In this month’s edition of the Industry Insider, we spoke with venture capital firm Acies Investment about how the industry has changed, what the future of iGaming holds, what advice they have for companies looking to break into growing industry sectors, and more.

Tell us about what brought together the partnership of Acies Investments, and what makes the firm different.

Acies Investments is a gaming industry venture capital fund formed in 2021 by Dan Fetters, Edward King, Chris Grove, and Jim Murren. Collectively, we have over a century of experience as gaming industry operators, advisors, entrepreneurs, and investors—invaluable experience we seek to extend to the founders of start-ups and early-stage growth companies.

We view our capital investment as a component of the partnership; what really drives us is our ability to play an intricate part in the realization of an entrepreneur’s vision, with us able to offer operational advice, open new commercial relationships, attract incremental capital sources, and help analyze strategic growth initiatives. This shared philosophy brought us together as partners and is what has enabled us to forge such close relationships with our portfolio investments.

You each have decades of experience in the gaming industry, with strong histories as advisors and operators. How have you seen it progress over time?

A holistic metamorphosis from sinner to saint! Today, the industry pioneers technological innovation; employs talent from across the technology, media, hospitality, and consumer industries; is the bastion for financial integrity and consumer protection; and attracts global investment capital. On top of this, the industry’s taxes are material contributors to state budgets that fund important social and community programs. As we look forward, we see elevated progress, especially within online gaming where VC-funded gaming-technology start-ups (unthought of a few years ago—and hence our own focus!) are, as one example, revolutionizing global sports-wagering, bringing product innovations unseen by traditional incumbents. The industry has passed the mainstream and can now consider itself the cutting-edge!

The rise in sports betting and iGaming has ushered in a new generation of regulated gaming. How are you identifying the next generation of companies and what areas do you see as the biggest growth opportunities?

The advent of online gaming is the proverbial wake-up call for all existing operators. The prospective size of the industry, potentially $50+ billion, is rapidly attracting out-of-industry talent who are re-imagining the addressable market, in term of engagement (“who”), product (“what”), distribution (“how”), and globalization (“where”). We expect there to be a fundamental change over the next 3-5 years where traditional definitions of gaming (slots, tables, traditional-sports) blur with new forms of prediction, tournament, and social games encompassing exotic prop bets, esports, skill, and “arcade-game” wagering, both peer-to-peer and against-the-house.

We equally expect regulation and oversight to move in-line with player behavior expansion, and are spending time with next generation legal, compliance, fintech, and player-protection technologies. In short, we expect to see a comprehensive industry shake-up, and are enthused to be part of the change.

What are some of the biggest capital market trends that you are keeping an eye on in the industry?

The “collapse” in public market equity valuations in the first half of the year, while disruptive and likely agonizing for many, likely bodes well for the industry long-term. The refocus it has brought on marketing/player ROIC, and the necessity to drive profitability will ensure there is going-forward disciplined capital allocation and realigned investments into innovation rather than somewhat zero-sum player acquisition policies. With this, we would expect equity valuations for the “winners” to rebound materially post-stabilization in the broader markets. The industry has seen such corrections in the past (post-GFC, post-COVID) and we are staunch believers the industry’s underlying resiliency supports equivalent resurgence. The private equity market has seen similar turbulence, with predominantly generalist (or non-gaming specialist) funds paring their new capital deployments—which we “selfishly” see as an advantage for us, being able to utilize our individual 20+ year histories in the industry to contextualize today’s framework and still support aspiring entrepreneurs with capital commitments.

You have a front row seat to the most cutting-edge companies revolutionizing the industry. Based on your observations of these game changers, what advice would you give to emerging companies looking to break into these growing gaming spaces?

Operationally, be original: create an innovative solution with a protective position (IP, other) to an existing industry problem or new opportunity. While obvious, too often founders mimic an existing technology or product “because the industry is big enough for two.” Even if initially successful, the probability of creating a lasting independent company, or pursuing a successful financial exit, are curtailed.

Strategically: be dynamic. Don’t be afraid to pivot alongside the market and landscape opportunity. Capitalization wise, be realistic and think long-term. Striving for the highest valuation today risks non-completion of the current funding round, or of the next round (a “down-round” being unattractive to new capital) – listen to your prospective investors, who post-close are going to be alongside you cheering you on as your partner.

G2E is where the global gaming industry comes together to discover, connect, and explore. What new trends and technologies are you most looking forward to at G2E 2022?

There’s so much we’re seeing it’s hard to predict! Web3 applications are right up near the top though, given the technology’s prospective ability to transform the entire ecosystem in ways not yet even fully imagined. G2E offers an ideal forum for entrepreneurs, companies, investors, and regulators to meet and debate the myriad of complex issues that will shape this evolution. We look forward to being part of the discussion!