Episode 56

Andrew Pace [00:00:00]:

Jesse, I I think I speak for everyone listening. Keep going, man. Like, walk us through the pinnacle story. Bring us to your business today. Keep going, dude. This is awesome. Yeah.

Shane Mercer [00:00:08]:

And you'll have to excuse, mine and Pace's eyes when they lit up with green dollar signs when you mentioned a 365 that's been around for 20 years. Hello, and welcome to another episode of Behind the Lines, the only podcast purifying the sports betting industry. Remember to give us a like, download, subscribe, follow us on all the socials @ inplayLIVE. And if you wanna see what we're all about on the inside, we have a promo code for you that's 'BEHINDTHELINES', all caps. Alright. With me as usual, we've got Andrew Pace, founder of inplayLIVE, only the greatest sports betting community on planet Earth. And Pace, a busy weekend behind us, March madness is kind of starting to to tail off, and we're getting some sanity back into our lives. How's your bracket looking?

Andrew Pace [00:01:07]:

Good. Funny joke. I'll leave that at that.

Shane Mercer [00:01:11]:

Yes. You know, some of us, you know, are are still in hot contention while others have their brackets completely busted. I'm I still have all of my final 4 intact in all of my brackets, so I'm feeling very proud of myself.

Andrew Pace [00:01:27]:

That that's like even if you lose all of them by a landslide, which sounds like you won't, that's a huge accomplishment.

Shane Mercer [00:01:35]:

Yeah. Right? Just to make it through the first two rounds and you still got your final 4 intact. I'm I'm just like, you know what? I'm I can enjoy the rest of the tournament no matter what happens.

Andrew Pace [00:01:42]:

Yeah. Yeah. Right on. Good for you.

Shane Mercer [00:01:44]:

How was it with the inplayLIVE team over the course of the weekend and kinda where are things at now?

Andrew Pace [00:01:51]:

Yeah. I think just one thing that was really notable, which was watching Texas A&M against Houston, no debate the best game of the tournament, like, not even close so far. Texas A&M played a game where they extended the game and gave themselves the greatest probability of coming back by their style of play down the stretch. And I remember in 2021, which was the 1st year that I bet on March Madness, which is crazy to say. People would be like, what? That was the the first season I bet on college basketball or March Madness. And watching team after team after team, extend the game, but somewhere between the 1 to 3 minute mark when they were losing to give themselves the highest probability of of coming back. And if you actually take the Texas A&M against Houston example, Houston missed a couple free throws. They turned the ball over one time and even with but other than that, they play they play great down the stretch.

Andrew Pace [00:02:51]:

They they made most of their free throws, and they only turned the ball over one time. Texas A&M tied the game because they got quick twos, and they, yes, they they did score. They hit a few 3 balls. But the point is that they gave themselves a chance, and it is crazy to watch teams not repeat that model. If if you miss so you don't score the way Texas A&M did, at least you tried, and then, obviously, eventually, you throw in the towel. Maybe once you're down, you know, 14, 16 points, you throw in the towel. But, yeah, I I we're not seeing that the way we used to, and it's league wide. And one of the things we talk about with sports betting is adaptor or, you know, adaptor fail kind of thing.

Andrew Pace [00:03:36]:

It it's crazy to watch something that is analytically sound drop off, and I'm a little bit mind boggled by it, to be honest.

Shane Mercer [00:03:49]:

Yeah. You know, to sort of see it fall off and and it sort of is the method to come back in those games and and to see teams sort of not, you know, deploy that strategy is kind of odd. Now I just wanna mention it too because on the flip side of it, I think we're seeing more of it in the NBA. And here's an exam here's an example of it though. So, Pace, we watched that game last night, Texas a and m Houston, and that went into overtime and it was awesome. And then sort of coming in after that was the Pacers and Lakers game. And I tuned into that. I had it on my TV I was watching.

Shane Mercer [00:04:18]:

And, the Pacers did it. They started hacking down early about a minute and a half. You know, just under 2 minutes, they started hacking to get back in the game, and it started working for them. They were hitting 3 balls and, you know, they they kept on intentionally hacking. And the broadcasters in the game, or who were broadcasting, you know, they started complaining about it. And they're like, this is like our college game out here with all of this fouling on purpose, and they they were kind of bemoaning it. And I'm sitting there going, well, they're coming back, and the Pacers were getting themselves back into the game. And I'm thinking to myself, how how can you sit here complaining about them trying to win? So, anyway, I think we're seeing more of it in in the NBA, and it's it's funny that we're seeing less of it in college.

Andrew Pace [00:05:03]:

Well, what you just said might precisely be the point. Who knows what league influences come in to say it's ruining the game or or they don't wanna see teams doing that anymore? I don't know. I don't I don't know. But it it is, there's a compelling case to be made when you watch a team do it successfully. Yeah. And I would presume we'll see more of it throughout the rest of the tournament after having watched that Texas A&M game. And if we don't, I I just don't really know what to say. The flip side to that was was watching Oregon lose in double overtime and walk off the floor, walk up and down the floor, and just be so ill prepared for the situations that they were in, in in a game where everything is on the line.

Shane Mercer [00:05:50]:

Yeah. Yeah. It it's strange to see teams, you know, be that unprepared. But, hey, we've seen it at at, you know, the professional level of of sports. So, I mean, I suppose we should only expect to see it at the college level. Okay. I think that's enough on on March Madness. We have an incredible interview coming up on this show.

Shane Mercer [00:06:09]:

I have to say it's probably one of the best interviewees, one of the best guests we've had on the show. So that's coming up in just a few minutes. But, Pace, before we get to that, I wanna bring up something that I think maybe you and I owe a bit of an apology or at least myself, I feel like I owed a bit of an apology to Apple. We came we came out here, a few weeks back talking about the new Apple Sports app, and both you and I were kinda like, meh. You know, it's like, whatever. Well, guess what? I probably use this app more than any other sports app now. And let me tell you why. It so after having set it up in a way that you could just monitor the leagues you're interested in, So for me, that was NCAA college basketball, of course, both men's and women's.

Shane Mercer [00:06:54]:

And then I added in the NBA, and I added in NHL. So I've got, you know, 4 leagues. And, I find myself using this app more than anything else because, you know, what I've got now is I've got a whole schedule of sports, of just the stuff I'm interested in, lined up where I can now look at it and say, okay. This section of my day is gonna be important. I'm gonna have moments that I'm gonna want to tune in for here at this part of the day, and I know it first thing in the morning when I go and I take a look because it's curated all of the games I'm interested in, all of the leagues I'm interested in, and it's got it run down in terms of chronological order. So, you know, when it's tipping off, and then even then as I'm going through the day, I can see, oh, okay. This game is coming in now. You know, this game's in the 4th quarter, and it's got it listed in that way where it's, you know, the most pressing moment.

Shane Mercer [00:07:43]:

So this game is nearing the end. It's at the top. You know? And then the games that are starting later, they're lower down and and, you know, as I kind of scroll. And I I have to say, it's it's one of it's it's really, you know, changed my, changed changed my sort of sports tracking, if you will. And the other side of this is is it as up to date as other apps when tracking live games? Probably not. You know, it it it it lags a little bit, but we've seen other apps and other sportsbooks often be incorrect or inaccurate with the information they're giving. I'm finding that although Apple might not be, you know, as up to date, it might be a few seconds behind some other apps. I find it's most often accurate, which I think is is really important.

Shane Mercer [00:08:28]:

So, anyway, I just wanted to sort of put that out there and clear the air.

Shane Mercer [00:08:32]:

Because I felt like I came on here and I kind of, you know, shit on their app. And and now I'm saying, like, hey. I use it all the time.

Shane Mercer [00:08:37]:

So don't know how how you're using it, but I just wanted to, you know, put that out there for everybody.

Andrew Pace [00:08:42]:

Yeah. I think for for what we were looking at, we're just looking at at speed at the time. Yeah. And really what just to give some context is really what happens is there's a a total discrepancy on what's going on in a game. Different sportsbooks have different lines. Different sportsbooks have different scores. Different sportsbooks have different time left, and we kinda went, oh, let's look at Apple. And that's kinda how it started us getting more accurate information from them.

Andrew Pace [00:09:08]:

And then, like you said, it's kinda like your own personal day planner.

Andrew Pace [00:09:08]:

So it's great from a scheduling standpoint to to manage things, which I think is if, you know, you got anything else going on in your life besides betting on sports, that's important.

Shane Mercer [00:09:20]:

Yeah. Alright. Well, we'll leave it at that because this next guest that we have on is, wow. What a mind when it comes to sports betting, but he's coming at it from the technological side. And as we sort of talk about Apple, this will give everybody a really good inside look at the technology fueling one of the biggest sportsbooks in the world, Pinnacle. And he also gives us a lot of insight into the industry as well. So without any further ado, here is that interview for you now. Jesse Liermonth, host of the Betting Startups podcast and founder of Betting Startups dot com, which is a place to keep track of all the startups trying to carve out their piece of the multibillion dollar North American sports betting.

Shane Mercer [00:10:06]:

Hi, Jesse. Thanks for joining us on the show. How are you, man?

Jesse Learmonth [00:10:10]:

I'm doing well, Shane. Thanks for having me. I'm on the West Coast. I'm not too far away from Pace. I'm on Vancouver Island. He's in the city of Vancouver. And just before we started recording, we were sort of, as people do on the West Coast, talking about the weather as we do. It's sort of a hobby people have out here, and, we've had some very, early spring like conditions emerge over the last weekend.

Jesse Learmonth [00:10:29]:

So, yeah, vibes are good out here. Loving life.

Shane Mercer [00:09:19]:

Hey, there you go. Yeah. Not not just a a BC thing, but, across Canada thing easily. And, we've enjoyed some warm weather over here, but it, it's also cooling down. It's a lot cooler today. But, we are here to talk about the hot hot sports betting industry that is just exploding across our entire continent. And so, Jesse, give us a sense of of how you got into the sports betting space and a little bit of your kind of, you know, origin story, so to speak.

Jesse Learmonth [00:10:58]:

For sure. I'll try and keep this rather succinct, but there's a, you know, there's a few minutes worth of, of an arc to this one. So if you'll bear with me and humor me on it, I'll I'll try and give you the the Coles notes. But, look, I'm I'm in my early forties now. Back when I was 17 years old, I got my first job at a local grocery store, an independent grocer here on Vancouver Island in a town of 3,000 people where I grew up. And in the store, you know, my job was everything from cleaning the butcher's equipment to, you know, taking out the recycling, you know, working the cash register. And part of working the cash register included printing out, 6.49 lottery tickets right? So we were a licensed retailer for the government lottery and I'm 17 years old at this time right? Just to contextualize it a little bit And, I mean, that was super boring to me. I was very uninterested in selling lottery tickets, but we got sent to this 4 hour, like, BCLC mandated retailer training course.

Jesse Learmonth [00:11:52]:

So I went. Actually, I got my mom to drop me off there. I don't think I have my driver's license at that point. And they're going through, like, the mechanics of, like, the 649, like, blah blah blah. I'm like, this is so uninteresting until they got to the section where they're talking about the sports action tickets. And all of a sudden, I perk up. Right? I'm 17, love sports, and they start explaining the concept of a point spread and an over under. And I'm like, holy and it's just like a light bulb went off in my mind.

Jesse Learmonth [00:12:14]:

I'm like, wow. This instantly just added a whole new dimension to watching sports. Right? So I go back to work the next day at this grocery store. One of the weird ironies is that, at the age of 17, I could sell these tickets as a retailer, but to buy them on the other side of the country, you had to be 19. Right? So I went into work the next day, printed out a slip, took a toonie out of my pocket, rang it through the cash register and printed myself a ticket. Started printing myself, you know, point spread tickets from the age of 17. I kinda just sorta, like, got my first introduction into sports betting very innocently that way. And it was nothing more than just like a fun little way for me to try and and, you know, make a couple bucks and and, you know, sort of back an opinion I had at that time.

Jesse Learmonth [00:12:53]:

Fast forward a little bit early 2000, you know, I'm in university. I got my first credit card and a buddy introduced me to the world of online betting at that time. Right? He's like, well, you need a credit card, so you have one. Great. Here are the websites I use, and, you know, these are websites from far off lands, which didn't mean anything to me, but because my buddy used them and, you know, had some level of confidence giving his credit card information to these websites. I'm like, yeah. If it's good enough for him, it's good enough for me. So I signed up for Uh-oh.

Jesse Learmonth [00:13:17]:

Yeah. No. But it was all good, but, like, I signed up for a few accounts. Interestingly enough, one of the ones I signed up for way back then was a site called bowmans.com, and nobody will know what that site is except for the fact that Bowman's at some point between then and now got acquired by Bet 365. So my Bowman's account at one point got migrated from the Bowman's platform over to Bet 365, and I still use my Bet 365 account to this day, like, 20 years later. So, yeah, so it's it's it's a legacy account and, I'm no stranger to a parlay or 2, so I'm probably a good customer of theirs. But but yeah. So, like, I I got, like, really into betting from the customer side of the counter, just recreationally.

Jesse Learmonth [00:13:55]:

Like, I never wanted to make a buck from it. I was never, like I didn't have a profit motive. Right? This is something I did for fun. But then, you know, in the early and mid 2000s, then the poker boom happened. Right? There was, you know, Chris Moneymaker, you know, won the main event and, like, all of a sudden it was everywhere sort of in the, you know, mainstream media and, like, you know, is there any, like, mainstream thing all of a sudden? So for better or for worse, I got kinda caught up in that. I was never, like, a good poker player per se, but I certainly spent a lot of hours on the tables, on a lot of the websites that were, you know, serving the North American market, which included the US before UEGA got passed in 2007. A lot of those websites were still taking American players. So those were good times.

Jesse Learmonth [00:14:34]:

I have to say, you know, this is a sweeping generalization, but, you know, the the American players were the ones you wanted to play against because you could often count on them to make a lot of donk moves and, you know, it it paid very well playing against them. And then when Newiga got passed, those players went away and things got much tighter and, became less fun. So I got swept up in all of this stuff. Right? Again, from the customer side of the counter in parallel, you know, in my twenties at this point, trying to figure out what I wanna do with my life. And I I got the entrepreneurship bug fairly early and I don't quite know where that originated. We don't need to go into that today. But I started my first, tech startup in 2,008 and, it it was in a highly regulated industry. It was gonna be sort of what will not what we now call Fintech.

Jesse Learmonth [00:15:18]:

Like, that term didn't exist back then, but it was a Fintech play. And I didn't realize, like, the the level of, like, regulatory constraints that one had to deal with to try and, like, you know, disrupt the Fintech industry, particularly in Canada, where, you know, our our banking laws and infrastructure are fairly conservative here for a reason, which is good. It protects most Canadians. But, you know, on the other side of the coin, if you wanna innovate within that space, it's awfully difficult because they don't wanna they don't wanna change. So I'll have to say my first tech startup didn't go that well, but I got a taste, like, I got a taste for it. Right? And really wanted to do something else, took a bit of time off, and then I'm like, what's my next startup gonna be? And it was just like the perfect time, the perfect marriage of, like, me sports betting for 10 years online, learning a lot about the experience from the customer side of the counter, you know, playing with a lot of online sportsbooks and again these far off countries which we'll come back to you I'm sure. And, you know, my my second tech startup was, called BetSmart Media. I got 2 cofounders together.

Jesse Learmonth [00:16:15]:

We raised a little bit of money from some angel investors. And this is in 2010. Right? So picture, like, Moneyball had just come out a couple years earlier. Like, everybody's talking about Sabremetrics all of a sudden, this whole, like, concept of, like, data analytics, which was a new thing. Like, everybody's talking about that. And there really wasn't a lot of, like, good sources of, like, data for sports bettors to kinda play around with at that time. It's much different today. But back then, 2010, 2011, there really wasn't a heck of a lot.

Jesse Learmonth [00:10:57]:

So what we set out to do was build software and tools, using a pretty large dataset that we had assembled through various means and built some pretty, like I don't know if I'm allowed to swear on this, Shane, by the way.

Andrew Pace [00:16:48]:

Oh, hell yeah.

Jesse Learmonth [00:16:53]:

We built some pretty shit hot stuff. And, I don't mind saying that. And we we built like, our our main thing well, I'll I'll cook you named up a couple of things that we built. You might find it interesting. We built, we built an arbitrage software, so we got a, you know, a feed from, like, 40 different offshore books. We built, like, a pretty sweet arbitrage product. We didn't really know how to monetize properly, though, so it sort of died on the vine. But our our sort of main thing that we built was a trends analysis software.

Jesse Learmonth [00:17:16]:

Right? So we'd gotten, like, I think, 10 or 12 years worth of historical data from the big US pro leagues. We then got a historical, set of odds and mapped those historical odds to the historical games and basically created, like, a query interface where people could almost not quite as easy as a Google search, but, like, people could very easily model out the conditions or a scenario for a game and then sort of, like, look backwards over our dataset to see how a team has performed under the similar set of conditions. And with the historical odds we had and mapped to those conditions, we sort of spit out, like, a profitability metric. You might say, hey. You know, the Blue Jays against an AL East opponent in the month of March on 2 days of rest, and you can model it any which way you want. And then we would say, oh, you know, in this scenario over the last 10 years of Blue Jays are, I don't know, 2015 and had you bet a $100 on every one of those 35 games in that time, you'd be up x number of units or y number of dollars. And it's a pretty slick tool that we built. What we didn't know at the time through sheer, like, naivete and ignorance is there was no no market for it.

Jesse Learmonth [00:18:15]:

Like, obviously, this is well before anybody knew what the word PASPA was. You know, there there was nothing in North America to sell into from an industry perspective, being that everything was offshore. So very quickly, what that meant is if were gonna do anything with this business, we had to figure out where the where the action was, and the action was over in the UK and Europe where, you know, there's a regulatory framework. It's a more mature industry. Culturally, it was far more accepted. Right? Like, this the perception of betting here even 10 years ago is just so different than it is today, and it was still very much, like, kind of in the shadows and, you know, thinking about, like, all, you know, all all the cliche stuff. To wrap up this little soliloquy fairly quickly, though, we we ended up, like, building these tools. We took them out to market, tried to sell them both, you know, as apps that we marketed, which, you know, we had some degree of success with that.

Jesse Learmonth [00:19:02]:

But we also kinda realized that there might be an interesting b to b opportunity where if we take these tools, put them on other people's websites, cobrand them or whatever, And they're they're really, like, engagement products, I guess, to use a bit more of, like, a a a current terminology to describe what it was. But we we had some success, and we tried for a few years. It is well, at the same time, sportsbooks and and a lot of the operators in the UK and Europe saw what we were up to and they're like, hey, guys. You know, we really like the stuff you built. It's really smart, really well built. Like, you're solving a real need. Unfortunately, for one reason or another, we, you know, we can't take it. We can't license it from you.

Jesse Learmonth [00:19:39]:

But we wish you all the best. And, actually, some of them started saying, hey, guys. You know, clearly, you can build you know, you you you have an eye and and and capability for building this type of tool and software. Can you help us out, because we have a backlog of projects we wanna launch. Can you help us out by building some of our stuff for us? And we're like, well, we're not really in that business but also we've ran out of all of our investors money and there's no more investor money lined up. So if we wanna stay in business, guess what? Yeah. We're for hire. So we ended up spending a few years working, for a bunch of sportsbooks over in the UK and Europe doing different projects for them.

Jesse Learmonth [00:20:14]:

You know, we did work for, William Hill. I was over in Gibraltar a bunch, working for those guys. Bwin, which is a large European operator, a bunch in the UK. And we did a few projects for some of the offshore sportsbooks as well. One of the companies we end up doing some work for was called Pinnacle Sports. I'm sure we'll talk about more of them more about them in a few minutes here. And then to basically wind up this this chapter of my journey, we've been at this for, like, 5 years, building all these products, doing different things. Didn't really, like, didn't really, like, crush it, though, as a business, if we're being honest.

Jesse Learmonth [00:20:45]:

It was always, like, kinda hand to mouth, like, just trying to survive and stay in the game. And we did a lot of good stuff, built you know, the body of work that we're super proud of, but we didn't build a good business around it. And it was just because we were way too early. There was no market. So in 2015, we had a bit of an opportunity to, wind down that chapter and, the aforementioned Pinnacle Sports who we got to know the team there really well. We did, as I say, a couple projects with them. And, you know, we'd go to industry conferences every year. We'd meet up with the team.

Jesse Learmonth [00:21:15]:

You know, we get along famously. And in 2015, they had recently, at that time, just gone through an ownership change of their own whereby the original founders of Pinnacle had stepped out. A new owner had come in, and they were making some changes at that time to really modernize the business, and and, you know, more notably, like, modernize the technology, that powers the business. And they made us an offer. They said, guys, you know, we know you. We like you. You can build good stuff. You're well respected.

Jesse Learmonth [00:21:42]:

You know, all all of this stuff. Right? They're like, what do you think about winding down your your cute little company up there in Canada and folding shop? And we'll acquire you. And, you guys pack your bags and move down to the island of Curacao and spend a couple of years working for us, and we'll see what we can do together. And that the sort of the the start of the next chapter I'll pause there. But just to, I guess, yeah, answer your question a bit more directly, Shane, about the the origin story, like, just been at this for for years, both from the customer side of the counter and then got got a bit of a window into how the industry works, and it's just, like, been full court press ever since. Just, like, you know, trying to understand how the industry operates, getting to know all of the key people within it, and trying to do good stuff within it. And, that's been my modus operandi, basically, since 2010, and I've been at this for, like, 14 years now, and those signs are slowing down. So there we are.

Andrew Pace [00:22:27]:

Jesse, I think I speak for everyone listening. Keep going, man. Like, walk us through the pinnacle story. Bring us to your business today. Keep going, dude. This is awesome. Yeah.

Shane Mercer [00:22:36]:

And you'll have to excuse, mine and Pace's eyes when they lit up with green dollar signs when you mentioned a 365 that's been around for 20 years. But, anyway, yes, I do wanna hear. I wanna hear more about this. This is fantastic. Like, you're it's just such an incredible story. Keep going. Keep keep telling us about so what's next? Pinnacle brings you a pinnacle. Yeah.

Shane Mercer [00:22:55]:

Yeah. Yeah.

Jesse Learmonth [00:22:56]:

Alright. So it, I'll tell you so I'll tell you, like, a quick hilarious anecdote. So my cofounder of of my company, which is called BetSmart Media, I think I mentioned that, but BetSmart, we called ourselves. We actually went down to Curacao in May of 2015. And what we didn't tell the people at Pinnacle at that time is, like, we were basically, like, out of business at Best Smart. We had more or less wound down all of our contracts. We were exhausted. We didn't really have any more gas left in the tank.

Jesse Learmonth [00:23:26]:

But we went down there and, we pitched them on of course, they're like we said, hey. We're coming down. And, you know, we had a great relationship as I said. Like, of course, come down. You know, we'll meet with you, whatever. Come spend a week in Curacao. Bring your girlfriend. Bring whatever, and hang out for the week.

Jesse Learmonth [00:23:40]:

Come see us. We'll talk business, but, you know, enjoy enjoy the island for a week. And we go down there, and, we had this big idea. We're like, you know what? Let's pitch Pinnacle on this big idea of ours. We need what we thought was about $2,000,000 in capital to get this project going for this big idea, and we thought Pinnacle could be a strategic investor in this project. So we went down there and, pitched this big idea to them and they're like they're like, guys, like, it's a big idea. It's cute. And if anybody can make it work, it's probably you, but they're like, it's just not for us.

Jesse Learmonth [00:24:11]:

So, unfortunately, we're gonna have to say no to your big idea. You know, sorry you came all the way down here just to get a quick note, but, you know, you're on this beautiful island. Just go enjoy enjoy the island for a week, go to the beach, whatever. And we're like, oh, shit. That is kind of a bust. And, you know, it's like our 2nd day there. We're like all deflated. Next day, the CEO of Pinnacle, Paris, calls me up.

Jesse Learmonth [00:24:29]:

He says, hey, guys. Come in if you can, come into my office this afternoon. You know, I've been thinking a little bit more. And while you're down here, we kinda wanna meet with you guys again. So we go in there not really knowing, like, kinda what this conversation would be because they just said no to our pitch effectively. And she's like, well, you know, we know you have this big idea, but, like, hear me out. What if you guys move down here and, you know, Pinnacle's just undergone an ownership change? We're investing heavily in modernizing the technology. We need lots of good people with you know, that can help us move the ball forward here.

Jesse Learmonth [00:25:01]:

And, you know, we know you guys. We like you guys. What if you guys, you know, come join us for a few years and and take this journey? And, like like, well, so now all of a sudden, like, you're talking about, like, us moving to Curacao. We didn't come down here with being the idea, but, like, we basically have an offer now, on the table and, it was mind blowing. It was, like, very surreal. Didn't say yes immediately, but we're, of course, like, we have to think about this. Anyway, we spent the rest of the week down there in Curacao and, left the island there, on a handshake deal to say, like, yes, in principle, we're interested in this. We need to go home and, you know, spend the next few months kinda, like, winding down our affairs.

Jesse Learmonth [00:25:35]:

We have, you know, a big office with a big lease. We have employees. We have investors. We have customers. We gotta, like, deal with shit to wind it down properly. We're not just gonna cut and run on this and move to Curacao. So we took the next few months, wound down, wound down BetSmart and signed the agreement to join Pinnacle. And, my cofounder and I, judge his name.

Jesse Learmonth [00:25:56]:

He's still with Pinnacle. He he and I, packed our bags, and I think it was, like, January 2nd. So, like, you know, mid literally middle of winter here in Canada, packed our bags and moved down, to Curacao. And, the deal was, we did a handshake deal, with Paris where we said we'll spend 2 years at Pinnacle. That was sort of the term we agreed to. And, you know, I'm like I was I was very I was very, like, deliberate about saying, like, I I don't know if I can commit to anything longer than 2 years. I don't know what I wanna do. I'm very entrepreneurial.

Jesse Learmonth [00:26:25]:

I don't know if I can work for anybody. Like, I don't know if I'm a good employee. Like, all of these things. Right? But I'm like, I'll give you 2 years for sure, and we'll make some stuff happen in 2 years. So we did that. Pack our bags, get to Curacao, and, man, it was just, like, overload. Like, we get to this island and, you know, my cofounder and I were like, what are we doing here? And we get you know, they they put us up in an apartment for the first, 2 months to kinda get us settled there before we found our own place. And, you know, they they were they were they were so good to us, like, getting us settled down there and giving us the, you know, nice apartment overlooking the water and, like, all the amenities.

Jesse Learmonth [00:26:57]:

Like, it was a pretty good situation. And, like, truthfully for us, with our company, we had been, like, 5 years of, like, living hand to mouth, like, scrapping to get by. And, like, all of a sudden now we have, like, you know, beachfront condo in the Caribbean island, and we got these, like, pretty fat salaries that we never had before. So you kinda get a taste for it on the other side and, like, it was pretty surreal. Right? So we get there. And the 1st year of our time there, the whole idea was that we were supposed to be, like, a quote, unquote, like, innovation team within Pinnacle. You know, Paris is, like, you guys have all these good ideas. You have the capability to bring your ideas to life and and build software and products to to whatever ideas you have, you guys can build.

Jesse Learmonth [00:27:37]:

She's like, we don't wanna take that away from you. So what we're gonna do, we're gonna create your your little team over here in the corner. You guys tell us what you wanna build, and you just spend the next year building it. So it's a pretty, like, kinda cool opportunity, like, almost like a blank check, like, blank canvas sort of thing. Like, well, like, what should we do? And at that time, and some of your audience and some of your members, you know, might remember, if they've been betting with Pinnacle for a long time, like, Pinnacle had a few different versions of their their website, of their sportsbook, and they all look like they were designed and built in 1998 because the reality is they were built in 1998. And there's a concept called, you know, like, technology debts. Right? Everybody's familiar with financial debt. You owe money.

Jesse Learmonth [00:28:18]:

You gotta pay off money. Well, with technology, when you build software, over time, you make decisions when you build software such that eventually you'll get to a point where you can't keep building on the same software because a decision you made years ago, it'll break something in the underlying software. And Pinnacle had a lot of what's called technology debt with their sportsbook. That's why it looked like it came from 1990. It's because they couldn't really change it. It was really, like, sort of stuck in that era because of the underlying technology. It was so, I guess, rigid. Right? And that that happens.

Jesse Learmonth [00:28:44]:

It's not the uniquely pinnacle thing whatsoever. That happens to every technology company over a long enough time horizon. Anyway, she's like, well, what do you guys wanna do? I said, well, look, you guys have these 19 98 esque websites. What we're more interested in is building, like, a mobile app or something like that. Can we build a mobile app and we'll hook into the APIs and, you know, just leave us we don't need anything. We'll just do it ourselves. We'll kinda show you our progress. Just kinda, like, leave it with us, and we'll do it.

Jesse Learmonth [00:29:08]:

And they're like, yep. Go for it. So we ended up building a native app, an iPhone app and an Android app, which is originally conceived to be just like basically like, it was basically like showing the pinnacle numbers. Right? It's just like an an easy way on your mobile phone to look at the the live prices for all the markets that Pinnacle has. We obviously, you know, implemented what I think were some pretty, like, nifty, like, UX thing. So it was a really, like, intuitive clean just, like, super clean experience, super clean UX UI. And then somebody had the great idea. They're like, well, why don't you just put a bet slip in there? And then somebody actually is looking at the number.

Jesse Learmonth [00:29:43]:

They can actually just place a bet through there. I'm like, that's not a bad idea. It adds quite a bit of scope to it, but, like, yeah. Okay. Let's do it. So we ended up, you know, adding a bet slip to it, and then customers could actually then log in to this app and place their bets through this app. And all of a sudden, what happened kind of by accident is we had built something which looked way more modern, functioned a lot more modern, and and it's just like a much different experience than the core Pinnacle desktop sportsbook websites, which became a problem for Pinnacle because they said, well, now we have this, like, pretty shit hot looking mobile app, but our websites are still stuck in 1998. And it was almost like 1 year to the date that we got to Curacao.

Jesse Learmonth [00:30:21]:

My my boss, Paris, who was the CEO up until last year, she calls me up to our office, like, almost a year to the day. She's like, Jesse, like, so it's been a year now. You know, I've left you and your little innovation team alone. You've built this mobile app. But I'm breaking up your little team. You guys are you guys are out of business. And I'm like, well, what's that mean? Like, are we fired? What's going on here? She's like, no. No.

Jesse Learmonth [00:30:42]:

No. No. Quite the opposite. Like, Jesse, you're now in charge of product for all of Pinnacle, including the late the 1998 esque websites. My partner, Judd, is all of a sudden in charge of IT. He's he's a tech brains of the operation. And then, basically, we got put into, like, real roles with real jobs with real responsibility, whereas the 1st year was kinda like us sorta, like, fucking around, doing what we wanted, 1st year on the island. Year 2, it got very real.

Jesse Learmonth [00:31:07]:

We had to, you know, figure things out real quickly. And I said, yeah, of course, we're up for this challenge. You know, let's see what we can do. And I was on that I was in that new role for, like, maybe one day. And I'm like, I we can't these old websites that Pinnacle has, like, if you wanna grow as a business, if you wanna scale the business and and reach new audiences, reach new types of customers which aren't necessarily the sharps or the price sensitive customers that Pinnacle is known for attracting. If you're trying to actually reach a more recreational segment of customer, we're gonna need to develop a much more recreational user experience that those type of people will be comfortable playing with. Not this, like, grid spreadsheet looking UI from 1998 that the legacy customers love. They didn't want us to touch it.

Jesse Learmonth [00:31:50]:

But, you know, the reality was like Pinnacle needed to modernize. And I think we were sort of the answer to, to that for them. And I spent the next 3 years, leading a project for the company where, put a lot of blood, sweat, and tears into building the sportsbook that you now see when you go to pinnacle.com. So if you go there now, and people, again, that have been playing with Pinnacle for a number of years might have noticed, that new website was launched in 20 18 or 19. I'm losing track of time here, but, that that was launched about 5 years ago, and it now and remains Pinnacle's website, and I'm sure it will for a a number of years to come. But that that every pixel on that website, was done by my teams. We spent days, weeks, months, years literally designing and developing that. It's not only the the front end website user experience, but underneath all of that, there's a whole layer of other technology we needed to develop out to modernize, the website and to give it the flexibility it needed to add a lot of the functionality, that people were asking for and customers were asking for.

Jesse Learmonth [00:32:49]:

So that was sort of my, like, my my magnum opus, I guess, in my 6 years with Pinnacle. Like, that project was was the big thing that I did. But in my time there, I I mean, I was on the executive leadership team. So in addition to, like, really focusing on that customer experience and modernizing the sportsbook and and the brand, you know, really helping sorta drive, like, the the global business strategy and figuring out how, you know, how to reach new markets, reach new customers. I also, at one point, was given the London office. So I was in Central London for a lot of my time with Pinnacle, and that's where most of the marketing teams were. And for 3 of my 6 years there, I had those teams under my responsibility. So one thing Pinnacle is really known for is its content, a lot of educational content it puts out.

Jesse Learmonth [00:33:32]:

It was my teams that were, producing that content out of the London office and we put a ton of time into really trying to, like, educate and empower our bettors. And, like, that's such a cliche marketing thing to say. Like, oh, like, empower the bettors. Everybody says that, but, like, the reality is that Pinnacle can actually back that up. Right? Most sportsbooks, you know, what what what's the you guys will know better than anybody and your members will know better than anybody. What's the first thing that happens when you first show your first signs of having an edge or CLV or anything like that? What's the first thing that's gonna happen?

Shane Mercer [00:34:02]:

Peace out. See you later.

Jesse Learmonth [00:34:04]:

Bye bye.

Shane Mercer [00:34:04]:

See you later. Right.

Jesse Learmonth [00:34:06]:

Right. So Pinnacle prided itself on a winner's welcome policy whereby it was never gonna do that. You know, customers will never be restricted. You know, sub you know, absent fraud or anything like that where you're breaching the sports book t's and c's, absent that, you're never gonna be cut off for just winning. Right? So because Pinnacle as an operator had that mindset and that core philosophy, what that meant from a marketing perspective is we could put out anything we wanted. Even if it gave our customers an edge, we didn't give a shit. Right? So we were actually putting out what we think and thought was genuinely helpful, educational, insightful content, genuinely aimed at helping people get more confident and and better at betting. And, you know, I I that I I cringe now when I look at what most of the American operators are putting out in the post PASPA era.

Jesse Learmonth [00:34:52]:

But, like, pinnacle has that, like, authenticity with its content, and that was a big part of of my energy there as well was kinda getting the, sort of that strategy in place and and scaling it up with the teams. And, look, the reality for Pinnacle as well, you know, the low margin model means there's not a lot of money for marketing. Right? There's no big bonuses. There's no huge ad campaigns. You know, unless somebody knows about Pinnacle, there's a good chance they're never gonna hear about Pinnacle unless it's through word-of-mouth or or otherwise. And absence that marketing budget, you gotta be real creative about how you're gonna reach new audiences and reach new customers. So our whole strategy with the content was put the content out there. Hopefully, some of it, you know, with a little bit of of maybe, you know, optimization of the content.

Jesse Learmonth [00:35:36]:

Hopefully, some of it will get discovered organically and will be sort of an on ramp for people into the Pinnacle ecosystem. And it ended up working really well as a strategy for the company. When you talk about sort of user acquisition or customer acquisition for Pinnacle, again, never any paid customer acquisition. There's really only 2 ways we acquired a customer, all 3, I guess. First way was organically through the content. People would type in some search term into Google. Pinnacle would almost always pop up in in the first or second or maybe third position in in the search rankings. And, organic acquisition, was was a top, you know, way we would get new customers.

Jesse Learmonth [00:36:11]:

The other way, of course, is through affiliates. I mean, you know, there's such a love hate relationship with affiliates, between affiliates and operators. But the reality is it's a necessary, evil, and affiliates, were a huge part of the acquisition strategy. And then the 3rd part, of course, is just, like, word-of-mouth. Right? Pinnacle, probably above most, if not all operators, has such, like, a loyal, like, passionate, base of customers, and they're just so, like, quick to, like, evangelize the brand largely because Pinnacle doesn't kick out winners. Right? Like, that alone separates them from, like, 99 plus percent of the rest of the operators. So people have a real loyalty to Pinnacle for that and obviously wanna sort of spread the good word about that. So word-of-mouth helped as well, but by and large, like, that organic acquisition we saw from the content was really what was moving the needle for a few years there.

Jesse Learmonth [00:36:55]:

And, anyway, I'm I'm I'm getting, all over the place here now, but I wrapped up my time at Pinnacle, September 2001, I guess it was. So I'd I'd just hit my, 6 year mark there. At the same time, I just turned 40 at that time, so I was having, like, the early midlife crisis. The 2 year deal that we handshaked on in Curacao on that first visit turned into 6 years. So very proud of the fact that not only did I meet that obligation, but things were good enough that we stuck around for 3 times longer than we were, obligated to. My, my boss there, the CEO of Paris, she you know, I reported to her for 5 of my 6 years there. She is, you know, one of the most, I mean, incredible people in the industry, bar none. She doesn't need me to to do her bidding for her, but she is an absolute, mover and shaker.

Jesse Learmonth [00:37:42]:

She is one of the most generous people, very you know, I I appreciated how she really let me, as an entrepreneur, come into that organization and do the job I needed to do without giving me, like, tight shackles to do it. I was able to sort of do it my own way with my own sort of entrepreneurial flair within certain guardrails, of course. But, you know, she really gave us a lot of, autonomy and independence and empowerment to sort of do the job that needed to be done based on sort of a broad objective. So, you you know, it just felt like the time was right after 6 years. I left on fantastic terms. Still dear friends with many, many people there. Many of them came to my wedding, you know, about a year later and, still maintain, very close relationships with with most of the folks there that are still there. So I I can't speak highly enough about my time at Pinnacle and and and the company and organization in general.

Jesse Learmonth [00:38:28]:

And, really, I guess, as a final punctuating point on this, like, what I really respect above all else is, like, the role that they play within the ecosystem. Right? I mean, it's a little bit of a romantic notion to talk about, you know, the the fact that they, you know, they offer lower prices than everybody else. And, like, they really are doing things in service of the customer. I mean, they're not running a charity. They're trying to make money too. Let's not dilute ourselves. But, you know, they're not out there trying to eke out every bit of margin that they can, like 99% of the other operators out there cramming same game parleys down your throat, cramming these high margin products down your throat. They're not doing that.

Jesse Learmonth [00:39:03]:

Right? Like, it's almost like a very, like, pure sports betting. It's one of the last pure sports betting operators out there in the world, really. And I got all the time in the world for Pinnacle because they operate with that philosophy. They really do operate with, like, the player's best interest in mind. You know, there's always gonna be disagreements and arguments, and you'll always read on a form about some disgruntled player. That's always gonna happen. But, like, by and large, they're they're an amazing operator, and I'm I'm no longer paid to say this on their behalf, but I still believe it. Right? So, yeah, that that that was a wild ride.

Jesse Learmonth [00:39:32]:

Happy to dive into any aspect of that. You guys want to, or we can move on from there.

Shane Mercer [00:39:37]:

So so much there to to kinda dig into, Jesse. First off, yeah. I mean, Pace and I are huge, evangelists for Pinnacle as well for for all of the reasons you kind of outlined there. And, it it just it just makes sense. There's such a a sort of peace of mind of knowing when you go to a sports book that I can bet this market, and I'm not gonna have my account taken away from me. You know? And I I know that I can I can bet this, and I can bet it over and over and over and over again, and it doesn't matter how many times, you know, I place a wager or win a wager with the bet? I don't have to worry about that, or I can withdraw. I can withdraw from this sportsbook, and I don't have to worry about getting limited because I did that. Right? And I took some of my money back.

Shane Mercer [00:40:17]:

It's just it really is such a such a nice thing, and I'm glad you you know, that idea of peer to peer sports betting. That that really kind of resonates and clicks, so that makes sense. It feels like that. Right? Like, it's an actual fair and balanced approach where we're we're, you know yes. We're at odds, but it's it's in a it's in a mutually respectful way. And, I I think that that's a a big aspect of it. I I gotta also mention too the multi view and the multi view bet. I'm a huge fan of that and that whole format it's setup.

Shane Mercer [00:40:48]:

So if you're the brains behind that, like, bravo, that thing is awesome. Absolutely love it. That that's just, you know, it's it's such a such a nice sort of way to go about things and keep track of things when there's so much going on. Now the other thing I wanna mention though is that you brought up the fact that you would work on an app and developed an app, but Pinnacle still doesn't have an app. What's going on?

Jesse Learmonth [00:41:11]:

Yeah. Super interesting. So, before I answer that, Shane, just to speak to the multiview thing, first of all, thanks for shouting that out. So, yes, I was very heavily involved with that. I'm gonna shout out my former colleague Leon. Leon and I and Curacao spent many, many hours in my office whiteboarding what became the multi view. So that was conceived in my office in Curacao. I'm really happy to hear that, you get value from it and you liked it.

Jesse Learmonth [00:41:32]:

We thought it was a pretty cool idea. Yeah. It was, technically, it was one of the harder things to build and implement. I won't bore you with the technical details of why, but there was a lot of data flowing through the pipes and having multiple games, multiple live numbers updating concurrently, it was a a bit of a challenge, but we got there in the end. I'm just happy to hear people are are finding value from it and that, you know, it actually worked the way we intended. So cool. Apart of that there, the app, though, the app was interesting, and I you know, I'll also, I guess, caveat by saying, like, I haven't been to Pinnacle in two and a half years, so I can't speak to anything sort of post September 2021. No way to have that year wrong.

Jesse Learmonth [00:42:08]:

2022, maybe? I don't know. I'm losing track of time here. Whatever. But It's been a bit. It's been a minute. Yeah. But look, the the mobile app we developed, was called Pinnacle Lite. Some of your audience, some of your members might have used it back in the day.

Jesse Learmonth [00:42:26]:

It was live from 2016 until about 2018. And around 2018, we removed it from the app stores. If you had already had it downloaded on your phone, you could continue to use it. We supported it and and probably they still do. I don't know. I'm not sure if anybody still has it on their phone. But we removed it from the App Store. And part of the reason for that, more of like a strategy level, was, at that time, I I mentioned we were about to rebuild the entire sportsbook soup to nuts, right? So, we were gonna rebuild this whole sucker from the ground up.

Jesse Learmonth [00:42:54]:

Part of that strategy was to build an accompanying mobile app with the new sportsbook. So, we said, you know what? We're building a new one anyway. Let's just close off, like, this this little experimental one that that the guy has built. So, you know, people were still using it. Wagers were still flowing through it. I think tens of 1,000,000 of dollars in, like, handle going through it every month still. This this, like, little silly app we built. But the whole intention was to build a new fully, you know, native companion mobile app with the new sportsbook.

Jesse Learmonth [00:43:25]:

And as often happens, with anybody that's been involved in a large scale software development project, things often get descoped. Right? You come in at the start of a project. You're like, we're gonna do this, this, this, and this. It's gonna cost x, y, z to do all of this. And then you start getting into it and you actually start down the path of building a doll. And, you know, for one reason or another, an estimate was wrong or something unforeseen came up that made it more complex than you originally thought, which takes resources away. Long story short, this is this is largely what we encountered with the project. And at least for the time that I was there, the the native app got descoped.

Jesse Learmonth [00:44:01]:

The idea wasn't to never put one out, but it was to say, hey. We'll come back to this later. Right now, we really need to get that desktop and mobile web experience dialed in, which we did. And then around the time I I departed, you know, there was still talk about, you know, where does this native app fit on the priority list? And I guess I mean, I haven't even looked, to be honest. I'm not sure. I guess they don't have one. You're you're sort of saying that, but, I'm not sure where it sits today. But it was just one of those things that kinda got delayed, delayed, delayed, and then, I mean, maybe maybe it's still in the queue.

Jesse Learmonth [00:44:30]:

I'm not sure. But, I mean, if if if not, you know, they certainly are one of the only large operators at their scale without a an app these days. But equally, you know, the the mobile website works just as well, and, we we you know, getting many, many millions worth of handle coming through it. So it sort of scratched the itch, but it wasn't a full fully functional native app like most people are used to having on their iPhone home screen.

Shane Mercer [00:44:52]:

Yeah. And and maybe it's maybe it's that whole point that they don't feel like they need it because they're still gonna get that that loyal customer base returning and showing up. And I don't think I could multi view on my phone anyway. So yeah. But, you know, it it's, wow, quite a story there that, you know, in in terms of how you got in with them and and, you know, what you did for them. And and to know that that, you know, we're using technology that you built on a regular basis is very, very cool. So I'm I'm so excited that we have you here on the show. But I wanna talk a little bit about what you're doing now and and what's, what's happening now.

Shane Mercer [00:45:26]:

You've got, you know, betting startups, dotcom, and you're talking to a lot of people, I guess, who are kind of like you or working in the space, that kind of things. But what what kind of people are you seeing out there mostly when it comes to betting startups these days? How are people trying to capitalize on this on this ever growing industry?

Jesse Learmonth [00:45:48]:

Yeah. Yeah. It's an interesting question, Shane. So just very quickly just to just to give some context around this. So when I left Pinnacle, it was September 2021. So one of my one of my jobs at Pinnacle, being in charge of product management there, was that anytime a company wanted to pitch something to Pinnacle saying, hey. We got this new widget or we got this new whatever the case might be. They wanted to pitch Pinnacle and have Pinnacle integrate their their thing.

Jesse Learmonth [00:46:11]:

I was always the person they would talk to. Right? So I'd be on the phone constantly hearing people's pitches, getting presentations from them. I would be sort of like the gatekeeper, if you will. So I was already, like, talking to every startup in the industry anyways. They all knew who I was. I knew who they were for the most part. And when I left Pinnacle in September 2021, all I really knew is I was nowhere to get a job. I needed some time to, like, catch my breath, chill.

Jesse Learmonth [00:46:33]:

My my now wife and I were planning our wedding at that time. So I'm like, I'm just gonna, like, fucking do my own thing for a little bit here. And I'm like, you know what? I think I kinda wanna start a podcast. I mean, everybody like I say, my midlife crisis was happening. Like, I'm gonna start a podcast. I'm like, what am I gonna start a podcast about? I'm like, well, I don't really know too much about anything except, you know, I've been in this industry for a long time. I I look at every new product that's coming out. Why and and, obviously, since PASCO was appealed in the US, there's a flood of investment coming into the space.

Jesse Learmonth [00:47:01]:

And as a result, all of these new entrepreneurs coming into the space. I'm like, fuck it. I'm just gonna start a podcast where I'm talking to founders in the industry. I don't know if there's 10 of them out there or what, but, like, I'm just gonna launch this and see what happens. Tomorrow will be episode 107. So all that to say, like, there's no shortage of entrepreneurs, in the space trying different things. To your question around, I guess, like, who are these people and kinda, like, what are they up to? You know, over a sample size of a 100 plus that I've spoken with on the podcast, I mean, you you get a wide variety of everything from, you know, operators themselves. There's a lot of, like, new, like, genuine start up operators in the US, predominantly exchanges.

Jesse Learmonth [00:47:38]:

You know, you got, like, if you guys are familiar with it, like, Sportrade, Profit Exchange, more recently, Novig in Colorado. So you got, like, the actual operators and then of DFS operators. You got your underdogs and, you know, a whole host of these other ones that are coming. So I talked to a lot of these guys. But then there's also sort of stuff around the edges of that. Right? You got content tons of content people out there. So lots of people do different content based, startups, and equally tools as well. Right? There's a very, very robust ecosystem right now of vetting tools out there and and more and more coming online all the time, it seems.

Jesse Learmonth [00:48:11]:

And everybody's trying to sort of carve out their own little niche within it. I know you you guys do some good work with, a few of them. So, you know, there's there's a lot of them trying to sorta capture a sliver of of of the of the pie. But one thing I've noticed is kind of interesting. I've been doing the podcast for coming up on two and a half years now, and not to plug my own, shit here. But, I actually just released a report 2 weeks ago. I sent out a survey to about a 125 startup founders that I know within this industry, and I asked them to complete a survey. 68 of them replied to it and completed the survey, which I'm very grateful for.

Jesse Learmonth [00:48:44]:

But what I wanted to do is, like, try and figure out, like, are people still seeing opportunity in this space like they did even a couple years ago? Right? There was this whole, like, gold rush mindset and and sort of, like, vibe when PASCO was repealed in 2018. And, you know, everybody had dollar signs in their eyes when they talked about the sports betting industry and, like, all of this upside potential with the regulation. And to a large part, that's been that's been realized. But I think what I've what I've kind of concluded now and this this report that I just mentioned, I think, really punctuated it for me is, like, the sentiment right now from a lot of the entrepreneurs that are trying to carve out a piece of the space right now is, like, it's fucking tough right now. Yes. The industry is huge. Yes. There's big prizes up for grabs, but it's not the same gold rush sort of environment that it was even a couple years ago.

Jesse Learmonth [00:49:33]:

It's getting tough out there. You, you you sort of, you know, you layer on top of that, like, very constrained capital markets now. Right? Like, 2 years ago, you you know, you're just saying, like

Shane Mercer [00:49:44]:

the high interest rates are gonna be making a difference. Yeah.

Jesse Learmonth [00:49:46]:

Exactly. Like, the like, the the I mean, basically, a zero interest rate phenomenon of, like, 2020, 2021. That was a historical aberration. Like, that's not a normal thing, but a lot of these people thought, like, that's the way it is. So they went and raised all this money when money was free. You know, you could go raise it with what's called, like, a pitch deck in a dream. You didn't actually even need a product at that time,

Jesse Learmonth [00:50:03]:

And a lot of them did. And now, like, it's it's you know, the chickens are coming home to roost a little bit. It's like some of these companies are out of cash, and they can't raise more cash because either they're facing what's called a down round. Like, their valuations are gonna be lower, and there's a lot of ego involved with taking a lower value now than they did 3 years ago. Or there's just simply no capital available to them because they don't have fundamental they don't have, like, sound business fundamentals, backing everything. Right? So it's really tough out there right now. Money the money is expensive now. The conditions to get the money are are tighter and tighter, which isn't a bad thing, to be clear.

Jesse Learmonth [00:50:37]:

Like, part of a healthy sort of capital markets ecosystem is is having, like, sound business fundamentals. And the reality is some of these companies didn't really have much of a business model. They had a great idea, but, like, maybe no fundamental business model underneath it. So it's challenging out there right now. All that being said, you know, I track every new funding announcement within the industry. And from January 1st to, I think, like, mid February, like, the 1st 6 weeks of this calendar year, there were, like, 12 new fundings announced worth the cumulative, like, $35,000,000 in new capital to these 12 companies. So, like, money you know, checks are still being written. Money is still flowing into the space.

Jesse Learmonth [00:51:11]:

It's just that, you know, the ideas have to be valid now. There has to be, like, a real actual, like, business case, ideally with teams of people that have some experience within the space and know what the fuck they're talking about. Know people that come into it. And and one thing that I always found pretty interesting is there was a lot of, like the industry really attracted a lot of people from, like, the corporate finance world who saw this as just, like, another, like, you know, like, opportunity. Right? And they got into it, like, under the surface. Like, this is is not that easy to make a buck in this space. It really isn't. Right? Despite the fact we deal in money all day long, there's big you know, there's there's, you know the charts also look up into the right when you talk about, like, the growth prospects of the industry, but it's hard to make a buck in this business, from the industry side.

Jesse Learmonth [00:50:37]:

And to carve out a piece of it, I give, you know, my hats off to to every entrepreneur that that can do that. It's not easy out there. So, you know, despite the fact it's a sexy space, it's compelling, it's everybody's, you know, childhood dream to start a business in sports betting, like, it's a grind out there just like it is any other type of business. It's no easier in this space. In fact, in many ways, it's harder with a a lot of, like, the regulatory headwinds that one faces when they launch a business in this space. And, you know, now you layer on a lot of the, you know, a lot of the conversation around responsible gaming and problem gambling, which is just really now sort of being surfaced as a a real, like, systemic issue both within the US and Canada to a lesser degree. I mean, we can't go 5 minutes in any sports broadcast these days without being bombarded with some level of, integrated betting content. Right?

Jesse Learmonth [00:52:37]:

Ah you know, what are the long term consequences of that? We don't know yet, but, like, that conversation is starting to happen a bit more prominently now. And, you know, there's a sustainability factor to the industry when you start talking about that. Like, we wanna sustain this industry for many years into the future, not at the risk of of, you know, basically, like, churning the entire market in the 1st few years and just, you know, letting the rest rot. Like so there's a very real risk there. It's a it's a balancing act, but still tons of opportunity. It just takes a real brave entrepreneur to come into this space and and try and carve out a piece of it. It's just not easy.

Shane Mercer [00:53:06]:

Yeah. Pace, you're an entrepreneur, you're a business owner in this space. Is some of this really kinda landing for you and and kinda hitting home? Yeah.

Andrew Pace [00:53:17]:

Well, I mean, what what he's describing is my life firsthand in a lot of ways. Right? I think that with ininplayLIVE specifically, you know, when it comes to looking at inplayLIVE rather, you know, as opposed to a community and, you know, this this group devoted to beating the sportsbooks and actually going, okay. Let's let's look at inplayLIVE as a business itself. I kinda always took the the Simon Sinek approach. You know, you just just enter this space with a purpose and and stick with that, and and anything that lands in your lap as a result of it is is just gravy. And I think that that's done really well for us because for me personally, like, it really allows me to not focus too much on some of these other things that I've heard about a lot of betting groups that are outside of inplayLIVE and how difficult it's been, for them in a lot of ways from a business standpoint, not necessarily from a, is our product working for our customers? Are our customers making money, from these sportsbooks, but just simply from a business. And then if you look at, like, things from, like, a macro level, just just bring up the DraftKings stock and look at the boom and then look at the crash. And then to this day, they don't have a profit to earnings ratio listed because it's still infinity.

Andrew Pace [00:54:33]:

Like, you can't divide by 0. So that's a real huge factor where you do have massive investors coming into the space and all the hype and everything associated with it. And then the very sportsbook that you viewed as the biggest one, whether it's FanDuel, DraftKings, whatever, and they they're struggling with their profitability because of all these crazy promos and marketing and managing, you know, things that Pinnacle did so well for so long that they they, they haven't been able to necessarily figure out. Like, how how how do we acquire customers? How do we deal with all these crazy promotions we're giving away in crowns and d k dollars and and all that stuff that you've seen through our community where you go, okay. I just lost my DraftKings account. Okay. They're no longer doing this crown promotion. And you're seeing these things be pulled away because they're trying to make money themselves.

Andrew Pace [00:55:22]:

And that that's that's the sports book, let alone all the other entrepreneurs that Jesse's referring to that are that are trying to carve a sliver out of the out of the space. So, yeah, I mean, I'm in tune with that to an extent, but at the same time, I do I do just really want to stay in my lane. I do wanna focus on, you know, our community and and what's worked for me and as a bettor and being able to pass that advice on to to to the group and continue to have great people that that are working with me that can can do the same.

Shane Mercer [00:55:51]:

Yeah. Jesse, I wanna ask you. You know, you kind of alluded to it there in terms of sort of, you know, letting your customer base rot. How much of of the people you're speaking to, how much of their business model is still based off of customer loss?

Jesse Learmonth [00:56:06]:

Interesting question. So when you talk about customer loss, I mean, really, the people that are in that business are, I mean, either operators or Mhmm. Affiliates. Right? I mean, you get a certain percentage of affiliates that are, doing rev share deals, with the operators. And this is all very anecdotal based on my own experience, a sample size of 1. But my vibe right now is most of the the the newer affiliates that that are incoming to the space. And when I say newer affiliates, a lot of these, you know, betting tools that I spoke about, they're also affiliates. And the the dichotomy there is a lot of these tools which say that they're in service of helping you make more money or helping you beat the books.

Jesse Learmonth [00:56:44]:

I've always struggled with those that then go the other way and and then basically, like, make money off of the customer loss on a rev share basis with the book. So what I would all that to say, Shane, like, I think anybody that is an affiliate now seem to be moving more towards, what are called CPA deals, which is a one time fixed fee that these people receive to refer a new customer to an operator. And they are not incentivized based on that customer's p and l or their profit or loss with that book. You know, you'll get I mean, CPAs are are are coming down across the board right now, but I don't know any I mean, maybe you guys are well aware of this. But

Andrew Pace [00:57:21]:

Well, we we have some pretty crazy stories. Yeah. I mean, we definitely, like, explored that space, and we got kicked off of a bunch of platforms, and then we get we've we've been limited as a business. So I like to think I my personal accounts get limited. We got limited as a business. So, I mean, Jesse, we we were naive in a lot of ways. Like, we explored a lot of these things, not even knowing some of them existed. But as a bettor, it gave me great insight into the industry.

Andrew Pace [00:57:46]:

And then watching people come after me, the CEO of the company, and looking at me as, like, this this big fresh meal being prepared for them that I can open the door to their sportsbook. And the best example I have of this was steak. And them being so excited and offering us all these things and actually claiming that they don't limit players and then offering us a not a a loss revenue share program, but simply a percentage of dollar wagered regardless of winner win or lose. We were just so excited. We're like, this is so cool. We're working with the sports book. You know, Drake's there, you know, like, you get all excited about that. I think it lasted, like, like, 4 days before they they completely went against what's printed on their website with us.

Andrew Pace [00:58:34]:

So, yeah, we've we've definitely been experienced with all that, and that is why I will gladly, whether whether there's a payment or not, promote bookmaker and Pinnacle. Gladly promote them. And it isn't about customer loss. That's not what it is. Yes. They're Sharp Books. But it's about having a reputable company that you can play on for the rest of your life and know that that payment will land in your wallet. And and you you would think that that level of transparency in the industry should not be sought after.

Andrew Pace [00:59:07]:

That should not be sought after. That should be regulated and be standard. But here I am sitting you to with you today where I have 3 sportsbooks and $55,000 tied up from the last 2 weeks of of wagering that I don't know if I'm going to receive, and I genuinely don't know if I'm going to receive it. And and that is everything wrong with the industry, and I don't care if they're licensed in in Curacao or if they're licensed in the United States of America. You should never be thinking about that when you engage in a relationship with a sportsbook. And quite frankly, a lot of these startups that you're referencing, they will check to see if you are affiliated with, some of these companies to and then use that as a reason to not pay you. Like, you used a tool which goes against our terms and conditions. You have software that goes against our terms and conditions, and it won't even necessarily be true.

Andrew Pace [01:00:03]:

It's just because you made a a winning wager, and then they claim that that that's that's the case. So, yeah, it's really interesting. It's really interesting for sure.

Jesse Learmonth [01:00:12]:

Yeah. I mean, also extremely disheartening. Right? I mean, it, it's, like as you rightly say, PACE, like, the the the fundamental proposition of of sports betting is a simple one. Right? You post a number, you take a bet, and if the bet wins, you pay out. And that's it. Right? It the the fundamental premise couldn't be simpler. But to your point, you know, there there's so many there's a lot of bad actors out there. There's a lot of fine print and t's and c's, which are way below the the level of the page anybody's gonna read when they see the big headline promotion and the big fonts up above the fold.

Jesse Learmonth [01:00:43]:

Right? There's a lot of, you know, there's I don't wanna say bad faith out there, but, like, it it it it really does you know, for those of us that have been in this industry for a long time and trying to do good things within this space, it really is, you know, just a bit, you know, demoralizing to to hear anecdotes like that. And, I mean, you're right. Like, whether it is with unregulated books or regulated books in in the US or Canadian market, I mean, it happens. And you shouldn't have to be, you know, submitting documents to a regulator to justify your case as to why this sports book goes in money. You should just get paid when you're owed money. I mean, it's such a fundamental thing, but you're right. It, you know, it it it sucks. And I guess coming back to the sustainability of the industry.

Jesse Learmonth [01:01:23]:

Right? I mean, you know, people are only gonna get burned once before they swear off of this stuff forever and and and go spend their time doing something else. Right? And, again, like, I I believe this can be a long term healthy sustainable industry, but it's also incumbent upon the industry to make sure it's acting in in a sustainable way. And some of these, you know, examples you cite here are exactly, like, counter to that. So it sucks, man. I'm sorry to hear that.

Andrew Pace [01:01:46]:

Oh, I mean, that's that's normal for me, but, you know, it's it's a part it's definitely a part of the journey. Yeah. It's it's not a new story, one that I'm referencing.

Shane Mercer [01:01:56]:

Yeah. It's a story that that has happened in the past and will happen again in the future very, very likely. And and, you know, you're a pro at dealing with it and you know how to go about it, where, you know, we get a lot of new members come in and they're they're they're shocked, you know, that this kind of thing happens. You know, they they sort of aren't sure how to navigate it, and then that's why the community exists in a lot of ways. It it's a place where other people can give them information and tools, tips on how to navigate those kinds of problems. But I I wanna ask you, Jesse, a little bit about, that idea of sustainability and and how you know, whether or not you're seeing entrepreneurs out there kind of embrace that idea and and that kind of, mindset. You know? And I guess, overall, sort of a big picture look at at the North American sports betting landscape, how do you see it changing, growing, evolving in the next year, 2 years, 5 years?

Jesse Learmonth [01:02:48]:

Yeah. Good questions, Shane. So I don't know. I I I feel like we're at this I mean, I don't know if you guys spend a lot of time on, like, gambling, Twitter, or whatnot, but, like, I just really feel like this, like, groundswell of, like, sentiment really bubbling up now around this idea of, like, sportsbooks restricting and limiting players that, again, show any sign of sophistication in their bets. And, I mean, I can't think of any other industry in in, like, the finance world or anything where you have a product, you offer it, and if somebody is using it successfully, all of a sudden, you cut off their access to this. It's, like, counterintuitive. And, you know, the UK, is an interesting market to look at as a potential, like, window into the future where things could potentially go from a North American perspective. The UK, it's regulated online gambling industry, dates back to about 2005.

Jesse Learmonth [01:03:38]:

They had something called the gambling act was passed there, sort of like their version of PASPA. Not quite exactly right, but, nevertheless. So So they're a more mature market, and I often look to the UK as, like, you know, a bit of a crystal ball. Like, you know, if things unfold here the same way they do there, like, what can we expect to see? One thing they looked at doing, and I'm not actually sure where it got to, but this notion of, like, player accounts getting restricted or limited, they were actually looking at implementing, something within their regulations such that any licensed bookmaker there had a mandatory minimum limits they had to post with every market that they put up. Basically, all I had to say, they would guarantee a minimum bet from every customer regardless of your sharpness profile, on any market they put up. And I think something like that, would go a long ways to making all of this more sustainable. You know, number 1, it puts puts a little bit of, like that's another thing too, I guess. I'm gonna go on a tangent for a second here.

Jesse Learmonth [01:04:33]:

Like, one thing with Pinnacle is that, you know, Pinnacle was in the business of risk management. Right? The model that it had, it basically opened up action from any single person in the world regardless of how sharp they were. And because they had that value proposition, every single Sharp in the world that he was able to access Pinnacle tried to bet with Pinnacle. So Pinnacle very much had to be in the business of managing that risk. Otherwise, they'd they'd have their lunch eaten, you know, 7 days out of 7. And, you know, working there for 6 years, like, I really got to appreciate, like, what the what a risk taking mindset was from the people that work on the trading floor there. And that's just not reflected in any of the other operators in in the US market. Right? Like, these guys aren't out there actually managing risk, and it's depressing on some level.

Jesse Learmonth [01:05:20]:

There's maybe a couple operators that are. I mean, Circa Sports, shout out Circa. They those guys are awesome. Newer operator called Prime Sports is doing the same thing. You know, shout out Prime Sports in Ohio, soon to be New Jersey, I'm told. And then, you know, there's a couple others that are sort of exploring that model. But, like, all that to say, like, you know, pure bookmaking in its in in its purest form, like, putting up a number, taking the bet, paying out the winners, that's just like it's been lost. Like, that art's been lost somewhere along the way here, and I think I think having a minimum bet limit would go some way in, like, putting you know, swinging the pendulum back towards the player a little bit and away from the operator.

Jesse Learmonth [00:53:15]:

I could really see that being something that comes to fruition in the next year or 2. I don't know what that looks like or if that's on a state by state level or what, but something akin to that that just just brings a bit more fairness back to the player is really what's needed because absence that or something similar to it as I say, the name of the game right now for a lot of these sportsbooks, the FanDuels, the DraftKings, the MGMs, the Caesars, you know, their business is getting in at these customers is in as quickly as they can and churning through them just as quickly. Right? And and that's just not a recipe for for a long term success for their business or for for the ecosystem bet guarantee is something I could see coming. And, you know, beyond that, I think the other thing to kinda watch out for here is there's gonna be, like, ongoing consolidation if you if any of your audiences ever look at the, you know, analyst reports or things like that for the US specifically. You know, you see there's there's between FanDuel and DraftKings, they have something like 80 I don't know what the number is now. 85% of the market share for the US market. Right? And there's gonna be more and more consolidation coming up to the top, and and a lot of the mid tier operators and bottom tier operators are gonna get squeezed out.

Andrew Pace [01:07:09]:

Well we've seen we've seen some of that. Right?

Jesse Learmonth [01:07:13]:

I was just gonna say some have already packed their bags and left. I mean, I was just at a conference 2 weeks ago in New York, an industry conference, and talked to a couple of operators there who haven't announced anything publicly yet but they're preparing to pack their bags like so there's there's more of that coming. Really? Yeah. Wow. And it's so it's tough. So, you know, in in any industry where there's monopolistic forces or or duopolies, like, typically what that means is bad things for the end consumer. Right? I mean, something tantamount to, like, price fixing. I'm not saying that's what's happening at all.

Jesse Learmonth [01:07:42]:

But what you wanna have as a consumer in anything is more options. I didn't tell you have less options. That's bad for you as a consumer. So I think the trend towards consolidation in the US is is broadly bad news. That being said, I am encouraged by, you know, some of the aforementioned challengers in the space of Circos, the Prime Sports, some of these guys that are coming in, trying a fresh approach, trying to basically take the an antithetical model to a DraftKings and and seeing how that lands. I think they're gonna they're gonna do well to carve out some of the market share, but, it's gonna be tough sledding for a lot of these mid tier operators. So, we'll see how it plays out. But, the other thing too, just sorry.

Jesse Learmonth [01:07:13]:

I finalize this thought. And you mentioned you mentioned this pace, which is, like, DraftKings and some of these guys, which are the biggest leaders in the industry. Some of them still aren't showing a profit. So it's like, well, if not now, then when? The whole thing there, these companies are hanging their hat on, is not sports betting at all. It's what's called iGaming or iCasino.

Jesse Learmonth [01:08:32]:

They're waiting for iCasino to get regulated in as many states as sports betting is currently regulated. The the the insider secret of the industry that is often uttered within the walls of many of these operators is that sports betting is how you acquire the customer, and Icasino is how you make money from the customer. So a lot of these guys are really just trying to run almost like lost leader or breakeven businesses right now with their sportsbook. While they wait out however long it takes for Icasino to come in, at which point they think that will be their sort of their hockey stick growth, on, you know, on their revenue, chart. So we'll see if that plays out. But, again, like, you know, the the the purist in me hates that. I I don't love that. I mean, I I don't I'm not a big fan of Icasino.

Jesse Learmonth [01:09:14]:

That's just me personally. Sports betting, I mean, sports betting is something more close to a democracy where a player can grind out an edge and you can do all the things and you can actually make money. And iCasino, on the other hand, I mean, it it to me, like, parts of it border on predatory. So, like, I don't I don't really spend any of my time involving myself there. But the reality is the industry for better or for worse sees that as, like, the saving grace and how they get the profitability. And, you know, that that likely will be true, sadly, but, you you know, that that's the other thing that's gotta hang in there until that comes to pass. Yeah.

Andrew Pace [01:09:45]:

I mean, that sounds a little gloom and doom. But, I mean, being in Vancouver, there's a whole other side of this that, maybe isn't as discussed as much. And I'm gonna make this quick because this is gonna be a whole other hour if we open up this can of worms. But that is just the it's the whole crypto space and the way that, you can wager and interact with different websites using and depositing, with offshore books and cryptocurrency books. And, that is a big reason also why I'm talking about having money tied up because maybe I've gone and played with a few that are a little bit shadier than than others. But that is a very legitimate side of things. And, of course, you kinda pointed to the UK and what is prominent in the UK that isn't necessarily prominent here, but you can start to see the trend towards it. And that, of course, is, the peer to peer exchanges, right, and and everything that can exist through there.

Andrew Pace [01:10:34]:

So, as as a professional sports better myself, you know, seeing these changes happen over the last decade, are are notable. It's not necessarily as easy to make money as it was 10 years ago, but I I find myself that there are always these new options and opportunities that are coming forward. And what I really hope in the grand scheme of this whole thing is that when you take this discussion of sort of, like, a maximum minimum for a player and and things like that, where you go, okay. Regulators in Ontario just banned celebrities from being able to advertise on on the the iGaming, broadcast, AGCO. Well, do I care about that? I don't I don't care. But what they did was a regulator took action on something. So when you talk about this brewing, you know, trend of of what's happening online and what's being exposed, you know, at what point do regulators get involved in in some of those types of things in North America? And I think that's what we're sort of most excited for. But at the same time, that's something that isn't here right now.

Andrew Pace [01:11:40]:

It's it's not even close. So that's that's the dream.

Shane Mercer [01:11:47]:

Yeah. Yeah. Absolutely. And, you know, when you when you Jesse, when you say something along the lines of, you know, that the saving grace is a predatory behavior, you know, that that's that that's frustrating to think that that's the conversation that's taking place behind the scenes. Yep. Because there's so many other ways, and we've had them on, like, you know, the exchanges, for example, which are huge in the UK already as we sort of look to them as the future. I'm hoping that that is a, you know, part of our future here, you know, and and those kinds of things because there are other ways to to to carve out that piece of the pie that isn't, you know, based on that kind of predatory behavior. And and, you know, I wish more would see that, like

Jesse Learmonth [01:12:27]:

Yeah. I didn't mean to get all doom and gloom there. That was a call out pace. I'm like, oh, man. I'm getting real, real negative over here. That's hey.

Shane Mercer [01:12:33]:

But that but those are the conversations happening, and we kind of already instinctively know that those are the conversations.

Andrew Pace [01:12:38]:

Need to be able to arb out on a blackjack table or a roulette wheel from one site to another with some of these shady books, and that'd be fine because they'll let you play over there. I just need it to be the same wheel so I know that if it lands on black, I still get the other half of my money. But yeah. Anyways yeah.

Shane Mercer [01:12:57]:

Yeah. Well, anyway, Jesse, I just wanna say, thank you so much for coming on the show. I've I've learned so much from from hearing your story and, you know, some of the knowledge you've been able to share. It's just been it's just incredible, and and just an amazing experience for me and and just, able to to sort of soak up the knowledge that you've gained from being in the industry for as long as you haven't from speaking to people who are trying to, carve out a a space in this in this industry. So thanks so much for coming on the show, and we'd love to have you back sometime because I'm sure that we could probably talk for another 2, 3 hours very easily.

Jesse Learmonth [01:09:14]:

I was just gonna say, you know, thanks for letting me ramble for an hour, Shane. And and as you say, probably could go for another hour easily. So let let's let's, pin that for a part 2 at some point. But, no, it's been fun to chop it up with you guys here today. I hope, some of this has been interesting, insightful, useful, what have you. Thank you. I'll plug, if you'll allow me.

Andrew Pace [01:13:45]:

Please please do.

Jesse Learmonth [01:13:46]:

Plug, my podcast, the Betting Startups podcast. Again, if if people are interested in kinda seeing what, you know, what the up and comers are talking about, thinking about, working on, it's it's the best place to see, kinda what where the builders are are are at. So betting startups.com is the place to go for that. I also produce, another industry podcast called the Business of Betting podcast. It's hosted by a guy named Jason Trost. He's the founder and CEO of SmartGets, which is one of the largest exchanges in the UK. So I produce that podcast for him. It's a weekly podcast.

Jesse Learmonth [01:14:17]:

It's, it's awesome as well. So I'll I'll plug Business Abedding. Probably some other stuff I should be plugging, I have forgotten. So we'll save that for part 2 when I come back. But, really appreciate the time, guys, and then thanks for having me.

Shane Mercer [01:14:29]:

Jesse Lermoth, host of the Betting Startups podcast, founder of betting startups.com. And, yes, go check out those podcasts he mentioned If you wanna hear more of this kind of content, that'll really help you learn about the industry, understand how it operates. That's all part of beating the books. Jesse, thanks again, buddy. Cheers, guys. Alright, pace. That was Jesse Liermonte. Wow.

Shane Mercer [01:14:55]:

What a mind. What an incredible conversation. I'm so glad I had the chance to chat with him and learn from him. I'd love to have him back on the show again in the future. Pace, what's your big takeaways?

Andrew Pace [01:15:06]:

Well, I mean, we'll just we'll just get him. I'll just get them to take over my seat, and then you guys can listen to him instead of me. One thing that didn't come up in that interview that I think is important for our members and listeners to know is Jesse's responsible for building all those, tools at Pinnacle that we use, the middling tool, the arbitrage tool, the odds conversion calculators. He built all that stuff, which is just like it's really cool. It's really cool.

Shane Mercer [01:15:32]:

Yeah. Just just, you know, really interesting to hear him talk about the industry and where he thinks things are going and, you know, what what's on the horizon and, a really kind of cool, podcast that he's doing over there. So, you know, I encourage our our listeners if they want sort of to hear more from him and and sort of hear some of the conversations he's having to to check out, his podcast as well. Alright. Well, I think that does it for us on this episode. Pace, look forward to touching base with you again in a week or so. Till then, keep eating those books. Thanks for tuning in to another episode of Behind the Lines.

Shane Mercer [01:16:03]:

Remember to like, download, and subscribe. We are on YouTube, Apple, Spotify, and everywhere you get your podcasts. Have a betting story or wanna be featured on our podcast? Drop a note in the comments below. And if you wanna join inplayLIVE, use promo code 'BEHINDTHELINES'.