regulated.
Speaker 4 (06:35):
That could be daily Fantasy, that could be sweepstakes or whatever.
But what we want to do.
Speaker 5 (06:42):
Is kind of offer our investors access to the fast
growing market of gambling.
Speaker 3 (06:47):
So who are like, who are these investors? What did
you go out and you say I'm going to start,
you know, a fund or I'm going to start an
investment group, And are are you putting up your own money.
Are you going out and convincing you know, your friends
and family to invest with you.
Speaker 4 (07:03):
How how does this all get started? Well, it's hard
to get started, is the short answer. Right.
Speaker 5 (07:11):
The asset management excuse me, the asset management business is
one we're scale but gets more scale. So starting out
is very hard. You are knocking on doors of people
that know you and then know your background and that
kind of inherently trust you. And when I walk in
and go hey, I think this is a good idea,
if they agree, or maybe if they don't think it's
a terrible idea, they start investing with you.
Speaker 4 (07:33):
And so there's a few different sort of models you
can use to make.
Speaker 5 (07:37):
These investments, but the one that we currently operate in
is we find investment opportunities and then we go out
to I think it's about three hundred and thirty investors.
They're all sort of accredited investors, and we say, hey,
this is this deal we've.
Speaker 4 (07:51):
Sourced, this is why we like it. We run investment
memo and we kind of take it out to them
and then they commit their capital and we pull it
together and we invest in the companies.
Speaker 5 (08:01):
And what we do, which is just worth noting is
you know, we're not buying the whole company, We're normally
buying a minority.
Speaker 4 (08:08):
Piece of it.
Speaker 5 (08:08):
So say kind of twenty percent is probably a pretty
good estimate of what our goal is.
Speaker 4 (08:12):
So we're pulling together, you.
Speaker 5 (08:15):
Know, we would say between three and twenty million dollars
to go try to buy the minority.
Speaker 4 (08:19):
Pieces of companies.
Speaker 5 (08:20):
We haven't done any of that, we're that big yet
on the high side, but we've gotten close a few times.
Speaker 4 (08:25):
So but that's how we work. It is.
Speaker 5 (08:28):
It is out there selling the dream, which is honestly
the part I like least because I'm an investor. I
don't like the selling. I like talking about the risk
and I like the how.
Speaker 4 (08:39):
Big could it be? But what could go wrong?
Speaker 5 (08:40):
And the truth is is this business is a lot
about investing and then spending half the time convincing everyone
else that you're right.
Speaker 3 (08:49):
So so when you're like talking to people about investing
money into these deals, is this something? Are these typically
like you know, higher net worth individuals that are looking
for a way to just diversify their investment strategy. And yeah,
maybe they've got their you know, money markets and they've
got their mutual funds and their stocks and all their
(09:11):
securities and maybe some real estate and and hey, like,
I'm going to take what might be a good trust
check for most of us, but for them it's a
little bit of a smaller percentage of their assets. And
say it's maybe this is a little bit more of
a lottery ticket.
Speaker 5 (09:28):
Yes, So there's this whole part of the financial markets
that most of us don't talk about, called family offices.
Speaker 4 (09:35):
I'm not sure if you guys are familiar with that.
Speaker 5 (09:37):
It was a phrase I knew when I was at
this large institutional firm, but it is Its essentially reflects people, right.
Everyone thinks like, oh, if I get a couple million dollars,
his own best, or if I get to ten million.
Speaker 4 (09:48):
Is sell best?
Speaker 5 (09:49):
You know, once you reach a point a certain one,
you kind of start having your own firm. You might
not hire Morgan Stanley meant to pick a Morgan Stamily,
but you might not.
Speaker 4 (09:57):
Hire them and go, well, what mutual ond to me?
Speaker 5 (10:00):
And you're gonna go, I want to have people that
are allocating my capital between real estate, venture capital, private equity,
money mark.
Speaker 4 (10:07):
So it becomes very complex.
Speaker 5 (10:09):
They think a lot about taxes and so once you
reach that level of sort of wealth and awareness of
your investment strategy, you often then make allocations towards.
Speaker 4 (10:23):
You know, the same way we're taking real estate.
Speaker 5 (10:25):
Maybe it's a venture capital or growth equity, and so
within that you might have some big funds like a
Carlisle or someone in a Blackstone who's really big, and
they might get I'm going to make up a number
one hundred million dollars because that's a good general fund.
But then they might go, you know, I really think
that there's some growth happening in AI or growth happening
in sports betting, and growth have another place, and they go, Okay,
(10:45):
well we're going to find a more kind of niche
manager and give him a half million or a million
or two or three and sort of create a pool
where you might have a general pool of capital, and
then you've got sort of these satellite managers along the
edge to help drive some your performance based on your
own intuition experience.
Speaker 3 (11:02):
So when you're finding opportunities to invest in because you're
going out and you're finding stuff in online gaming and
sports betting, what like, what do you look for what?
Because I mean, you must hear a million different pitches, right,
and everyone's got the best idea and everyone's got this
figured out and they just need some money to get started, right.
(11:24):
And so so when you're hearing this what sets want
a part for you? Are you looking at the people
behind it, their experience, the idea itself? Like what what
makes you take one of these pitches and say, you
know what, there might be something here.
Speaker 4 (11:40):
I think the answer is a lot of what you
just said.
Speaker 5 (11:42):
But I will tell you the first place I always
have to start for what I do, since it's in
the gambling industry, is is this illegal.
Speaker 4 (11:50):
Or is this illegal? It's amazing how profitable.
Speaker 5 (11:55):
Your business can be if you forget to pay your
gambling taxes, get licensed, and so sort of our first
step is always what's the legal framework here? And does
it make sense? Does it fit within that kind of
law or construct they're using? And just as a quick aside,
that's actually where we see a lot of people like
privately they make investments and like, oh I invested in this,
(12:17):
you know, daily fantasy company and it's super profitable. It's
like whoah, Like everything about that is that's a that's
actually a sports book, Like, so you don't realize it
or you know this is this is this, and it's like,
oh no, actually that's.
Speaker 4 (12:29):
Online lottery law should apply.
Speaker 5 (12:31):
And so what we find is sort of when genurnalists
investors show up like this is the greatest thing ever,
it's like, did you really spend any time to understand
what you're getting yourselves into from a legal standpoint? So
some interesting stories there, for sure, but I would say
once we passed the hurdle of it is legal, it's
in a part of the market that's interesting, or it's
(12:51):
a product that's compelling, you do have to diligence the team.
How big is the market. We have a very concentrated
market get here in the US with sort of the
fan duels DraftKings, Bet and GM Caesar sort of having
a lion share.
Speaker 4 (13:07):
So if you're trying to sell B to B software.
Speaker 5 (13:10):
And it's let's just say it's risk management software so
that they can offer more lines, you got to be
very clear, like how many customers are going to have
in the US?
Speaker 4 (13:17):
Is this better internationally? So we start kind of using
the context.
Speaker 5 (13:20):
That we have for the industry to say, well, where
does this product fit it? Does it allows people to
gamble more gamble more stuff or the sportsbooks being more
profitable kind of as an idea.
Speaker 4 (13:30):
If it's a B to B solution.
Speaker 5 (13:33):
And if it starts checking those boxes, that's where we
start getting interesting for us. Specifically, I'm not a big
startup guy, Like if you call me with an idea
and a pitch deck.
Speaker 4 (13:42):
I'm not your guy.
Speaker 5 (13:43):
I'm sort of the guy like we've gotten the three million,
five million, ten million.
Speaker 4 (13:48):
In revenues and we think we get to fifty or
one hundred.
Speaker 5 (13:50):
That's really where I feel comfortable sort of dellocating capital.
And so there is a big network of people that
do the startup side, just not where I said. I
look for the phrase investors like to use, even though
it's a total throwaway, useless comment, So prepare yourself for
industry jargon. It's sort of this idea of product market fit,
Like if you just google that, you'll find every investor
(14:11):
in the world using it.
Speaker 4 (14:13):
And if somebody can.
Speaker 5 (14:13):
Really tell me exactly what it means, you know, I'll
play you a dollar.
Speaker 4 (14:17):
But I think what in.
Speaker 5 (14:18):
My head what it means is is is this really
a business and a product you can sell? We just
like to say word product market fit to make us
ourselves feel better about.
Speaker 2 (14:27):
It as far as well. First of all, let me
ask you, Gus, how many folks work for you at
Discerning Capital.
Speaker 4 (14:33):
Just three of us. We're a small team, you know.
Speaker 5 (14:37):
It's sort of one of the things I've learned is
you can outsource a lot of this. So if you're
running a really big firm, you have to have your
own compliance, you have to have your own account administration
and thinks. For firms like us that are sort of
the new generation and actually multi billion dollar funds run
this way.
Speaker 4 (14:54):
Now, you just need the investment team on one side,
and then everything else you can outsource.
Speaker 2 (15:00):
And then the follow up to what you were discussing,
not to say that everything is saturated, but you know,
Evan and I when we created this this Behind the
Big mini podcasts series, one of the things that we
discussed right from the beginning was when you talk to people,
they think of DraftKings, fan duel and bet MGM, and
that's it when it comes to the sports gambling space
slash ecosystem. So you know, you said startups, possibly I'm
(15:23):
not your guy, and then you threw a couple numbers
out there. How many of those opportunities are out there?
Is there just endless? Are there people that we have
never heard of that maybe we never will? You know,
when it comes to knocking on your door, does it
happen a lot?
Speaker 4 (15:38):
Yeah?
Speaker 5 (15:39):
So I think the number is we've seen roughly two
hundred companies in the last year, so it's a much
bigger market than you'd think. And from the consumer standpoint,
let's just we'll pick on bet MGM.
Speaker 6 (15:53):
You know, say you're in Michigan and you're on bet
MGM and you log in and you you know, fund
your account and then you they you know, they say
you're good to bed and all that, and then you
go fine and you start playing blackjack or whatever you're playing,
or slots because I picked Michigan because it allows eye
because you.
Speaker 4 (16:09):
Know, then you switch you over anyone who plays the
sports bet and it's all on the same app. You're like,
this is great, there's just one company involved.
Speaker 5 (16:15):
But what you're missing as the consumer is when you
first fire up that app, they're paying a company.
Speaker 4 (16:21):
It's not usually this group GEO comply. I think it
is for BETMGM, and they.
Speaker 5 (16:24):
Check where you are right, and that company charges for
the ping to the cell phone tower and they get
their fees, and then when you put money into the wallet,
you know, and maybe someone else runs their wallet. I
think I betam GM as their own, but for some
they might outsource their wallet others, you know, then they
have to do know your customer kind of are you
trying to launder money for a cartel?
Speaker 4 (16:46):
Yes or no? Sort of.
Speaker 5 (16:47):
There's all these banking services before your accounts even open, right,
so you might think, oh, there's just a few players,
but there are groups that are like, oh, we can
do you know, know your customer called KYC, you know
better than anyone else. We can do it cheap, you know, faster,
we can go more global with our searches. Then when
you get to playing the games, let's just say the
slot section, right, you've moved over.
Speaker 4 (17:07):
You're now an I casino.
Speaker 5 (17:09):
You go on that page, you seal the slot games.
Oftentimes those are made by hundreds of slot studios around
the world are designing.
Speaker 4 (17:21):
Those slot games.
Speaker 5 (17:23):
There's even this weird thing of distribution which we call aggregators,
where like there might be a thousand slot houses in
the world that will make slot machine games for online,
lot of them in Europe, but they don't know how
to get in front of bet of GM. So there's
like whole groups that will say, well, we'll take one
hundred and fifty group of you, we'll put you together,
and we'll give you one pipe in the bed of gym.
(17:44):
But the consumer just logs in and it sort of
feels like Netflix. It's like what game am I going
to play? And then what's really interest about slot games?
Like if you play those games, it's like Netflix, they
stay at the top longer, right, so they get more play,
and then you can re skin those games, and those
slot manufacturers get paid based on reskinning means like you
take it from there's the Gator version till you make
(18:06):
it the Jaguar version or whatever, and each one of
those you normally kind of get a percent of whatever
people win or lose on those games.
Speaker 4 (18:14):
Let's just say you have a jackpot functionality over the top.
Speaker 5 (18:17):
You can kind of see like when you expand this out,
you know if betem GM says you win ten million
dollars across or things like do they do themselves? They
have a software provider who's doing the jackpot? Is it
like brought to you by the slot manufacturers? The aggregator.
I mean the complexity then when you do the same
thing in sports betting, like you think, oh, I'm just
I'm in DraftKings now and I'm looking at who's going
(18:39):
to score in the first quarter, you know, and I
want to parlay that with someone else of who you
know is the next pitch going to be a strike?
You're actually going across multiple different suppliers, and then oftentimes
you build a parlay of those things have to be
built in house or by another third party. So while
the user experience is very centrey Aid, the supply chain
(19:02):
to this industry.
Speaker 4 (19:05):
Is a mint.
Speaker 5 (19:07):
And we should probably spend some time at some point
just talking about regulated gambling and why it's just so difficult.
But I mean, I think in this industry you've got
all these barriers to entry, so you end up with
a dispersion of suppliers. The question in my head and
where I spend all the time is does that make sense? Well,
we ultimately move to the suppliers all sort of come
(19:29):
together and you have an oligopoli there. I don't know,
but it's just sort of an amazing feature of this
industry where when you go to Google and you Google
something you're just getting Google when you go to DraftKings,
you're not just experiencing Google.
Speaker 4 (19:42):
It is. You know, our DraftKings it is. I would
be I'd love to know the number.
Speaker 5 (19:47):
I don't think it's ever been disclosed, but I would
bet DraftKings probably has two hundred two thousand people that
are kind of a two thousand groups that are built
up into their unit.
Speaker 3 (19:59):
One of the interesting things that you can do is
go on like a gaming board's website and pull up
the list of their licensees and you can see right,
you know, and depending on the state, they're all going
to do this differently. But you have licensed operators like
so you'll have the DraftKings and Fandles of the world.
(20:20):
But then you have all sorts of different suppliers and
they and they're gonna give it, Like I said, every
state's gonna give them different names in different categories.
Speaker 4 (20:28):
But when you just start to see the.
Speaker 3 (20:29):
Volumes of people that are or of companies rather that
are in there, and and you can actually look and
see what this licensing entails because you mentioned it and
it is, it can be a significant barrier to entry
in time and cost, in aggravation in it you know,
the private the types of things you need to do.
(20:50):
I tell people this all the time, Sean. I think
I've told you this, Like I had an individual license
when I worked in Pennsylvania for for a gaming entity,
and I had to go into the bank and get
eighteen months of my kids savings account statements printed out,
so I could. I mean, it's you know, if you
(21:11):
ever want to really pissed off a bank teller, I
highly suggest doing that. I mean, it's crazy, but that's
what the licensing process and tails for better for worse.
And so when you're talking about starting up one of
these companies that's going to be a supplier to the industry,
you know, that's what you're signing up for.
Speaker 2 (21:29):
Excellent stuff. Well, I'll tell you what. There's a ton
to learn. And the regulated gambling came up on our
last podcast, and of course there's new hurdles in every
single state, and our friends over at Sports Trade I
think just got approved in Arizona if I'm not mistaken.
NO want to hit the gas pedal on that one,
but I leave that was breaking new. So why don't
(21:50):
we go there. Let's talk a little about the regulated
gambling space and the hurdles that exist, Davis, As far
as from state to state, it just seems like it's new.
But you know, and one thing that we talk about
often here is did they actually care about the sports Gambler?
Speaker 4 (22:06):
You know?
Speaker 2 (22:06):
And I know that we have some people out there
that want to be the voices for the Sports Gambler,
and one of those is actually hosting bett Bash in Vegas.
But as far as where we're moving into that direction,
do you feel like the Gambler's voice is now being
listened to a little bit more or is that maybe
just on the surface level, Davis.
Speaker 5 (22:25):
Well, I think there's a lot of parts of your question.
So going specifically to whether or not I think the
state regulatory bodies are necessarily there for sort of professional
betters and to kind of make the markets highly efficient.
Speaker 4 (22:42):
I don't think that's their number one goal, just to
be fair.
Speaker 5 (22:47):
I know a few of them, and I had a
great call with one of them a couple months ago
about something else, and they're very clear of like, our
number one goal is to protect the consumers, then number
two is to revenues. So if that's sort of your
true north, you're not necessarily getting concerned about you know,
(23:09):
are we getting the sharpest odds for our customers?
Speaker 4 (23:11):
And how easy is it to move money in and out?
Speaker 5 (23:14):
Because what you're really focused on is avoiding letting your
customers be fleaed or your constituents in your state. So
I think the idea that they are there for professional
betters is not right. I do worry that if we
go too far into regulating gambling and taking tax rates
too high and making it just ultra cumbersome, we're actually
(23:38):
going to make it easier for gray markets or black
market operators to continue operating in the US.
Speaker 4 (23:47):
And it's interesting. I've met a lot of people.
Speaker 5 (23:49):
As I've gone to start my own business, and when
you meet people outside of the gambling industry, so we're
going to move over to sort of your average affluent
or dentist or whatever if they just like to throw
a couple hundred bucks.
Speaker 4 (24:04):
On the game over the weekend.
Speaker 5 (24:06):
I've been shocked at the percent of those people that
I'm I'm meeting that currently use a bookie or some
sort of a legal site to do it. And the
number one reason that I hear is sort of access
to credit and it's easier to do right. The guy
that you knew in college still runs it for fifty
(24:29):
guys and a sort of a side thing, and he's good,
you're you know, you're good for it, and you pay
at the end of the football season. I think there's
lots of reasons that that doesn't allow for consumer protections
and what happens if it doesn't pay you.
Speaker 4 (24:40):
And all of that. But I do think that.
Speaker 5 (24:44):
That model is going to remain fairly healthy in the
US until we can be more fluid, and so I
think the regulators thus far done a pretty good job
of I mean, right, I think go back six years,
seven years, I think we got nothing right.
Speaker 4 (24:59):
So we've come a long way.
Speaker 5 (25:01):
But I do believe that, you know, the regulators are
not there necessarily to make betting ten thousand dollars on
an NFL game very efficient and easy to move your
money in and out and you get the best possible
line guaranteed, Like, that's not their concern. Their concern is
if you take that, if you find a way to
get that bet in, you accept the odds they're publicly posted.
(25:23):
Does that sportsbook follow its rules in terms of service
and follow the laws in their state and then pay
their taxes?
Speaker 4 (25:29):
I think that's sort.
Speaker 5 (25:30):
Of the reality of regulated gambling today.
Speaker 3 (25:35):
So let's talk for a minute about you were talking
about sort of the wide variety of companies that are
out there, because you know, while there might be a
relatively smaller number of operators, the number of companies that
supply them and flow into them is really significant. So
over the the last three years or so that you've
(25:56):
been doing this, you know, with your own company, what
what are some of the companies that you've looked at
and invested in that you think are sort of, you know,
on on track to be really successful. But more interestingly,
I think you know why, like what what set them
apart and what is so exciting about them for you?
Speaker 5 (26:15):
Yeah, so I'll probably just take like a more general
view because under the Discerning brand, we've only.
Speaker 4 (26:20):
Done one thus far.
Speaker 5 (26:21):
It's public, so that's a little less exciting to talk about.
Speaker 4 (26:25):
And unless your listeners in Australia.
Speaker 5 (26:28):
You know, if you are in Australia, go log in,
you know, make your pickle that account and you'll love it.
Speaker 4 (26:34):
Are you'll likely love it.
Speaker 5 (26:35):
Obviously some concerns I can sell in Australia. But so
that's the only thing we've done is in Australia. But
what I would say is going generally the deals that
we have done or looked at and gotten very close to.
It's sort of I use this phrase form of these
sort of micro services. Like I think it's really hard
in this industry to be good at a lot of
(26:55):
things all at once. It's probably a truism for most industries.
But the things that I really love to look at
are the companies where they found sort of this part
of the market that no one else was paying attention to.
They identified the problem, they built a solution, and now
they're executing well, you know one that we we were
involved with and we led their last round of financing.
(27:18):
We mentioned briefly kind of a warm up, but is
you know US Integrity now called IC three sixty, but
they exist. I kind of describe them as the Securities
Exchange Commission for sports betting, right the same way the
sec Today's a terrible day in the stock market, but
you know if people were trading yesterday or two days
ago news and all of a sudden this comes out
(27:40):
or what do they know? They oh, they work for
weapons manufacturer? Where are those missiles going to? Did they
know something? They do that same thing for sports betting.
They become somewhat popular now that they had some very
public or the NBA issues that they identified also things
like an SEC baseball coach betting on himself. But they
sort of are a suit regulator in a lot of ways.
(28:01):
And I hate to say it, but as we move
into things like nil paying college athletes, the prevalence of
issues of sports integrity will rise. So we did that
deal and it was a much earlier stage business when
we did it a few years ago, and we did
that at a different employer. But that business to me
(28:25):
is like undoubtedly going to grow. It's a sad reality,
you know. On that same side, just to give a
shout out to a company we know, well, you know
there's a company Kinbridge. They offer responsible gambling help to people.
They partner with the sportsbook so that when you go,
I've got a problem, you know, the customer service agent
at DraftKings or BETTMGM doesn't doesn't know what to do.
(28:47):
They might be trained a little bit, but groups like
Cambridge is sort of the place where they can step
in and go, hey, we've got people that are certified
in a licensed to help treat problem gambling.
Speaker 4 (28:59):
And so I picked those as two examples. But this
is an industry where.
Speaker 5 (29:07):
These small solutions can actually become massive.
Speaker 4 (29:11):
Right you pick your number? Is this one hundred billion
dollar industry is one hundred and fifty billion? I was like,
you know, I was joking, like we can't even get.
Speaker 5 (29:17):
Consensus on how big we are, but it's a massive industry.
So if you can just be a small service provider here,
you can have a fifty one hundred million dollars revenue
business pretty quickly. And we love the ones where they're
sort of they've identified they're part of the market, they're
focused on it, and they don't want to be all
things all parties, but they're just we're going to do
this really, really well. And when I can look at
(29:39):
it and go, like I was saying this, you know,
listeners aren't on video, but like as I said, responsible gambling,
it's like YouTube are not in your head because like,
what are the odds that we don't need good responsible
gambling the.
Speaker 4 (29:51):
Next five years? They're very low.
Speaker 5 (29:53):
So my view is that's you know, the question is
what do you pay for? What's worth a nonprofit? How
profitable are they? Those are the questions I like to
wrestle with, because I want us to sort of find
the things where it's an obvious answer to sort of
they're going to be growth businesses, just a question of
how big do they get.
Speaker 3 (30:13):
I want to ask you about one of the things
that you said almost is a throwaway line though at
the beginning of your answer, where you were talking about
your investment in Australia or this Australian company rather because
I think one of the things that well, maybe Americans
might be guilty of this across the board, but certainly
when it comes to sports gambling, you know, we forget
(30:35):
that this is an industry that has existed for quite
some time outside of this country's borders as well. And
you know, to that extent, what sort of synergies are
you seeing. Are there companies that are either doing business
outside of the US that are you know, looking to
come in or vice versa, companies that might have some
(30:55):
you know, issues sort of navigating the US regulatory world,
but are far more successful in other jurisdictions.
Speaker 4 (31:02):
Yeah, well, touch on the last one first.
Speaker 5 (31:05):
Is actually really easy because if you operate what we
you know, there's like sort of black businesses which are
definitely legal there's sort of fully regulated white markets and
then there's gray. So the most profitable sports books in
the world that I've seen operate in black and gray
because they'll pay taxes then take So, yeah, they don't
(31:27):
even worry about the US because why would you ever
come here if you make you and you.
Speaker 3 (31:32):
Can't when you're operating illegally, you're not getting regulated.
Speaker 5 (31:37):
So you know, I'll just take that because that was easy.
Thanks for teeing that part up. But then you know
the truth is, and you know, I've got a lot
of buddies, right, I'm not like a gambler by nature,
like the I'll bet on some golf if I'm watching it.
Speaker 4 (31:51):
I'll bet on the Super Bowl a hundred bucks river.
Speaker 5 (31:53):
But when I talk to my friends, are sort of
outside of my gambling network, right, they're only Oh Fanduels
run away with It?
Speaker 4 (32:00):
Right?
Speaker 5 (32:00):
Who owns FanDuel Flutter Flutter is used to be Patty
Power Betfair. Right, that's when I first met them. They
were a UK based entity that maybe they're Irish, but
I met him in England and I saw their trading
team in Ireland and probably twenty fifteen really interesting in.
Speaker 4 (32:22):
iOpening for what's worth it.
Speaker 5 (32:26):
But you think FanDuel I would tell you that's a
global business. You think, okay, next up DraftKings, Yeah, they
are a US business. Then you start looking who's next,
Caesar's US Bet, MGM, who's that right, that's MGM brand,
and then all the technology from in Taine, which is
a large global sportsbook and I.
Speaker 4 (32:45):
Casino based out of the UK. So I kind of
just point this.
Speaker 5 (32:49):
Out of like, it's not like we're already living in isolation.
Much of what's happening in this country is already international.
Points bet, Who's now you know Rip in the US
and al fanatics. You know that was an Australian sports
book they came over, So sort of a lot of
this is already international. A lot of the suppliers, so
(33:09):
the groups that supply the lines to these sports books,
or the data rights companies. Like if you want to
hear something crazy, it's how this is something everyone's always
intrigued about.
Speaker 4 (33:21):
So I'm sorry, I'm gonna take a quick aside here, right,
Sports Radar and Genius.
Speaker 5 (33:27):
Most people don't know who these are, but they are
actually the people that create the data that says whether
or not you win your bets or not. So you
might be betting on DraftKings, right, but when they decide okay,
did you know, going back to the story from earlier,
so on Jerry Rice, like did Jerry Rice, how many
yards did you have?
Speaker 4 (33:42):
Well, they use the official data provider. Who's that is that?
The NFL? No, no, no, the NFL doesn't want to.
Speaker 5 (33:47):
Touch sports bet so they have sold off their rights
to Genius. Right, so Genius Sports has now said we'll
spend billions of dollars take what's happening on the field.
Speaker 4 (34:00):
They literally have people like iPads in the stands clicking
like you know, Patrick mahomes through at seven yards. So
this guy goes from the stands to a data center.
Speaker 5 (34:11):
As long as it all matches, it becomes the global
truth of what happened on.
Speaker 4 (34:14):
The betting lines.
Speaker 5 (34:16):
So even though we're talking about like, oh it's DraftKings,
it's like Genius and Radar European companies, so like, you know,
it's sort of the industry is already inherently global. But
I always love that because people think there's like some
sort of you know, vision is you know, robotic vision
is telling you like, oh, this is who caught that
(34:36):
or it's like, no, there's some guys with an iPad
sitting there watching that game, and if they disagree, it
goes to someone in a video surveillance room who goes, yeah,
that was you know this player. But it's sort of
amazing how unsophisticated that business is.
Speaker 2 (34:51):
So do we have his social handle? Can we tweet
at him instead of at DraftKings to get that refund
when Mahomes gets that incomplete pass next time?
Speaker 5 (35:00):
Yeah, I mean you can, Yeah, you can tweet it anybody.
Just good lucky in your response. I love the way
now that when you tweeted a companies they like it.
Have you seen this, like if you just like I
was sweezing it tweeting a Breeze Airlines, you mess something
up for me and they just like it so that
they like auto log And I'm like, this is sort
of weird that I'm complaining and I saw somebody get
saying that like DraftKings was doing that. Enough you tweet
at them and they like it so that they have
(35:21):
a system of like it's sort of weird.
Speaker 4 (35:23):
So you know, you need a dislike button or we'll
follow up, We'll talk to Elon about it.
Speaker 2 (35:30):
Thank you, he doesn't have much on his plate these days.
Speaker 4 (35:32):
You're right.
Speaker 2 (35:35):
Go for it, Evan, are you so? I wanted to
ask you, Davis, as far as you know, we continue
to just see these numbers online gambling just continue to climb,
and you're the right guy for this question. Eventually, where
they will we just continue to grow and go north
a year after year in the online sports gambling space,
(35:58):
or will there be a moment kind of things plateau
or will there be continuing flow of these new opportunities
that present themselves to you and then improve things and
then more betters come to the space and it continues
to just increase these numbers, because year after year, quarter
after quarter, it just through the roof and it's eye
(36:18):
opening for people like myself.
Speaker 4 (36:22):
So I don't believe it's stopping. Right.
Speaker 5 (36:25):
The story of how I even got into this industry
is probably just worth sharing here because I think it's
it'll it paints my view. So when I was a
generalist growth investor, I was actually we were one of
the largest public markets investors in casinos. We own casinos
in Cambodia. I was flying on Philippines. It was look
at all these casinos Vegas McAll you name it. And
(36:47):
I was in the back of a black taxi cab
with a colleague in England and it's probably like twenty fourteen,
twenty fifteen, twenty sixteen, something like that, and I just
kept looking at my wind and I kept being like, Wow,
all of these ads are like, you know, aight a
and a bet three sixty five download bet on your
app on your smartphone and in the back of that
(37:10):
taxi cab when my iPhone was is still fairly new.
I think back then it was like you could pull
up the data and online gambling goes up into the
right and physical world gambling starts sort of a decline
or flattening out, and so that for me was sort
of the Aha moment. I was like, I'm one of
the largest shareholders in these big casino companies and I'm
(37:33):
looking at this market showing what technology can do.
Speaker 4 (37:38):
So then I went back and we did this big.
Speaker 5 (37:40):
Survey through professional survey group, and we said, I asked
people like, do you bet, do you not bet?
Speaker 4 (37:44):
All these questions we can understand people's use cases.
Speaker 5 (37:47):
And when you get to the people that bet or
are willing to bet or bet. The last few years
and you ask them at the end and you're like,
in the future, if it was readily available in your smartphone,
would you bet more at your house on your smartphone
or in a casino?
Speaker 4 (38:05):
And the answer.
Speaker 5 (38:06):
I believe the first one was ninety four percent of
people said I'd.
Speaker 4 (38:10):
Rather bet on my phone. And then we did it.
Speaker 5 (38:13):
I mean it was ninety two that time that we
did it again, like a year and a half later,
it was like, went to ninety four. And I point
that out because at that time I started looking at
the gambling industry in.
Speaker 4 (38:23):
The US and it was about seventy.
Speaker 5 (38:25):
Billion dollars for tribal plus commercial casinos.
Speaker 4 (38:29):
And that's when I started flying around the world saying
the US was going to be huge.
Speaker 5 (38:33):
This was you know, I was meeting back with Patti
powerbet Pair back then and being like, the US is
gonna be huge.
Speaker 4 (38:38):
And the response to me with was actually they were like,
isn't it still illegal there? We don't have a strategy yet.
Speaker 5 (38:43):
So I felt like I was a little bit like
a positive chicken little running around Europe.
Speaker 4 (38:47):
Trying to find somebody that was interested in how big
the US could be.
Speaker 5 (38:51):
So but the number I picked back then was I
was like, the US gambling and wagering market will be
seventy billion dollars online, and you know, we're still online
sports betting and gambling. I think it is about twelve
billion last year, as the number saw the other day. Again,
these numbers are always squishy, but so I.
Speaker 4 (39:08):
Think we're still sort of in second or third inning.
Speaker 5 (39:11):
The questions that I struggle with at this point are
how much go to sort of regulated gambling so FanDuel, DraftKings,
bet MGM, caesars, how much goes to the daily fantasy players,
how much goes to the sweepstakes.
Speaker 4 (39:26):
Guys, how much goes to eyeladder, you name it.
Speaker 5 (39:29):
It's a little unclear to me, but I think the
point is it's gonna be massive, and it might take
a year where it goes sideways and no new states open,
but I think we are on an inevitable march to
allowing people to wager for fun on their phones, whether
it's sports, whether it's eye casino or whatever. And that's
(39:51):
been my view for years, and honestly, that's how I
went from sort of partner at big investment firm to
in house of a casino and now doing this full time.
Is because I'm a believer that this isn't changing.
Speaker 3 (40:04):
Yeah, And I think to your point, when you look
at the I casino margins for the operators in the
in the handful of states where it's legal, and you
know it, when you see that proliferate, which I think
it will right over the next whatever decade or so,
it's that that's going to be a real potential game
(40:25):
changer because now you're going to take these numbers that
are already big and they're going to.
Speaker 4 (40:30):
Look small by comparison.
Speaker 3 (40:32):
You know, we talk a lot about when are we
going to see sports betting in Texas and California, and yes,
that'll be material as well. But when we see I
casino proliferate beyond the you know seminar eight states where
where it's legal and and sort of match where sports
betting is from a digital perspective, yeah, talk about a
game changer, right, Yeah.
Speaker 5 (40:53):
I think people are just inherently looking for more ways
to like do more interesting stuff and have a have
a sweat.
Speaker 4 (41:01):
Right.
Speaker 5 (41:02):
It's like I said, I'm not a better but if
I'm going to watch a golf tournament and I say,
it's like the Masters, what's the Masters every year. It's
like I want to have somebody I'm cheered for for
even if it's you know, I bet one hundred bucks
in the whole thing, right, it's the fun in the
engagement is what people are chasing. And I don't think
that's going away anytime soon. I actually think that's what's
going to drive the growth in this industry.
Speaker 4 (41:23):
Is how do you get the sweat? Is that? You know?
Speaker 5 (41:27):
I always say, it's like I don't. Actually you want
to hear something funny. If my interview question, ask anybody
as an investor, if I'm like interviewing somebody can work
for me, ask them if they play the lottery. And
the vast majority of people and I'm ruining my interview
question here, but the vast majority of kids on interview
coming straight out of college, when I worked at this
(41:47):
big fund, they'd be like, well, you know, statistically the
math is this, and so unless it's a produced amount,
like you should never play because then as a positive
ev I'm like, I don't want to work with you
because you don't play the lottery for twenty dollars, which
is what most peop are doing.
Speaker 4 (42:04):
Because you're worried about the statistics, What do you why
are you playing? You guys? Ever played the lottery? Yeah?
Speaker 3 (42:09):
When I ask people a similar questions, I said, I play.
Do I play the lottery?
Speaker 4 (42:13):
No?
Speaker 3 (42:14):
But when Powerball hits a billion dollars, yeah, I throw
twenty bucks on it.
Speaker 5 (42:18):
And it's about sitting down with your wife and going
what would you do your buddies and you send the
one hundred million dollars yacht and go see you boys
and Monaco on this thing?
Speaker 4 (42:28):
Right when I win, it's like, that's the point.
Speaker 5 (42:31):
And so it's just like I think people it's inherently
a social thing, Like I have a question of whether
or not, and it's something we've been exploring over the
last few years. Is there ultimately like a social network
for betting, like where there's a better place to share.
Speaker 4 (42:45):
Some people have different versions of it, but right now
it just goes into your tech, your text chains with
your your buddies or whatever. But I think this growth
in entertainment, sharing the joy, sharing.
Speaker 5 (42:57):
The sweat is fun and that's why I believe this
industry is going to be big.
Speaker 4 (43:02):
Now is it all regulator? Where I don't know?
Speaker 5 (43:06):
I can just tell you it's I believe it's an
inevitability that this industry keeps growing.
Speaker 2 (43:13):
Well, Davis, this has been a ton of fun. Man,
extremely bright and uh yeah, you got a lot going on.
Of course, love the sweat And I'm definitely gonna be
stealing that question for our future guest, who Evan, what's
the question you're going to ask during interviews? And yes,
I do play the lottery through my mother. She plays
every day, so technically she wins. I win. Correct. You
(43:36):
can find Davis on Socials Fantastic, Twitter or x platform
here for Davis Dcat seven and he asked the question
about college football n C double A football dynasty mode?
Is that going to be increasing the divorce rate in
this country? Are you do you play on PlayStation? Have
you been dialing up the n C double A?
Speaker 5 (43:58):
So it's so I've been on the road for six weeks.
I just got back last night. But I'm like, I
am going to refire up the Xbox down, let's go
and get on there. I mean, I it was such
a big part of my youth was night spent like
four in the morning. So I went to a very
small school called Washington Lee, and I like, you know,
(44:19):
I did the thing where I made the team as
like a D three D three team, and you know,
the recruiting is brutal, but you take it on a
national championship and you're like, what didn't I just do
with a month of my life? But you know, so
I don't know if I'm gonna play as much as
I used to, but I am definitely excited. My wife
is already upset, and then I'm even.
Speaker 4 (44:38):
Considering getting it, which is what sort of sparked the tweet.
Speaker 3 (44:42):
So this is like the best or not the best.
But one of the better parts about having kids is
like I've got fourteen and twelve year old boys who
now get these video games and it's like, oh, well,
you know, they bought them, so maybe I'll play them
and or yeah, or we'll play with and this is
a you know, father son bonding activity and that's really
(45:04):
really hard for your wife to yell at.
Speaker 5 (45:06):
Well. The number one question that like that jumps into
my head is can you beat your children?
Speaker 4 (45:11):
Oh? Absolutely not, No really.
Speaker 5 (45:13):
Oh see, I grew up playing enough all the way
through college that you know, my kid, my oldest is
nintend now, but I you know, they like to daddy's
daddy smokes him stuff.
Speaker 3 (45:23):
So give it a couple of years until they're they're
slightly older. But these like eight thousand button controllers are
sort of my downfall. I grew up playing you know,
Sega Genesis had a B and C. I can still
dominate that, but when you get into like L one
and L two and Triangle Circle, no.
Speaker 4 (45:41):
No, I'm I'm a disadvantage.
Speaker 5 (45:43):
I'm forty, so I was in college for that South
So like me and my buddies are playing on Xbox
in college.
Speaker 2 (45:49):
So yeah, saying you're lucky at those timesty recruits to
Washington Lee or is that the name of Yah.
Speaker 4 (45:55):
Washington And that's very good.
Speaker 5 (45:57):
It might feel a little harder based on what I've
watched about Dynasty Mud.
Speaker 4 (46:01):
But we're gonna see.
Speaker 2 (46:01):
What a great video from Scott van Pelt the other
day where he was crying basically saying what you guys
are just saying, He's like, I can't beat my kids.
I used to be good at this game and it's
just rough. But good luck on that. I hear great
things about the game. Davis can't thank you enough for
stopping by once again discerning cap dot com for more
information over there, and man enjoy bet bash and I
(46:23):
know you said you're possibly gonna squeeze over and see
what's happening with the guys in the industry. There's a
lot of stories being told, a lot of smart brains
over there. And as I said, can't thank you enough
and we'll catch up down the road, sir.
Speaker 4 (46:35):
All right, thanks guys for having me on. Looking forward
to next Monday.
Speaker 2 (46:38):
Well that was a conversation. Again, we do these podcasts,
Evan and I come away with just a full yellow
page of a lawyer pad and I know that's your
term there of notes and nuggets and just learning tidbits
every single episode. Davis Catlin extremely bright, as all of
our guests are connected and then some being in Las
(47:02):
Vegas in the the industry. Just a great conversation there
and learned a lot.
Speaker 3 (47:07):
Yeah, I think Davis really highlights, you know what, just
how how deep this industry goes, right and while people
he said it better than I can. But people are
betting on their phones, and they're aware of like one brand,
the consumer facing brand, but there are dozens of companies
that are going into making that product work and and
(47:30):
and it's why this is such a complex industry. But
a really interesting one to be involved in from the
business side, so thought he gave us some really great insights.
He obviously knows a ton about this industry and looking
forward to seeing, you know, how how the starting capital
takes off over the next couple of years.
Speaker 2 (47:49):
There's no question that it's going to take off. Even
more so, it's off and run. And this is our
post podcast recap, as we always do here, a little
post game. So some of the highlights for me, first
and foremost the guy in the stands with the iPad.
That was incredible to learn that. You think that that's
how it plays out, but I've never really heard that before.
(48:10):
That was new to me.
Speaker 3 (48:12):
You got to fight the latency issues and you know,
have the data coming in in real time before you
see it on TV. So that's one of the key
ways it gets done.
Speaker 2 (48:22):
And then as far as with you know, hey, you
got it. He said, what two hundred pitches in the
last year, I want to say that he heard yeah.
And then you know, the first question is are you
llegal or not? You know, how many people in your
mind have this great concept and whatever, like we heard
(48:42):
it could be on the whole sports gamble. It could
be something that is just from you know, working with
these sports gambling, you know apps, whatever it may be.
But how many people do you think have a great
idea but then at the end of the day it's
not exactly legal.
Speaker 3 (48:58):
Yeah, or it needs to be tweaked in some fashion, right.
I think the one mistake that people make is that
they see something that exists and they assume that just
because it's on the internet, it must be legal and therefore, well,
if they can do it, obviously I can do something similar.
And the answer is not necessarily. So yeah, Look, that's
(49:23):
a decent chunk of what I do day in and
day out is talk to people about those sorts of
complexities and ways that they might need to adjust their
ideas or what's gonna trigger licensing or what might be
okay in certain states or certain countries.
Speaker 4 (49:39):
And not others.
Speaker 3 (49:40):
Yeah, there's it's there's a lot of complexity that goes
into it. I thought it was fascinating that Davis is
forty I'm forty three, and his experience on multi button
video games seems to be significantly outsizing mine for that
three year age gaps.
Speaker 2 (50:01):
So that was a great tweet to pull up at
the right time at the end, just to plug his
socials and he's he tweets a little bit. He's he's
out there, he's active. And when I found that tweet,
I just started cracking up. I didn't see it till
we were just live there. But of course a lot
of people are playing that game. It is it's it
was the game from back in the day, some childhood,
(50:21):
some teenagers, some twenty year olds, whatever it may be.
It was a great game and it's great to have
it back, but definitely a little bit more difficult for
folks our age these days.
Speaker 3 (50:32):
Yeah, both from a dexterity standpoint and also from a
time standpoint. I seem to have a little bit less
free time these days than I did when I was
in high school or college.
Speaker 2 (50:41):
But there's no four am games going off in the
Davis household, huh.
Speaker 3 (50:45):
Not that my wife knows about it, So try to
keep it down.
Speaker 2 (50:48):
Lift Evan. That was fantastic Davis Catlan once again discerning
capital and it was a great listen. And as always,
if you missed anything, folks, once again subscribe, tell a
friend behind the vegue. You can get it over at
FOXPHL Gambler dot com
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