Sightline Payments recently raised $244 million dollars at a valuation north of a billion dollars. Vegas Golden Knights owner William Foley II’s Cannae Holdings led the series D round, the company’s second investment round in the last five months (they raised $100 million in April, the valuation was not disclosed at the time).
The fintech company has reached unicorn status in part by helping sports betting operators retain customers better than your run-of-the-mill payment processor. Sara Slane (founder, Slane Advisory) explained that in this intense, land-grab environment, everyone is looking for a competitive edge (or just trying to keep up with the Joneses). So, given Sightline’s ability to eliminate a friction point for consumers (see: funding a wagering account in real-time), it was an easy decision for nearly every U.S.-based online casino gaming and sportsbook operator to integrate the technology. That company’s omnipresence within the industry has Slane convinced (presumably like investors) that it is “unbelievably positioned to take advantage of the domestic online sports betting and casino gaming opportunity.”
Sightline is also helping to facilitate the digital transformation of the brick-and-mortar casino business.
Our Take: Despite the billion-dollar valuation, Sightline is flying way under the radar of the general public. But casino gambling and sports betting insiders know Sightline well. “They work with just about every company on the gaming side,” Slane said.
First arriving on the scene in the early 2010s, Sightline entered a financial ecosystem that by-and-large did not support online gambling or offshore sports betting transactions, as merchants feared they’d be shut down (see: UIGEA gambling bill of 2006). The need for a solution that could help gamblers/bettors seamlessly move money in and out of their wagering accounts led to the company’s formation.
Sightline started as a workaround that would enable operators to accept customer payments. But as co-CEO Joe Pappano explained, “Acceptance really isn’t an issue at this point.” Today, the bulk of the company’s 1.5 million cardholders (Sightline’s FDIC-insured financial accounts, which are tied to wagering accounts, literally come with MasterCard- or Discover-branded debit cards) use the funding mechanism because they value the benefits the Play+ solution provides. The balance presumably do their banking with merchants still unwilling to process gambling-related transactions.
Among the benefits cardholders enjoy is real-time access to funds. As Pappano explained: “If you win $500 [from an online operator] and want immediate access to that money, there is not a seamless way to get it. It may take multiple days to get an ACH back or to receive a check.” But with Play+ (which is integrated into the operators’ payment stack), the customer can immediately push the $500 to their co-branded Sightline card and spend it like cash. The functionality is believed to promote the customer retention and brand loyalty that operators desire.
While Slane believes online payment processing remains a “massive growth vertical” for Sightline, it is just one pillar of a multi-faceted business. The company is also trying to facilitate the digital transformation of brick-and-mortar casinos and leverage payment data (think: spending preferences, buying behavior, fluency status) in an attempt to better understand a player’s LTV, valuable insights they can then pass along to their operator partners.
Historically speaking, the brick-and-mortar casino business has been cash intensive. But with land-based operators looking to achieve “single player identity” (think: the player uses the same wagering account regardless of point of interaction) and simultaneously working to establish a digital presence that can increase engagement, a move toward a cashless gaming experience is on the horizon (see: Resorts World Casino in Las Vegas). And with payment technology the nucleus of the cashless ecosystem, the pending shift to digital should provide a “phenomenal opportunity to increase the company’s total addressable market,” Slane said.
The macro environment is incredibly bullish overall for the gaming and entertainment industries. And VC-backed companies, in general, have been commanding record valuations, thanks to record levels of dry powder and an increasing number of nontraditional investors participating within the venture community. So, it would be logical to assume the billion dollar valuation Sightline commanded is rich, but that does not appear to be the case. Paysafe (NYSE: PSFE), the closest comp, has a market cap of about $6.5 billion, and as Chris Grove (partner, Eilers & Krejcik Gaming) said: “Payments are the lifeblood of gambling companies. It’s hard to overvalue a company that can execute on existing payment technology and can also develop next generation channels.” Remember, we are talking about an industry projected to grow to more than $150 billion in the next couple of years.
Sightline’s latest raise makes the company one of roughly 700 privately held startups to have reached unicorn status (and the first Nevada fintech company to do it). It was not in the company’s plans to close a second round in 2021. But Pappano said, when “Resorts World rolled out and people actually got to experience the technology that is going to drive the next generation of land-based casinos and see how it ties to the online experience, and knowing that the gaming industry has a herd mentality, we had a number of investors knocking on the door.”
Those investors included Foley, who said in a press release, “After seeing Sightline’s groundbreaking technology firsthand at the recent launch of Resorts World Las Vegas, I am more bullish than ever about Sightline’s ability to be at the forefront of the digital transformation afoot in the North American gaming, sports and entertainment ecosystem.”
The company plans to invest the newly raised funds into their technology platform, their team, business intelligence and data science capabilities and the creation of new digital consumer experiences. “The last piece is we are an acquisitive company. So, we are [going to be] very active in terms of looking at unique technology that exists in the space and getting [it] seamlessly integrated,” Pappano said.
