PlayChannel is raising a Crowd SAFE at a $17.5 million valuation with a 20% discount. This is a reasonable price given PlayChannel’s current traction. The company generated more than $2.1 million in revenue in 2020 and projects revenues of more than $7 million for 2021. Even based on 2020 revenues, a $17.5 million valuation is just over an eight times revenue multiple, which is pretty reasonable for a technology company. But this valuation is based on 2021 projected revenues, which is closer to a 2.5 times hypothetical revenue multiple.That is an even better deal for investors, particularly given the 20% discount. That’s why PlayChannel’s price rating is one of its strongest.

The global market for mobile gambling is large and growing quickly. Estimated at just under $80 billion in 2020, the industry is expected to expand at a CAGR of 17.8% over the next six years to hit more than $250 billion by 2027. The United States accounts for just over a quarter of global market size. Thus, the US market is estimated to reach roughly $62.5 billion by 2027. 

Online gambling includes several sub-segments. PlayChannel is specifically targeting the casino (slots) and bingo segments of the gambling market. The online casino segment makes up a large portion of online gambling revenues, second only to sports betting. Bingo is a much smaller segment but is still expected to grow year-over-year. 

PlayChannel is only addressing one segment of the broader online gambling market, and the company faces significant competition from other game developers. Those factors limit PlayChannel’s obtainable market size. Nonetheless, online gambling is undoubtedly a large and growing market, both in the US and abroad. As a result, PlayChannel’s market rating is high.

PlayChannel was founded by James Jones, Nick Bogovich, and James Hursthouse. Jones currently serves as the company’s CEO. He has around 30 years of experience in the digital media and gaming world, having held a variety of roles as the founder of indie game studios, the executive producer for Dungeons & Dragons online, the vice president of production for digital media and gaming at Hasbro, and many more. 

Bogovich is PlayChannel’s chief revenue officer, lending over 20 years of expertise in software and gaming. Bogovich graduated from MIT with a BS in electrical engineering and computer science. He later managed and founded software companies, ultimately landing in the gaming industry as the executive director of mobile for GSN Games (a publisher of online casino games) and the head of revenue for Chartbuster Games. 

Lastly, Chief Business Officer Hursthouse also has over 20 years of experience in the digital media and gaming industries. He currently serves as the chief strategy officer for AMPD Technologies, a tech and infrastructure company that partners with game developers. Beyond the founding team, PlayChannel is also supported by a chief technology officer, head of growth, and business development advisor who each lend additional decades of expertise in technology and gaming. 

It’s important to note that not all of these founding team members devote their full time to PlayChannel, which is a significant concern. PlayChannel is advised by people with a huge amount of past experience at gaming companies, but it seems that each one devotes only a limited amount of time to this venture. That’s why PlayChannel’s team score is relatively low, despite the impressive gaming credentials of team members.

Lack of differentiation is a key risk for PlayChannel. Mobile gambling is witnessing explosive growth, but that means PlayChannel faces extreme competition. There are hundreds of online casino apps to choose from, and PlayChannel’s app doesn’t stand out very much. Plus, there are a number of online gaming companies that have been around for much longer and have successfully launched a wide portfolio of games. Zynga, Slotomania, and DoubleDown Interactive are just a few well-established competitors. 

PlayChannel argues that its integration of live gaming events gives it a leg up over run-of-the-mill competitors, and that’s probably true to some degree. However, it’s not clear that live gaming is a key differentiating factor in the long term. HQ Trivia was undoubtedly the most prominent example of live gaming success, but it ultimately went down in flames after initial hype died down. It’s a safer bet for an online gaming app to differentiate itself based on the distinctiveness and defensibility of its core product, but PlayChannel isn’t there yet. Thus, its differentiation rating is its lowest.

PlayChannel has generated strong financial results after just two years in business. The company made just $22 in revenue in 2019 as it developed its first mobile game, but revenues shot up seemingly overnight to more than $2 million last year after Play to Win was launched. Moreover, PlayChannel has very low costs. The company spent less than $825,000 in expenses last year and turned a slim $2,095 profit. PlayChannel doesn’t provide audited financials for 2021 year-to-date but indicates that 2021 projected revenues are more than $7 million based on current progress. If that projection is attained, PlayChannel will have demonstrated more than 200% year-over-year growth, extremely impressive for such a young company. 

These solid financials are driven by good traction in the market. Play to Win has a 4.3-star rating from over 28,000 Android users, and the app has been downloaded more than 2 million times. PlayChannel’s partnership with ex-HQ Trivia star Scott Rogowsky, who will host live bingo tournaments for the company’s forthcoming Showtime Bingo game, likely indicates that its second game will receive similar interest from users. 

It’s worth noting that PlayChannel doesn’t provide detailed statistics on daily or monthly average users, retention, or other key metrics for a mobile app business. Prospective investors don’t have a ton of data to go on in assessing whether PlayChannel has the ability to keep these financial results going. That said, the financial data available indicates that PlayChannel is generating a great deal of revenue with minimal spend. That means the company’s performance rating is very high.

PlayChannel has relatively few tangible measures of risk. Prospective investors should note that early-stage companies like this PlayChannel come with inherent investment terms and financial risks. There’s no guarantee that the company will continue to maintain its pace of growth and justify its current valuation. Beyond those areas, though, PlayChannel lacks other markers of risk due to its traction and strong financial performance. 

On the surface, PlayChannel seems to be a pretty good investment. Its primary game Play to Win has clearly had a strong start in generating downloads and revenue, and the upcoming launch of Showtime Bingo seems promising. However, it’s concerning that the PlayChannel team doesn’t seem to be fully committed to the business. While senior leadership members have impressive credentials in mobile gaming and important c-suite titles, only one of them (and it’s not clear which) works full-time on PlayChannel. It seems that the company contracts out to develop its games, then launches them and lets them make money. That’s not a horrible strategy (it’s yielded more than $2 million in revenue so far), but it might not be a great sign for investors. A part-time team and the lack of differentiation might doom PlayChannel to join the ranks of countless other online gaming apps that have tried and failed to build sustainable business models.

PlayChannel’s team is deeply experienced, and while its members may only be committed to this company part time, their combined expertise has clearly paid off in a stellar first two years in business. PlayChannel went from practically zero revenue in 2019 to more than $2 million in revenue in 2020, with 2021 income projected at more than $7 million. Clearly, Play to Win is resonating with a decent-sized base of loyal users. That base continues to expand as the online gaming market is projected to grow rapidly over the next several years. 

It’s also a good sign that PlayChannel is fairly transparent about the capital it spends on user acquisition and how quickly that ad spend pays back. It achieves 100% return on ad spend after four days and typically makes about $3 for every $2 spent on marketing. The team has built an ads engine that can sustain revenue even for free users, so not every user has to spend wads of cash on Play to Win for the company to benefit. Of course, this revenue is relatively low-margin. PlayChannel’s 20% operating margin would be bad for many other business models, but casinos are an inherently low-margin, high-volume business. PlayChannel has begun to crack the code on developing that necessary user traffic, and the launch of its second game will only supercharge growth. 

While there are concerns about PlayChannel’s ability to differentiate and build a sustainable business model for the long term, the company has achieved major success in its first years of business. While it’s too soon to tell for sure whether PlayChannel can maintain this pace of growth, several positive signals indicate that PlayChannel has developed a capital-efficient, high-traffic business.

PlayChannel is a mobile gambling game developer behind Play to Win and Showtime Bingo (a forthcoming mobile bingo app). Both games feature live tournaments to keep users engaged, and PlayChannel has partnered with ex-HQ Trivia star Scott Rogowsky to bring some star power to the upcoming launch of Showtime Bingo. PlayChannel has generated significant revenue since its founding in 2019 (more than $2 million in 2020) and is led by a deeply experienced founding team. 

On the other hand, PlayChannel’s team is mostly part time, which seems to be reflected in a lack of long-term growth strategy. PlayChannel’s games aren’t differentiated beyond the use of live tournaments, and the demise of HQ Trivia proved that live gaming isn’t necessarily a sustainable user magnet. Given that the online casino industry is highly competitive, the company may struggle to win out among a number of more established game developers. Therefore, PlayChannel has been rated a Neutral Deal. 

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