In an attempt to disrupt the gambling industry, Royal Wins is the first pure skill gaming app that facilitates wagering and betting real money.

Unlike odds-based games in casinos, Royal Wins have developed a mobile gaming space that rewards its consumers on merit rather than luck.

The core feature behind the product is a mathematical algorithm which adjusts player returns and re-calibrates the house odds based on an individual player’s skill level.

Targeting a millennial market, the gaming company challenges and distracts consumers from the negative connotations of adolescence gambling by providing a vibrant cartoon gaming experience.

The company was founded in November 2013 by Jean-Claude Petter, who recognised the potential of skill-based gambling, predicting a shift in consumer attitude away from traditional casino games.

It’s now looking to raise money via Crowd88, a new entrant in the market for crowd-sourced funding platforms in Australia.

Business model

The value proposition for potential Royal Wins investors is based around the opportunity to get in early. But they’ll also need to put their faith in the powers that be at Apple and Google.

In 2017, Royal Win’s primary product “Kash Karnival” was removed from both the Apple Appstore and Google Play as the company didn’t possess the required gambling licence in order to operate.

Since this roadblock, the company’s principle objective is to receive the applicable licence (iGaming licence) to trade and anticipates its return by the end of June 2019.

Petter suggests that the immediate opportunity for crowdfunders is to be well positioned ahead of the company’s imminent demand, having exposure to the world’s first licensed skill gaming company.

Sales metrics

When the company was originally situated in Apple and Google stores, Royal Wins attracted consumers from all over the world. The product had 1,800,000 subscribers and 589,354 active users for the last quarter.

For potential investors, the company provided the following per-customer metrics for its business model.

– customer acquisition cost: $25
– customer lifetime value: $36
– $11 surplus.

Revenue for the 2018 financial year was $1.65 million. However, the company has been netting a loss over the past two years, heavily investing in research and development. As at June 2018, the accumulated losses were $3 million.

Based on the company’s forecast — which includes the acquisition of a gaming licence — it expects revenues to grow to $5.2m by January 2021.

Valuation

Featuring on Corwd88’s community funding platform, Royal Wins is offering up to 8,333,333 shares at an issue price of $0.12 per share to raise up to $1 million. The minimum invest is $240, with the offer expiring on June 30, 2019. As at the end of last week, Royal Wins’ capital raise had only gathered one investment of $252, a long way away from their hopeful aspirations; but it’s early days yet.

The crowd-sourced funds generated will be used to accommodate the firm’s growth. Investments will be made in marketing, working capital, licensing requirements, travel and operating expenses.

Opportunity

The attitude towards gaming has drastically transformed over the last decade, becoming a prominent component in modern society. Moreover, participation in traditional electronic casino games such as slot machines and poker machines has steadily declined.

With the demographic shift in technology savvy millennials participating in gambling activity, Royal Wins is aiming to capitalise on that shift in the market.

Risks

The key risk any investor should consider when participating in Royal Wins’ capital raise is the licensing risk. There is a possibility that the company is unable to attain their iGaming licence, leaving Royal Wins completely in the dust.

If the latter does occur, the firm will attempt to obtain a licence in another jurisdiction abroad which will delay operations even further. On the other hand, Royal Wins can pivot to a different business model, manufacturing games for other verified and existing operators and publishers.

Conclusion

While Royal Wins has a product that is proven on the market, the company’s current licensing situation poses a critical threat. Additionally, the company’s expansion and presence in the market will inevitably face challenges from other players in the gambling industry.

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Former fund manager and finance academic, Dr Nigel Finch advises growing business on strategy execution, corporate governance and capital raisings. He has worked across all stages of the business cycle from start-ups to seasoned ASX-listed companies including many who have tackled Asia’s emerging markets. Authoring more than 5 books and 100 scholarly articles, Dr Finch has a thing or two to say about business.