Earlier this year, the news broke that GAN had gone public on the NASDAQ exchange – and the company has continued to attract attention ever since with its growing market share in the US market.
Behind the decision was lawyer turned GAN CEO Dermot Smurfit (pictured), who has led the company from being a gaming content supplier to one of the fastest growing B2B platform providers.
We spoke to Smurfit to find out a little more about him, discussing all things family, company growth and his decision to switch from law to gambling.
SBCA: Looking at your background, you initially started out studying Law at Exeter University and went on to specialise in corporate finance. What is it that prompted you to make the transition from the legal sector to the gambling industry?
DS: I was actually sent to boarding school at a very young age. So I think one of the things I always comment on is that people who went to boarding school at a young age tend to do far better as independent individuals at university, particularly during the first one or two years. It certainly wasn’t intimidating for me. In fact, I remember concluding that was probably a positive not a negative that I was nearly a three hour drive away from home!
Exeter was great. It was a fantastic campus-orientated University, excellent Law Faculty, very exacting faculty, I think it’s extremely well thought of today as it was back in the early 90s. And I enjoyed the experience. I think it was three years of hard work, hard labour learning, the academic side of law and then going on to practice it for a couple of years in London.
From there, I started in tech banking after a brief legal career, which resulted in exposure to diverse Internet gambling companies in various places, and it appeared to be a promising Industry with decades of growth ahead of it …
SBCA: How has your family shaped your work ethic, if at all?
DS: I think my family has gifted me an obsessive compulsive work ethic where there is no obvious delineation between private personal life and business life. So we tend to merge everything in one go.
GAN has originated as very much a family investor centric business. and I enjoy every family meeting because it ultimately devolves down to being an investor relations conference.
SBCA: So do your family play an active role in the company?
DS: No, not, not particularly. The largest shareholder is Sir Michael Smurfit. He’s got a very significant shareholding in GAN and has been a supporter for more than a decade. So I’m delighted that his investment has proven to be highly successful, and his support of me over the years has been justified.
SBCA: During your time at GAN, what have been some of the biggest changes that you have seen across the company during this time?
DS: We’ve seen the company pivot from being a gaming content supplier to a B2B platform provider and ultimately, in 2020, the leading platform provider to retail casino operators in the United States. And we very much look forward to developing that reputation and expanding our market share accordingly.
SBCA: Not too long ago, GAN was up for sale, but then broke the news that you had decided to float the company on the NASDAQ exchange. What was your thinking behind this decision?
DS: Well, going back to the very early weeks of 2019, the Board of Directors determined that the share price listed on the London Stock Exchange Junior stock market – the alternative investment market – was struggling to realise appropriate shareholder value, bearing in mind everything that we’d invested in and achieved principally in the United States, but also in Italy’s regulated markets.
So on the back of that, we reached a decision in March that it would be an appropriate time for us to conduct effectively a market check, also known as a strategic review. That stringent review had two components. The first was to run a period for six months, appoint bankers in the US and see if anybody in the US had the appetite and financial capability to acquire GAN at fair value.
We ran that process to September 13 2019. At that point, literally the day before, we decided that the multiple offers we’d received from multiple parties didn’t represent fair value in any way, bearing in mind everything that we’d achieved and the huge ramp up we saw in Pennsylvania internet gambling at that point, and of course, the opportunity to expand into other states.
So on the back of a six month exercise in effectively inviting the US industry to acquire GAN, if they’re prepared to pay a reasonable premium above the then market capitalization, we determined that the secondary stage of the strategic review was the appropriate path forward.
So we shut down the first part, which was the ‘does anybody want to buy us?’ stage, and then we moved on to the second part of ‘Okay, it’s go time, let’s go and raise the expansion capita’ stage. We think we need to be a multi billion dollar organisation over the course of the next few years as a result of capturing as much market share in the US as possible.
SBCA: Looking back at your career journey and its unique transitions, what has been the best personal advice you have ever received?
DS: The best advice, which may sound tricky sometimes, is to just keep going. At the end of the day, GAN, like a lot of other companies, has had a tonne of challenges to optimise the business model, the technology system, the approach to acquiring and retaining corporate clients and end user gamblers.
So we kept on investing our time, energy and financial capital in ensuring the business does the right thing for our clients and delivers increasing shareholder value to our shareholders. I think it ultimately boils down to the single entrepreneurial truth, which is never give up. It doesn’t matter how complicated the journey is.
I remind people and a lot of my current investors remind me when I speak with them, that our share price was trading at 15 or 16 p per share back in summer 2017. As they say, it’s always darkest before dawn.
Then, skip forward nine months from that point, PASPA was repealed and our share price took off. Ultimately this has developed a significant amount of shareholder value for people who are prepared to take the risk and invest in the fact that we’d already invested five years at that point in hard labour grinding through a very difficult industrial landscape here in the US delivering simulated gaming, which was the principal reason why we stayed the course and stuck it out in the US. Meanwhile a lot of other European and international technology vendors and providers decided not to make that level investment.
As a result, we were one of the first into the market. The one thing we’ve learned about market development is if you’re there early, and you do a good job, then you tend to be well positioned to maintain that leadership role for decades to come.
SBCA: And looking to the future, what are your main goals for GAN in the next five years?
DS: Well, the bulk of our regulated real money gambling activities are centred around just two states today: New Jersey and Pennsylvania. Looking forward to the next few weeks, we expect to launch in Michigan, which is the next large market because they regulated both internet casino as well as online sports betting. So for us, Michigan is incredibly exciting. We’re bringing three clients live in Michigan at the start of the market commencement, which should be sometime over the course of the next few weeks.
But looking beyond New Jersey, Pennsylvania and Michigan, we’re looking at client launches in Indiana, Colorado, Tennessee, Iowa, Ohio, subject to regulation, and a number of other states. I have to say, we’re looking forward to this time next year, where we hope to be up and running in nine or 10, regulated real money gambling states.
Beyond that, we expect – as do all the industry analysts – that there will be 25 to 30 online gambling-enabled states over the course of the next five to seven years. The total addressable market will be valued at more than $30 billion, which will be split more or less evenly between sports betting and casino.
With the recently announced Coolbet acquisition, we have the sports capability required to address that opportunity for our clients and of course, for ourselves. We couldn’t be more excited! Over the next five years, we have a rapid ramp up and the next equity valuation target for me is a billion dollars. Beyond that, we’ve got a pretty clear shot on goal for a multi billion dollar enterprise all centred around the activity of regulated online gambling.
The US market has been a classic story of American prohibition, followed by regulation and relaxation. So internet gambling has been effectively prohibited since October 2006. But if you skip forward seven years to early 2013, regulation came extremely slowly. Once PASPA was repealed, and internet sports betting was allowed as well as the Internet came in, then it was like throwing a match on a puddle of petrol and the whole market exploded.