An Australian betting and wagering startup is the latest to jump on the cryptocurrency craze through its own initial coin offering (ICO), which it hopes will attract $55 million in capital from its users and new investors.
Neds was founded by the former chief executive of gambling powerhouse Ladbrokes Dean Shannon and launched in September last year. Shannon’s inspiration for starting Neds was born from a desire to do his own thing, and to create a wagering company that was, unlike Ladbrokes, internationally-focused.
Neds’ chief digital officer Chris Ward tells StartupSmart it was shortly after launch that the idea for launching Neds’ own cryptocurrency via an ICO began to brew, with a number of employees in the business involved in the crypto space already.
“We launched in October, and I think it was in December the idea came up. A lot of people in the business are in the tech space and have an appetite for crypto, and some of the team bought into Bitcoin and Ethereum years ago, so it’s something we followed,” Ward says.
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The crypto-integration first manifested itself as a way for Neds customers to place bets and deposit and withdraw wagering funds entirely in Bitcoin, with the dedicated Bitcoin betting website launching in February.
However, the glory was short-lived, as the website was shut down by the Northern Territory’s Racing Commission, with an email sent out at the time to “all sports bookmakers and betting exchange operators licensed in the NT if currently transacting in cryptocurrency (for example Bitcoin, Ethereum and the like) for their wagering operations to immediately cease and desist”.
Ward says the company’s currently awaiting a decision from the NT Racing Commissioner and the startup is ready to turn the website back on as soon as it gets the go-ahead. In the meantime, however, the ICO development has been kicking off.
The coin offering will be asking punters to exchange their dollars for “nedscoins”, which will have two main uses on the Neds platform. Firstly, they will be able to be used to place bets through the Neds platform, and secondly, nedscoin holders will receive quarterly dividends equal to 0.25% of the company’s quarterly turnover.
Neds recorded $233 million of turnover in its first three months of operation and projects a turnover of more than $3.1 billion by the end of 2019, meaning coin holders would theoretically get a slice of a $7.75 million kitty if that turnover is achieved.
Ward says another driving factor behind doing the ICO was to find a fresh new way for the startup to raise capital, eschewing the traditional means such as venture capital and private equity.
“We’ve seen other businesses be quite successful in the ICO space, and as we’re a real, existing business with real turnover and real staff, we have a lot to offer so we decided the ICO route was right for us,” he says.
“But we have more belief in the actual utility of the coin, not just financial gain. We want to be the best operator in the cryptocurrency betting space, and the utility of the coin is something we’re looking to keep growing.”
In a statement, Shannon said all the funds “raised by our ICO will be put back into the company to grow the business internationally and ultimately grow the top line turnover, which directly benefits the nedscoin holders”.
Gambling a mainstay of the crypto space
Gambling and wagering have long been mainstays of the cryptocurrency space, with some of the earliest applications built around Bitcoin focused on betting, such as Satoshi Dice.
Ward believes the crypto and blockchain space is well-suited to wagering companies, but says the technological developments are useless without user uptake.
“[Crypto gambling] will be a thing, there are more people buying and selling Bitcoin and buying and selling goods with crypto than ever, it’s taking off,” he says.
“But it’s dependent on the market. A lot of people can just wager in fiat, and even when we launched the Bitcoin betting website, we didn’t think we’d get a similar amount of people betting in Bitcoin as we do have betting in fiat.”
The team is still ironing out the last stages of its ICO process and hopes to launch the public sale in mid-May, with a minimum investment amount of $200. Ward says the company is still trying to establish what exchanges it will be listing its token on, but hopes to land some of the larger international exchanges.
Looking broadly at the ICO scene in Australia, while Ward believes Neds has a strong value proposition thanks to its well-established business, he says there’s a number of promising blockchain tech-focused businesses kicking goals.
“Some of the projects in Australia have a very clear path, ones like Power Ledger and Horizon State. They have very clear use cases and reasons to exist as blockchain technology, not just as a way to build revenue for the business,” he says.