You Bet: The Betfair Story and How Two Men Changed the World of Gambling. Colin Cameron
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a poker table. At bridge, with the money down, they might even have been rivals, which could have added an edge to Jeremy Wray’s annual summer party. Instead, today they remain a study of contrasts, individuals who still exist apart but bound together, Wray as Betfair’s chairman, Black as a board member, with a shared founder’s stake.
Of course, both Black and Wray are gamblers by nature. In general, Andrew Black wins. He only ends up in the red when he becomes bored or sentimental. When he loses interest or focus, he also loses his edge, and likewise, his money (which also, incidentally, is as likely to underwrite a horse’s supply of Polo Mints as burden the beast with expectations of a weighty bet). Now nearly a decade since he and Wray set out together in business, and although now not involved with day-to-day matters, he remains a totem to Betfair’s future. His association with the company – he is still on the board – is comfortably the longest one of his professional life.
Wray’s big gamble was to back Black in seeking to introduce technological innovation that brought stock market computer software systems to the worlds of betting on racing and sport, and, along with brilliant marketing, made the pair multimillionaires. Wray gambled with his own time and at a sizeable opportunity cost. He gave up lucrative returns in the City for a tiny office space in Wimbledon, without trappings of his former corporate world. There was no guarantee that he would make a living from his new berth, and if not, be accepted back into the financial comfort of the City. He literally bet on Black.
Black and Wray won handsomely. Those venture capitalists who passed on the chance to invest in Betfair stock have reason to rue their poor judgement in not bankrolling the pair. Thanks to friends and contacts who, along with some of the more enlightened City institutions – in all 170 shareholders – came up with the multimillion pound funding, in seven years Betfair grew from a company with about ten clients to one with a turnover of billions returning a profit of £27 million in the 2006 financial year. Their stakes increased in value over 130-fold. In March of the same year, the 23 per cent stake in Betfair bought by the Japanese Internet group, SoftBank, for £355 million valued the company, overall, at £1.54 billion. This netted Black and Wray, who sold 1 per cent of their stakes, an initial £15 million each, still leaving them with a shared 26 per cent of the business. Others took the opportunity to convert holdings into real money. This is not a story of paper millionaires. The 330- acre farm in Surrey that Black today calls home is proof of the true substance to Betfair’s success. In September 2008, customer number two million – a 59-year-old Swedish national, wanting to bet on John McCain in the US presidential race – signed up for Betfair, less than two years after the one million barrier was broken. Others like him generated revenues in the 2007 financial year of £181 million and profits of £19 million, up from £32 million and £7 million, respectively, in 2003.
Both Black and Wray have already registered significant profit from Betfair, namely when 23 per cent of the company was sold, yet still leaving them with the biggest stake. What’s more, this initial private sale may be also simply a prelude to a wholesale flotation in the future. Then their return from the company will be worth many times more than what they have already redeemed, to date.
Ultimately, few begrudge Black and Wray their spoils and whatever else they clear when the company does eventually go to market. In particular, few begrudge Black. In his case, money will never compensate him for the double tragedy of his life. Two decades ago, his brother, Kevin, died of a brain tumour. In 1984, Black, at least now blessed with a wonderfully extended family, had dropped out – or been kicked out, depending on whose version you accept – of university and spent the two years nursing his sibling. The decade that followed claimed Black’s father, to whom he was particularly close. He contracted MRSA after a routine operation. Black was devastated. He resorted to a life that was simply eating and sleeping. He retreated socially. He felt numb. He stayed indoors watching television, listening to the radio, reading. On reflection he might well have been depressed. At the very least, he went into traumatic shock. Then, he snapped out of his trance. At this stage in his life, Black had already hit on the idea of Betfair. He had been devastated by his brother’s death and was also hit hard by his father’s passing. In the case of his father, the sadness actually served to galvanise him. He kicked himself up the backside. His refreshed thinking became: if I do nothing Betfair will end up just another idea, and when my own time approaches, nagging away would be the thought that perhaps the greatest opportunity of my life passed me by. His brother and father would have expected more of him, he thought. Then he met Wray.
That so much has ultimately stemmed from the initial meeting between Black and Wray – to them and to the world in which they live – cannot be underestimated and is perhaps hard to comprehend. It may be easier to understand by considering that had Black and Wray not been behind Betfair they would have both been clients. Both fit a modern-day profile of a new type of gambler that is a growing constituency of well-informed, technologically proficient, affluent risk takers. Betting is as much an investment hobby as speculation to them. Most important for Black and Wray was that the timing proved to be perfect. Betfair both coincided with, and helped to create, an upheaval in betting, the way we bet and the way we see betting, the way government perceives betting, and how betting engages with world sport. This book will encourage you to consider how much of this was the serendipity, foresight, and planning of two free thinkers meeting at a garden party at the right time, with the world ripe for change and hungry for innovations, and how much was what everyone who gambles needs: luck.
Walk into the second-floor reception of Betfair’s Hammersmith offices and, as well as chairs that look suspiciously like they have been removed from the Big Brother diary room, there is a window into an office space. Above this window are the words ‘Global Network Operations Centre’. Through the window you can see a wall of screens, clocks telling you the time in London, New York, Johannesburg, Hong Kong, and Sydney. Central is a television screen showing whatever sport at the time happens to be the most significant in the world, from a betting perspective.
Behind two long desks which cover nearly the width of the room and face the screens are casually dressed staff who seem the essence of calm. That is despite their principal job being to monitor the smooth running of the systems and online status of accounts held by clients who in Betfair’s years of business have emerged as the biggest fish in Betfair’s sea. When the screens show green, all is well. When they become coloured in orange, there is a problem, which the team methodically resolves seemingly without breaking sweat.
Going back to 2003, the scene in London’s Old Whitbread Brewery, off Chiswell Street, was, in contrast, altogether more testosterone-fuelled and thick with perspiration. Up to this point, I had only a vague awareness of Betfair. Having accepted a commission from Esquire magazine to write about the growing popularity of betting exchanges, I also accepted, along with around eighty others similarly uninitiated, an invitation from Betfair to road-test the concept.
That night, a fag-end Champions’ League group game between Chelsea – already certain to qualify for that season’s knockout stages – and Sparta Prague was transformed into an epic encounter taking those present on an experience which will have changed many of their gambling habits, if not their whole social lives, permanently. What’s more the game was 0-0. Still, there was an intensity in the room. It was then illegal to trade or bet in real money at such a gathering. Instead, each table had an imaginary stake to invest and computers set up for gambling at high speed. Halfway through an otherwise drab goal-less draw in front of a largely lifeless, under-capacity crowd, you might have thought someone would actually be walking out with a real pot of gold, such was the intensity of trading and feeling contained in the room. An IT engineer on hand to fix any screens mid-match received an ear-bashing from one guest for the rate at which his computer was rebooting. From this reaction, you might have imagined that life-changing money rather than a Monopoly version was on the table.
Something was obviously afoot. And yet, some of betting’s shrewdest thinkers – Stuart Wheeler, who set up and ultimately floated the spread betting firm, IG Index; John Brown, who worked up from the shop floor to the chief executive’s desk and chairman’s office at William Hill; and the Tote chairman, Peter Jones – considered betting exchanges to be short-term, or with a minimal future ahead. The consensus at the start of the millennium? Betting exchanges generally were considered no more than niche potential.