9stacks lets virtual gamers play online real-money poker and is betting big on the gaming industry in India, which is pegged at $60 billion, globally, as of now.
What happens when 3 IITians from Kharagpur and one IIM-Ahmedabad student get together? There is business magic.
Sudhir Kamath, Pratik Kumar, Rishabh Mathur, and Abhinav Nigam met through common friends in 2016 and realised that they had several common interests when it came to business ideas. But one of these ideas was on top of their list.
Pratik, who had been playing poker for many years and won online and offline poker events, came up with idea for 9Stacks in January 2016. It was a great idea as KPMG estimates that the online poker industry in India is to the tune of $100 million a year, not including the many Indians who play on foreign websites.
The 9Stacks team expects this market to hit $1 billion in the next 3-5 years, driven both by growth in the number of users and in the average value per customer. Their aim? “To be one of the top 3 players at that time.”
Sudhir Kamath, CEO and co-founder of 9Stacks, says: “For the first few months we worked on the business plan, started architecting the product, and had discussions with potential angel investors. In parallel, we got advice from lawyers and tax advisors on how best to structure the company’s operations, given the realities of operating a real-money poker company. In about 4 months we had all reached the conclusion that we had to commit full time to 9stacks, and put in our papers.”
Sudhir, 39 years old and an IIM-Ahmedabad alumnus, was formerly CEO at Suntera Energy (oil exploration) and McKinsey. He is also an angel investor in companies like INI Farms, Vienova Technologies, Shiksha Finance, and Swas Healthcare.
But the idea of 9Stacks came from poker fanatic Pratik. The 35-year-old former CMO of Nykaa.com and founding team member of Zivame.com has been responsible for marketing and product development in various roles. He has advised startups such as TVF, Roposo, Biba, and VelvetCase in marketing and scaling up operations.
The other two co-founders also come with stellar experience. Rishabh, 35, headed mobile technology for Nearbuy (Groupon India) and was Co-founder and CTO at 9monks and Blot Canvas.
Abhinav, 36, came with operations and strategy consulting experience at Boston Consulting Group and Accenture Strategy.
Real-money poker has a simple rake-based revenue model – every time customers wager against each other (never against the house) 9Stacks takes a small percentage from the winner’s pot. The major costs of the business are technology, marketing, and customer retention.
“The business will always make money. It is a tried-and-tested model, and this is one of the things that investors like about the sector,” Sudhir says. He adds that theirs is the “best and safest place for customers to play online poker”.
The company - with an investment of less than Rs 60 lakh - was launched in August 2017, and has been earning revenues from the first day of operations. They are on track to achieve operational breakeven within the next two quarters and complete breakeven (positive cash flows) within 18 months. Sources say that they have closed a funding round of Rs 10 crore in angel funding.
The challenges are broadening the market to attract many more “casual” players who will play poker for fun, and at the same time see poker as a legitimate pursuit where they can leverage their skills to make money. This is their product challenge – to figure out what kind of games, tournament structures appeal to these players.
There is also the user experience challenge; basically how to make 9Stacks’ games easiest to play on mobiles. They are in place with the website, and say the poker lobby is “responsive and intuitive”.
The process challenge means the team must ensure that they have the quickest cash-outs when people withdraw money. Last but not the least is the marketing challenge – reaching “good” users when there are “restrictions to the channels we can use to reach them”.
9Stacks’ competition comes from other poker sites, including companies such as Adda 52. However, they compete with other real money game-of-skill companies, including online rummy companies like RummyCircle and Ace2Three, as well as fantasy league companies like Dream11. The Indian industry is yet to scale up and has close to 100,000 people playing online. Big revenues are still a problem in the industry because of the low user base.
V Ganapathy, CEO of Axilor Ventures, says: “Gaming is big business. But scaling up in India is big challenge.”
But the co-founders’ time in various businesses have taught them the value of keeping things simple and that’s what they are trying to do at 9stacks. Their focus is on customers above short-term profitability – this is a sector where the lifetime value of a customer is very high.
The team says they don’t want to go in for fancy promotions or complicated offers. They’ve chosen to go in for simple signup processes and easy and quick cash-outs to make gaming a seamless experience.
“This also reflects in our user interface, which is simple and intuitive, and our clean look and feel,” Sudhir says.
Over the next few years, 9Stacks hopes to be a big player in poker. They have to spend money on increasing the user base and will have to do so with increased social media marketing spends. And they seem to be playing their cards right!