After Brief Run, Startup Pikum Folds

10 February 2009
Pikum, the social betting startup, has confirmed with IGamingNews that the business will indeed be wound up. When asked their take on the company's demise, online betting industry insiders agreed that current market conditions for launching a consumer-facing pools variant are far from ripe.

Pikum was founded in 2007 by Sean Glass, a South African-born entrepreneur in his late 20's who launched the successful financial services company Higher One in 2000.

After attracting investors like First Round Capital and, later, Virgin USA, Pikum went live with its pool betting product in May 2008, which rewarded punters who bet more accurately than their friends.

The Pikum platform was sleek, and, like other pools betting startups, offered social-networking features. It would appear though that Pikum failed to attract the critical mass of players necessary to generate revenue profitably.

"I think Pikum found that trying to get the marketing done to attract players is very difficult, and that you burn through your cash very quickly," Lorien Pilling, head of research at Global Betting and Gaming Consultants, told IGamingNews Tuesday.

As a competitor at the European iGaming Congress & Expo Launchpad last fall, Mr. Glass (and his product) was well-received by a panel of judges that included the serial investor and founder of Sportingbet, Mark Blandford.

Dave McDowell, the chief executive of FSB Technology, a startup, competed against Pikum at the Launchpad. In an interview with IGamingNews Tuesday, he said he was very impressed with Mr. Glass but had misgivings about his choice to target consumers rather than businesses.

"I always thought he'd have a hard time on the b-to-c (business-to-consumer) approach, especially in market conditions like these where it takes £5 million to £10 million to build a brand, and that's a difficult task -- certainly a very difficult task for a startup," he said.

"The difficulty of a product like ours, which is based on pool betting, is to get the liquidity you require," added Mr. McDowell, whose company develops and licenses pool betting games like Fantasy Sports Betting. "This is certainly a large reason why FSB from the very beginning was aimed at the b-to-b (business-to-business) market."

Meanwhile, Brian MacSweeney, founder of the betting and gaming technology developer Boolabus, a startup, said that operators now are hungry for new products -- an appetite Pikum, perhaps, could have capitalized on.

"I think they had a really nice product, but I think they chose the wrong business model in that they went direct to consumers when there's a lot of gaming operators out there who are quite open for innovative products," Mr. MacSweeney told IGamingNews Tuesday.

"If they had worked on building a network across the Ladbrokes, the William Hills, then it probably would've stood a better chance of surviving -- especially without any of the marketing costs that would've went with it," he added.

Pikum, which is headquartered in London, also had the United Kingdom's football pools market to contend with -- a market that has been in decline since the country's National Lottery was established in the mid-1990's. In recent years, moreover, Sportech, the Liverpool operator, has largely consolidated the country's football pools, making survival as a standalone all the more difficult.

Mr. Glass and Johannes Larcher, the chief executive of Pikum, declined comment when asked whether they would seek a new round of investing.

On the Pikum Web site, existing customers have been instructed to withdraw their balances.

News of the company's closure was first reported by the Tech Crunch blog in Monday's online edition of the Washington Post.

Click here to view a blog from the editor discussing why the week of Feb. 9-13 was The Week of the Startup.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.