## Alternative Lottery Providers Heighten Rivalry Against Dominance – iGB
The recent disagreement between lottery enterprises Camelot and Lottoland underscores the mounting challenge to the supremacy of national lottery operators. iGaming Business engaged in a discussion with Zeal Investments regarding its potential and its investment viewpoint on nascent iGaming ventures.
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Alternative lottery providers are escalating competition against the monopoly. The recent disagreement between lottery enterprises Camelot and Lottoland underscores the mounting challenge to the supremacy of national lottery operators. iGaming Business engaged in a discussion with Zeal Investments about why they perceive such significant potential in this domain and their investment viewpoint on nascent iGaming ventures.
**By: Joanne Christie**
In late September, iGaming Business found itself at the heart of a clash between the traditional and modern lottery models when Camelot, the UK’s national lottery operator, declared it would increase the cost of EuroMillions tickets from £2 to £2.50.
However, rapidly expanding secondary lottery market operator Lottoland declared it would maintain its ticket price at £2, provoking criticism from Camelot, which included assertions that Lottoland is “not subject to the same rigorous regulations that we are.”
Lottoland, authorized and overseen in Gibraltar, the United Kingdom, and Northern Australia, released a sharp critique of its rivals the following day, declaring: “It is regrettable that they are clearly so intimidated by Lottoland’s expansion in the UK that they have resorted to such deceitful strategies.”
The exclusive right is in jeopardy.
This disagreement has thrust the vertical industry into the limelight for the first time, but other businesses, like Zeal Network, have recognized the possibility to supplant national lottery monopolies.
London-based Zeal, established in 1999 as German secondary lottery provider Tipp24, recently formed an investment division, Zeal Investments, to guarantee it is “prepared to take advantage of” future upheaval in the lottery sector, said James Ox, director of the company.
Ox, who established Geonomics in 2008 and served as its chief executive until its acquisition by Zeal Networks earlier this year, stated the company views lotteries as a key area for expansion.
“I am convinced that the secondary lottery market will continue to exist and expand. You can observe how quickly it is growing from the pace of Lottoland’s expansion and the number of new participants entering.”
Naturally, as we grow, we will undoubtedly encounter conflicts with certain state lotteries. Our company’s viewpoint is that rivalry in this instance is beneficial and should be controlled like any other gambling product. Regulate it, impose taxes on it, and allow individuals to compete.
Oakes stated that Zeal is on the verge of finalizing its initial investment and intends to make four to five investments in the upcoming year. “Our ultimate goal is to have around 20 portfolio companies, ranging in size from approximately £200,000 to £1 million or £2 million.”
Oakes clarified that Zeal’s business model distinguishes itself from numerous other investors in the iGaming sector because its approach is not centered on mergers and acquisitions, but rather on seeking involvement with nascent businesses at an early stage.
“Our strategy involves investing and acquiring a minority stake because we aim to invest in early-stage ventures, we don’t intend to absorb them too rapidly and hinder their development,” he explained. “Our objective is to provide assistance, but also enable entrepreneurs to cultivate these businesses. In certain scenarios, we might consider acquiring them in the future; in other cases, it might simply be a financial return.
“In the end, if these businesses achieve success, we would be delighted to acquire them, but if you attempt to do so from the outset, then you are effectively absorbing them, and you are extinguishing all entrepreneurial spirit.”
Initial investments, similar to what we undertake currently, are truly investments in the business owners and their crew, not the product or the underlying technology itself.
Oakes highlights that, sadly, for those putting money into the igaming field, the sector lacks the foundational support structure found in other areas like financial technology or medical technology.
A fully developed startup environment
“When you examine other industries outside of gaming or lotteries, you observe that they possess highly developed startup environments. For instance, there’s an entire financial technology startup ecosystem – there are accelerators, financial technology angel investing, financial technology this and that. In gaming or lotteries, that doesn’t exist, making our task more challenging.”
Oakes believes one reason for this is a shortage of willing investors. “On the funding side, it’s typical for many venture capitalists to avoid investing in gaming – more common in the United States, but it’s prevalent here as well, a significant portion of the capital that exists in other industries isn’t available in this domain.”
Another problem is the prevalent secrecy within the gaming industry. “One thing I’ve definitely noticed in this area is that there’s more secrecy among entrepreneurs compared to other areas, which is truly intriguing.
In recent times, we’ve observed a trend of young individuals working independently, confined to their spaces, with limited interaction with the external world. It’s a noteworthy phenomenon. Consider other industries, where emerging ventures actively promote themselves from their inception. It’s a contrasting approach.
These factors have hindered innovation within the gaming sector, but Zeal is striving to alter the status quo. They have recently partnered with the London branch of the MassChallenge acceleration program. “The gaming industry necessitates a more effective framework for startups. We aim to demonstrate to the world, through collaboration, that there’s space for new ventures to flourish and that investors are eager to provide support.”
Zeal’s primary focus is on novel methods for operating lottery enterprises, but Oakes emphasizes their openness to other possibilities. “Our understanding of a lottery is quite expansive. If you envision games with rewards, any game featuring prizes and widespread participation qualifies as a lottery in our view.”
Zeal also harbors a broader objective, which is to identify companies developing innovative concepts in related fields. “The second aspect is more encompassing, and we’re seeking out new companies offering products or services that could be integrated into our core business.”
This might be a marketing agency that has devised a novel approach to acquiring clientele, or it could be a firm that has ingeniously integrated AI and customer relationship management. It could be a payments enterprise, thus not necessarily a lottery operator itself but a service provider.
Oakes stated that Zeal Investments’ initial investment is “an entirely fresh lottery paradigm that we believe could revolutionize the industry.”
If this proves accurate, national lotteries, which have historically enjoyed a monopoly and never had to fret about rivalry, may soon be compelled to do more than merely grumble to fend off competition.
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