Everyone loves the idea of winning big at the slot machines, collecting your money as the bells and sirens ring; but everyone also knows that this almosts never happens. With slot machines more or less being a game of chance, wouldn’t you rather play a skill-based game where you have better odds? GameCo has developed a video game-based gambling platform that provides a whole new way to spend time at casinos. Partnering with top developers, the New York Angels-backed startups is bringing the classic video gaming experience you love to a casino floor near you.
AlleyWatch chatted with CEO Blaine Graboyes about the company and how he plans to expand.
Tell us about the product or service.
GameCo is the inventor of the Video Game Gambling Machine (VGM™). GameCo’s VGM is the first platform to bring video games to the casino floor, engaging a new generation of casino customers. The first video game skill-based gaming platform approved by any regulator in the United States, GameCo’s patented VGM arcade-style cabinets allow a player’s skill to determine the payout and winnings while maintaining the same casino-based economics as slot machines. VGM games are single player experiences and typically 15-60 seconds in length with familiar titles from top entertainment companies and publishers featuring various genres and themes including first-person action, sports, racing, fighting, platformers, puzzle games, and more. GameCo is developing VGM games under license from major game developers and entertainment IP companies, including Paramount’s “Mission Impossible” and “Paranormal” brands, Steve Aoki from DJ Kid Millionaire LTD, CBS’s “Star Trek”, and “Terminator 2: Judgment Day” from StudioCanal S.A.S.. GameCo recently entered into an agreement with BANDAI NAMCO for the publisher to bring their famed property, Soulcalibur II, to the VGM platform. This will be the first AAA video game available in casinos and has positioned GameCo to secure other top game publishers.
How is it different?
Our product is truly unique in the casino industry, bringing the video game gambling experience to the gaming floor. Today’s slot machines are completely chance-based. And while slot manufacturers make amazing products with great licensed brands, these games typically do not appeal to a younger audience that grew up playing interactive video games. At GameCo. we’re focused on attracting the next generation of players to casinos and providing them with an experience that’s similar to console video games’ interactive and engaging experiences. While our VGM uses existing hardware and software from slot machines, the user experience is completely different. There are no spinning reels or matching symbols. VGM games are real video games in which the players skill directly impacts their payout. Casinos are in an amazing position to leverage their properties and amenities and their expertise in hospitality to provide a VIP experience to a largely underserved audience of video game enthusiasts. GameCo is completely committed to this goal and intends to lead the industry in bringing video games to casinos.
What market are you attacking and how big is it?
GameCo is one of the first companies to marry two significant worldwide markets: the video game industry and the ~$300B casino gaming industry. GameCo’s VGM is the first platform to bring video games to the casino gaming floor, offering an entirely new way for casino operators to engage players with offerings that are similar, but incremental to, slot machine entertainment. GameCo is targeting a multibillion dollar worldwide market for skill-based games we project to be $4.3B in the U.S. in five years and $6.2B outside the U.S. (by 2021). This market size estimate is based on 2.5% of legacy slot machines converting to skill-based games by 2021.
GameCo is focused on the largest market opportunity and most critical problems for casinos – stagnant slot revenue and aging demographic. iGaming (real-money online and mobile wagering) is limited to a $175M market in the U.S. and social gaming is still only $1B in the U.S. GameCo’s target market is substantial, and we estimate that there are 23 million high-potential customers for the Company’s products today.
What is the business model?
GameCo leverages established business models around slot machines with casinos. This generally includes one of three revenue approaches; sale, lease, and revenue share. In North America, casinos predominantly choose to purchase gaming machines and then will also purchase future “Conversion Kits” whereby the games are updated with new content ongoing. Other slot machines, and now GameCo’s VGMs as well, are leased for a daily fee or suppliers such as GameCo enter into participation agreements to share revenue with the casinos. Such revenue sharing is only possible in Nevada and with Tribal casinos with typical terms being an 80/20 split with 20% of Win Per Day (WPD) for each machine going to GameCo. Internationally, casinos tend more towards outright purchases as well as revenue sharing agreements. GameCo openly supports all of these business models in our goal to collaborate most closely with the best casino operators worldwide.
GameCo does have a very unique approach to our game development strategy and business model. Most gaming equipment suppliers utilize internal studios for content development. However, GameCo has pioneered a very unique “open platform” model whereby we make our platform available to game developers who then produce or “port” games to our platform. This allows game developers to focus on what they do best – making great games – without having to worry about the regulatory process or significant financial investment as an equipment supplier. GameCo’s VGM Platform handles all of the user interaction, gambling components, control of gaming peripherals, and casino economics and reporting. GameCo also managed the entire compliance aspect of game approvals along with sales, service, and marketing with casinos. This approach allows GameCo to bring innovative new games to casinos and provides meaningful business opportunities for game developers and publishers.
What inspired the business?
I was consulting for game publishers such as Blizzard, Ubisoft, and Wargaming. We’d often produce events at casinos – generally in their conference centers or arenas. We’d bring a few hundred to a few thousand esports fans to the casino for these events. And this connected me with multiple casino executives who very often were telling me that few, if any, of the esports fans would visit the gaming floor. You’d see gamers simply walk by a sea of slot machines with no interest in the product. I started to research the casino space and specifically slot machines. Learning that 75% to 80% of casino revenue came from slots was eye opening. It makes sense based on the organization of casino floors – it’s mostly slots. And then I learned about the challenges of an aging player base for slots and the general shift in most markets with non-gaming revenue beginning to overtake gaming revenue. So lots of young people are visiting casinos for nightclubs, bars, and restaurants but increasingly fewer were actually gambling. This led to the thought around video game gambling. How could we bring video games to the casino floor in a similar form factor and implementation as slot machines but appealing to a new, younger demographic of players. Further market research confirmed the thesis and led me to prototyping game concepts, running casino nights, collecting feedback from video game enthusiasts – each step validating the core concept of video game gambling.
What has it been like working with the New York Angels?
At every step, working with the New York Angels has been an excellent experience and also a tremendous learning opportunity. This was my first process working with an angel investor group and I was unfamiliar with the procedure. After initial interest, we connected with two New York Angels members, who became our primary contact and sponsors. We were then invited to present in front of the entire New York Angels membership. This consisted of a company overview, product demonstration, and then Q&A session. Following meetings included smaller breakout sessions with those New York Angels members who were directly interested in the investment opportunity with GameCo. The group performed considerable diligence and worked hard to understand our business and vision. As a platform company, GameCo is involved in both hardware and software – this is atypical for most startups today that are primarily software-focused, such as apps and SaaS products. We worked hard to show the New York Angels the validity of our business opportunity and ultimately we advanced a significant investment with the organization’s members. Our two initial sponsors also became members of our Investor Advisory Board and have continued to provide support and value for GameCo. And we’re proud that many New York Angels members have continued to invest in the Company during our Series A and we expect further investment from their members with our upcoming Series B fundraising. I’d highly recommend working with the New York Angels to anyone in our New York community or even those outside of the local area.
What are the milestones that you plan to achieve within six months?
GameCo currently has VGMs deployed with a handful of casinos across the country and internationally. And we have upcoming installations with great casino partners from Florida to Oklahoma to California and with cruise ships too. In the next six months we have important milestones as we continue our deployments with major casino operators in North America, Latin America, Europe, and Asia. GameCo will be releasing another 5-7 games in 2017 and generating a roadmap of 1-2 new games a month in 2018, including popular entertainment and video game brands. The company is currently out with our Series B round and our goal is to close financing to support the organic growth and expansion of the business. We’re also developing and will be releasing major new expansions to our current product line, including a Tournament Controller, for multiplayer competition, and our Bartop VGMs, for installation in bars and taverns. More than anything, GameCo intends to maintain our market and thought leadership in the convergence of video games and casinos.
What is the one piece of startup advice that you never got?
Finance is paramount. You can have the best team and product and demand from the market but you need to have complete control of the finances. This requires excellent capital partners, a strong internal finance leadership team and process, and diligence to focus on the numbers daily and weekly. It’s essential to be able to accurately forecast costs, revenues, and cash flow and to be able to have a handle on these numbers for investors. There’s nothing more important for a startup than runway and operating capital. And it’s the CEO’s job to ensure.
If you could be put in touch with anyone in the New York community who would it be and why?
I’ve been very lucky to have been connected with so many great people in the New York community but one person I’ve never met is Fred Wilson of Union Square Ventures. I read his avc.com blog daily and while GameCo is likely not a great fit for Fred’s firm, I’d be very interested to meet him and learn from his outlook and perspective.
Why did you launch in New York?
I was living in the midwest between Toledo, OH and Detroit, MI when I developed the concept and business plan for GameCo. I purposefully chose to return to New York, where I had launched previous startups, primarily to engage with the investment community in New York. My outlook is that New York provides a truly unique marketplace for startups with a very strong diversity of investors, from angels like the New York Angels to venture capital firms like Courtside Ventures and Third Prime Ventures to private equity firms such as Steel Partners – and we were able to bring in all of these profiles with GameCo. We also found access to a number of strategic investors from the casino industry, which adds meaningful value to our business. While GameCo has an office in Las Vegas, we focus our fundraising in New York along with our business development and platform engineering efforts. The New York area offers unrivaled access to world class talent which allows startups like GameCo to develop new products and pioneer new market opportunities.
What’s your favorite restaurant in the city?
I’m a member at the National Arts Club and stay at the club when I’m in New York, so Gramercy Park is my primary area. For breakfast, l’Express at 20th and Park Avenue is my go to spot. When I’m in New York, I can often be found at a table in the back working early in the morning. For dinner, my regular destination is Friend of a Farmer on Irving Place. Their farm-to-table approach is very special and they make great cocktails. And for special occasions, I’m a huge fan of Le Coq Rico on the other side of Park Avenue on 20th Street. They have the best chicken dishes in the city, in my opinion.
