Andrew Black is a classic success story, he started with an idea and a company that has grown and expanded to be a dominant force in the online gambling industry with a revolutionary way to bet on the horses. But how did he do it?
In a suitable twist of irony, Andrew Black’s most prominent ancestor was his grandfather. A conservative MP who was strongly opposed to alcohol and gambling, whose grandson now manages one of the largest betting sites in the UK. After school, Black attended Exeter University but was asked to leave during his second year. According to Black, he spent most of his time at the bookies rather than attending lectures.
This experience must have helped him, because, after a stretch of time being a full-time gambler, he had a great idea for how to revolutionise the gambling landscape with a different method of betting. The focus of the venture was going to be betting online. Coming fresh off the Dotcom crash, it wasn’t easy to secure funding for his business start-up. Venture capitalists wanted nothing to do with it and it was up to Black and his business partner, Edward Wray, to find the funds themselves from friends and family. But find it they did and with £1 million in hand they started Betfair.
Betfair’s focus was on offering exchange betting, a different relationship to the standard one between bookmaker and customer. Instead of betting on a result against a bookmaker, the exchange meant you were betting against your fellow gamblers. Other sites had a similar idea and launched at a similar time but they were missing an element that Black and Wray included to dramatically enhance their site. Rather than one gambler placing a wager and another accepting it, Betfair worked more like a financial exchange which offered more options, and, most crucially, rather than one large bet being seen by one person, it could be met by multiple other gamblers. This produced an exchange which was more like the Tote of horse-racing. After the acquisition of Flutter in 2001, Betfair managed an impressive 90% market share due to its more flexible model, and soon skyrocketed.
As you’d expect, this approach did not sit well with some established bookmakers who threw several accusations and dismissive reviews about how their business model was “a parasite on racing”. In a 2003 interview, Black responded to the claim calmly by saying: “The bookmakers have to understand they don’t own racing. They have got used to the fact that it has almost become their product because they have been the only people exploiting it. It so happens we now exploit it more efficiently”.
There were also accusations that the model could encourage corruption due to the anonymity of the bets but this is widely rebuked, not least because the online exchange keeps meticulous record of who it is that’s placing bets. It’s perhaps telling that, despite earlier complaints, a fair few bookmakers have branched into the sporting exchange market with Ladbrokes now owning Betdaq.
Nowadays, Andrew Black is worth approximately £200 million and has become something of an angel investor in UK based technology businesses.