I first heard of Fanunite back in the winter of 2018. It was one of the hottest blockchain companies going public.
I invested in the private financing and waited for the company to go public.
I waited for more than two years.
It’s not a blockchain company anymore but it’s a good story. And I still own it, at a profit.
Here is my interview with Darius Eghdami, president of Fansunite Entertainment (FANS-CSE)
:
DJ:
I was looking at your deck from the spring of 2018 when you first started getting things going on Fansunite. Tell me about your journey over the last two and a half years, and don’t leave anything out if that’s okay.
Darius:
Don’t leave anything out?
DJ:
No, no, just talk as long as you can.
Darius:
Yeah, it’s definitely been a bit of a crazy journey. We started in 2018, really with a back-of-an-envelope idea. We were fortunate enough to raise money on that napkin idea. Potentially, maybe, we overvalued ourselves, even though we were trying to make sure we went into the financing at the right prices as our goal was to make everyone money, but we had the ambition to go public pretty quick.
We knew we needed some more meat on the bone, which is why we didn’t go public right away much to the chagrin of some of our investors . But we hired out,brought on a full tech team that started building out our technology. So really we just put our heads down for two years building that. And then towards the end of 2019, we thought the time was right to go public. And again, we knew we needed some more revenue, we knew we needed some more meat on the bone.
Darius:
So, we started looking at potential acquisitions to come with us along on the ride and looked at a few deals, sports books and casinos around the world. And we were introduced to a group in the UK, and we got introduced through our lawyer, actually.
It was a Scottish sports book, a white label, licensed from the UK on a sub license. We had a chat with them, really liked what they’re doing and thoughte the platform was kind of a gem. They had been growing a business for about 10 years themselves, two of them. Really, really strong operators,super experienced in the industry. And it was actually remarkable what they had been able to accomplish. Gotten to over $300 million worth of bets on the platform, just with the two of them.
Darius:
And so we thought, you know what, this is a huge opportunity for us to come in and raise some money, actually pour some resources in, bring our team and help these guys, and take them and us to the next level. So we made the acquisition offer for them. We got a deal in place, and then we went out and raised money as part of that. We completed a small public financing for $3.1 million. We did a long form perspective, so that took some time, but we thought it would be the cleanest way to go public. And we’re happy we did that. So we went public in May. Our acquisitions bookie closed in March, and we got treated pretty well right when we came out of the gate. I don’t think there’s a ton of supply out there for gaming companies, and then with the U S market opening up, I think that a lot of people were looking for that and so it was resonating with potential investors.
Darius:
And then we never really meant to do a transaction as big as we did with Askott Entertainment, but I’ve known Askott for about seven years. I’ve known Scott for that long. We actually started out in the industry together.
And I think, interestingly enough, you always look at competitors, and you kind of want to say why you’re better than them. But I think Scott and I always had this mutual respect for each other that we kind of rooted for each other, which is really cool. Always asking kind of how the company is doing, how we could help, what kind of partnerships could we do in the future.
Fast-forward to when we had gone public. We were looking to get into Esports especially during the pandemic, and Scott, they were doing their own go public listing at the time.
Darius:
They were very esports-focused, pioneers in the esports space, obviously. And they wanted to add more traditional sports. So, we had a chat during the pandemic. We said, you know what, this could be a transformational type deal, could potentially be one of the biggest gaming companies out there.
We quickly worked towards doing a deal together, and it was more like a merger of sorts. A merger of equals. We’re going to bring the teams together, bring on new board members, and raise money as part of the transactions. So we went out and did brokered financing, led by Canaccord, raised just over $5 million and the merger consummated on August 11th.
Darius:
I think, since then, it took a lot of people, like with any merger, sometimes it’s difficult to understand, at least from a market perspective of what the new company is, how they fit together. So we had a lot of sellers, which is fine. It was obviously hurting us at the beginning. Scott and I were taking a lot of calls. We were pretty down.
But we knew if we kept our heads down and focused on the business and executed that the share price will follow. I think that’s what we’ve now been able to see, which is really good. Because we put a lot of effort and time and years in preparing for that. So we’re excited about where we are now.
DJ:
Now let’s back up a bit. So you’re talking about your technology, on which you spent two years. And this interview’s going to be read by people who are just reading and don’t know anything about your company. Can you back up a bit and just tell me a little bit about your technology for eGaming and why it took you two years and how it all fits with Askott and just how it fits in the industry, especially now that it’s opening up.
Darius:
When we initially started working on our technology, our idea was to create sports betting but do sports betting on Blockchain. So Blockchain was relatively new, and we were building a way for people to bet on sports by using cryptocurrency and have everything recorded on Blockchain. That’s what we initially started building.
Later on, we thought, this is amazing technology, we think we can get a lot of people who really are interested in this and there were, but we knew it wasn’t really mass adopted yet. So we started going into regular sports betting, using fiat currency, and that’s the technology we building towards.
Darius:
Now Askott , they have been building their technology for about seven years.. They were nominated for the Esports betting supplier of the year in 2020 by EGR as well. And they were building an esports book for B2C, ut also building it in a way that they could license that technology to other sports books who wanted to either add Esports to their existing platform or create a brand new esports book.
Darius:
And that’s what really enticed us about this potential merger, because they had this world class platform with esports and then we could add on sports and then create a full gaming platform with zero exit points for our client so that we can service them by giving them traditional sports, by giving esports as well as casino. So that’s the technology that we’ve built.
We have our own brands that we run right now, and then we are licensing out our technology which is what we think the real win for us, in getting new clients on board, licensing our technology, and growing with them through the way we monetize with fixed fees and a revenue share.
DJ:
Okay. So you were going to build this on the Blockchain and then you kind of moved away from that towards fiat. I guess the big thing is, I know Esports and just sports betting in general, it’s just such a massive market. The companies that seem to be into that business, they all seem to be niche players, and correct me if I’m wrong, but the pubcos seemed to just have very low market caps. Can you maybe tell me, is it because the market’s fragmented or am I missing something, or why are the companies, such as yourself, just really at such a low market cap or such a low market valuation in comparison to the market that you’re servicing?
Darius:
Yeah. I think definitely with the esports side, people are still trying to figure out how to make money in the industry. Esports betting is the number one revenue generator in the esports industry, so people are realizing now that people globally are betting on Esports.
When you look at companies like Pinnacle Sports, which is probably the best esports sports book out there, I think they said now esports is their fourth or fifth biggest sport. So it’s starting to get traction, but we haven’t really seen that in the capital markets on the esports side.
On the traditional sports betting side, we are seeing those numbers now continue to grow. With the repeal of PAPSA in the US, there’s more and more gaming companies in the US. All the big players are now getting into online sports betting. And then you look at companies like DraftKings that went public about the same time we did, and their market cap has just shot up.
Darius:
Which is now putting the industry on notice. People looking for what’s the next big play and I think DraftKings’s market cap is now 20 billion. I’ll have to fact-check that. But they went out public and they acquired SBTech tech at the same time, which is a sports betting technology provider. People are saying that was for about 700 million US..
So we’re starting to see these huge numbers right now. Penn National Gaming, again in the US. And so we wanted to make sure we focused our efforts on the US market as well, not just here in Canada.
DJ:
Okay. Now tell me a little bit about the regulatory issues surrounding sports betting in general, but specific with the e-gaming sector. I mean, the little research I’ve seen is kind of interesting,
. And actually, if you could talk a little bit about it and not let my opinion color it, because you could talk better about it than I can. Just tell me what you think about the regulatory stuff that’s going on there.
Darius:
Yeah, it’s definitely fragmented. I mean, globally, there’s so many different jurisdictions that have their own licensing regime, but in the US it’s state by state. So, it’s more challenging to navigate, especially for a smaller company like ours. The time it takes and the amount of money it would probably cost a company like ours to get into the US market doesn’t really make sense. So Scott and I always said, we want to get into the US market, but not right now. And then a few months ago an amazing opportunity came up for us through a relationship that Scott has with a company called GameCo. Have you heard of GameCo?
DJ:
No. Is it on your website? I was researching your website. I don’t think I saw it there, or did I miss it?
Darius:
It might not be on our website, but it’s on one of the press releases we put out. So GameCo is a bricks and mortar casino cabinet manufacturer, well-established in the US market and globally. I think they have licenses in about 30 jurisdictions and about 12 or 13 in the US itself. So they have great licensing in place. They have great products and they have relationships with the casinos.
We got into a partnership with them, with a few different companies, but we’re going in with these guys, and we’re going to be the technology provider. GameCo is providing the licensing and the network to go to these casinos in the states and hopefully launch regulated and licensed esports sports book.
Darius:
So that was our entry point to get our technology into the US market without having to go through that licensing because they already have that in place.
So that was a huge, huge milestone for us. It probably accelerated our plans to get into the US market by a year or two, and they have the network that’s going to be able to go out there and sell our platform to casinos and actually launch regulated, licensed sports books in the US. Bit of a tangent on the regulatory question.
DJ:
No, no, no. Just tell more, because I think for the average retail investor, and I include myself in that, the e-gaming sector is still very opaque just in terms of trying to understand companies and trying to understand the potential of the market. I’ll just give you a question out of the blue. Are there any analysts that are even covering this sector that the average guy can be aware of and then just try to read just to get some background on this whole sector?
Darius:
Yeah. There are some analysts out there. Interestingly enough, we just got coverage launched as well.
DJ:
Sorry, who’s covering you now?
Darius:
Bill Newman at Mackie Research.
DJ:
Okay.
Darius:
So he started covering us about a month ago, maybe a little bit longer. Our stock was at 20 cents. He set a price target of 55 cents. We closed much higher than that today, so he was right about something.
But he has a pretty great report, about how we fit in the industry with the different arms of our business and where he thinks we can go. So there are a few analysts covering the space. Eight Capital does a great job as well covering the space.
DJ:
Okay. Any chance you could send me a link to that report or is it a private report?
Darius:
Yeah, for sure. I don’t know where it would be. I know it got distributed through email.
DJ:
Okay. Maybe I’ll look through the transcript and then just try and reach out to him directly or something like that. Okay.
Darius:
Yeah, that would be awesome.
DJ:
Now, your sports gaming platform, is that the Chameleon sports gaming platform?
Darius:
Yes, exactly. It’s a mix of Esports, sports betting, and casino.
DJ:
Okay. And then that also is combined with the Askott Games bits? So the iGaming is you and the Askott Games merger and then the Chameleon is just your segment?
Darius:
Chameleon is the white label technology platform, we just named Chameleon. That came from Askott. That’s the technology that they’ve been building. So when we go to white label our technology, we call it the Chameleon platform that people will be licensing.
DJ:
Okay, okay. So now just tell me why things have just been on a tear for the last month. Do you think that’s just a general thing, everyone’s stuck at home in COVID and small-cap stocks have just been hot across the board, to be honest. Or do you think it’s something that is more specific? I’m just trying to,
I mean, it’s awesome your stock’s been on a tear the last little while, and I’ve been trying to read your press releases just trying to figure out where it’s coming from. But there’s so many stocks have been on a tear and who knows why, which is great. I’m not complaining, that’s for sure. But do you have anything specific? Has anyone woken up to you guys in the last month?
Darius:
Yeah, I think a little bit of both. The industry definitely is starting to get a lot of attention. Other esports and betting companies are starting to really do well right now, both in the US and Canada. So definitely a little bit industry.
And then with the merger and our stock trading down a little bit, I think a lot of people who were selling didn’t understand the story of the merger, which is fine. People have the right to do that. But at some point I think they kind of ran out of stock to sell. And then our story just started getting told a little bit more across North America, which is great and now starting to resonate with investors.
Darius:
Also, I think a lot of people thought maybe we were a pre-revenue company. We’re not. When we came out with our October highlights, we hit our revenue targets and then exceeded them by I think almost four times.
I think people realize you guys are onto something special. They have revenue, they have great technology, and they’ve built a world-class team. So, that started the stock going up, and it’s obviously been on a bit of a run which we didn’t expect, but we’re not going to complain, obviously.
DJ:
Great. So can you tell me what your plans are for 2021 or what it looks like? Or tell me what you can tell me, I guess, is probably what I’m asking.
Darius:
For now we’re focused on growth. We raised about $5 million financing not build an idea or build a concept and see if it works. We built that already, right? So I was mentioning we’ve spent time and money building out the technology, and now we’re ready for growth in all areas of our business. So each of our three arms of our business are now revenue-generating.
So B2C, B2B as well as our games. And now how fast can we grow from the B2C side, we have our own brands, like McBookie. Our goal was to double their revenue this year. We’re on pace to do that, which is great. We want to do that again next year, more than double it again next year. On the B2B side, we have multiple clients now using Chameleon, which is awesome, but we have a great pipeline of more clients.
Darius:
We want to bring as many of those as we can bring on and really handle. So for us, it’s business development and growing the community and platforms in 2021. And our game side, which is our newest arm of our business, but one of our most exciting, is we’re building out our casino games. We hae two games that are created now, Loot Hunter and Crash Heist. We have a third in final testing right now, but we want to get to ten games next year.
And if you read one of our press releases, we had a partnership with an aggregator. And so our games could potentially go into over a hundred different sports books around the world through a single integration. The more games that we can develop, the more that can go into these casinos. And if they’re fun and engaging and people like playing on them, then we’re going to start seeing our game business really start to ramp up.
DJ:
Is that through mobile or through desktop? How does that work? Tell me a little bit on this.
Darius:
Yeah. So it’s both. So they’re called random number generator type games. We have a certified random number generator, and we build on top of that. And then the games that we built, they’re a little bit more fun. They’re a little bit more interactive.
They’re not like the traditional spinning cherry wheels that you see at these casinos. Crash Heist, as an example, it’s a game where you feel, as a player, you actually have some sort of power on the outcome of the game. And it’s all random, right? There’s exact returns to players in the games of how much they’ll return over time. But the concept is you go into a bank vault, you place your bet, and then the game starts and a multiplier starts.
Darius:
So your money starts multiplying because you’re stealing money from the bank. Now at any time within a second or 10 seconds or 30 seconds, the cops can show up. If the cops show up, you lose everything you have. If you cash out in time, you keep whatever the multiple is of your money. And you can come in, bet 10 bucks, that could go up 50, 60, 70, you cash out.
It shows you what you could have made if you stayed in the game, but it’s a little bit more fun, it’s a little more attractive because you actually feel like you can determine when to cash out. These are the types of games we’re building. We want to go after a bit of a younger demographic, not the older one who are just playing the same spinning wheels that they have for the last 20 years.
DJ:
Oh, okay. So that game would go out to let’s say a casino website that has already worked out the licensing issues with whatever regulatory authority? You’re just supplying the content?
Darius:
Exactly, and we hope they post it on their website, a new game, and hopefully it gets the traction that we believe it can. And then we do a rev share with those guys.
DJ:
Okay. So, that’s an interesting niche in this industry. How many companies are doing that? Just supplying the content?
Darius:
There’s quite a bit, yeah. There’s quite a bit of different games out there. So the biggest thing is how can you differentiate? And that’s kind of our esports style game going after a younger demographic. And then what kind of partnerships do you have to distribute your game? So, we’re excited about the first partnership with the EAR aggregator. I think it’s 120-some sports books in Europe, but can we go find more, so can we get into thousands of sports books? That’s our goal with the games.
DJ:
Okay, okay. Interesting. Really interesting. I mean, you’ve just been sort of under the radar. Well, a lot of stocks on the TSX venture have been under the radar, and now it’s just starting to boom up a bit. Is there anything else you’d like to add? Anything else you’d like to tell me?
Darius:
No. I think that our board is very strong. When we merged, we were obviously a smaller company. You typically don’t see these type of industry heavyweights join junior companies like ours. I think it’s a testament to the product and platform we’ve built.
We have three industry heavyweights with Harish, Chris Grove, and James, so a very strong board. Harish was ex-president of Paddy Power Betfair, Asia Pacific, which is now the Flutter group, the largest sports betting company in the world. And so to have someone like that on our board, and Chris Grove is one of the most well-respected industry guys in the US market on a regulatory front, as well as starting his own company in the US with multiple exits.
Darius:
He’s routinely on some of the major publications talking about the regulatory issues in the US, so it’s really cool for him to believe in what we’re doing. And then James Keane was one of the founding members of Paradise Poker during the Poker boom. Paradise was the third largest poker company in the world. They sold to Sportingbet.
He became a managing partner at Sportingbet, as well. So to have these types of guys on our board has opened up a lot of doors for us globally and in the US market and from a regulatory perspective. We’re pretty fortunate to have guys like that on our board with Scott and myself.
DJ:
Okay. One last question. Where do you see FansUnite five years from now? Have you guys got a five-year vision for world domination?
Darius:
We always situated ourselves or tell people that we’re focused on technology, and we want to be a global iGaming powerhouse. So, that’s what we’re focusing on. We want to keep getting as many clients as we can on our platform. We want to keep building games.
We want to keep bringing on players and platforms and grow globally through licensed and regulated jurisdictions.
