Betfair was the first (and for many people is still the only) betting exchange to become mainstream in the UK.
It may not have technically been the first product of its kind to market, but it was certainly the best, winning an incredible 90% market share just two years after launching in 2000.
The concept was very exciting at the time, their marketing was unusual, and the founders, Andrew Black and Edward Wray, had their moral compasses’ straight, all of which gave them a running start and then allowed them to grow rapidly to achieve long term success.
Betfair has many other products now, and is no longer an independent company, with its founders Andrew and Edward having sold their majority share to Paddy Power in 2016, but both men retain a smallish financial interest in the company.
It was Andrew Black who had the idea for Betfair, and it was also Andrew who had the skills to build the product, while Edward Wray knew how to drum up investment, write a business case, and run a company.
Between them, they built one of the first truly successful online only betting brands, and this is how they did it.
Who are Betfair’s Founders?
The story of Betfair starts when Andrew Black and Edward Wray meet more or less, so their stories must run in line with the company’s from that point onwards.
Before we get to that though, we can give you a bit of background as to who each of them were leading up to that point.
They aren’t all that dissimilar at first glance; both had a good early education, both from relatively comfortably off families, and both had experience of the stock market.
They we completely different characters though.
Born in 1963, Andrew Black came from an interesting background, because his father’s side were relatively well off – his grandfather was Sir Cyril Black, MP for Wimbledon for 20 years – and his mother’s side were very working class, and all enjoyed a gamble too.
Andrew was well educated but had a rebellious streak, leading to some events that might have been thought of as unfortunate at the time, but which actually led him on to create Betfair.
Like his mother’s side of the family, Andrew was also a gambler.
During his university days he would go to the local bookies and look for mispriced horses amongst other things, and was ultimately kicked off his course because he was spending more time making bets than studying.
He was good at it though, and for a time was making decent money as a professional gambler.
Tragic personal circumstances put the brakes on things however, when Andrew’s younger brother contracted an incredibly rare brain disease. Andrew cared for him for two years until his death, and has since said that this put his life on a completely different path.
Andrew Black had several different jobs before he launched Betfair, resulting in him having practically the perfect recipe of previous experience to set him up for success with a betting exchange.
He had been a software contractor for the UK government, and he had also worked for a hedge fund where part of his job involved studying internet startups and understanding why some might succeed and others might fail, and he had even worked for a company which created trading software for stock exchanges.
Bring these things together with the fact that he was a semi-professional bridge player and bettor on the horses, and you can understand where the idea for Betfair came from – although an ‘idea’ is all it was for a fairly long time.
It was at a garden party in 1998 held by Andrew’s friend Jeremy, that he first spoke to his future business partner about his idea.
Jeremy’s brother was Edward Wray, and he seemed interested in what Black was saying, but no more was said about it for nine months or so, until Edward called Black up with a proposition.
Wray was born in 1968 making him 5 years younger than Andrew Black.
He attended Tonbridge School in Kent, a private boarding school that is part of the Eton group, where he developed a keen interest in sports that would underpin his curiosity when it came to the idea of Betfair many years later.
At 18, he went to the prestigious Oxford university to study engineering, economics and management. He realised this was not the right path for him about half way through, but obtained his degree nonetheless.
Wray went from earning his MA at Oxford, straight into the finance world, joining the huge banking firm JP Morgan, where he spent the next 8 years working his way up the ladder.
By 1999 he was the vice president of debt capital markets and derivatives, but the long hours and stressful environment of being a banker had made him want a break.
He told his boss he was going on a 6-month sabbatical, and began to explore other options. For Wray, he knew that if he didn’t try and branch out on his own he would always regret it, and if it came to nothing he could always go back to the banks.
It didn’t take him long to find a project though.
He remembered his conversation at the garden party with his brother’s best friend, and called him up wanting to discuss it further, and a partnership was agreed.
The Beginnings of Betfair
Things moved very quickly from this point onward.
Once that phone call had been made, the two men began working on their exchange betting project in earnest.
It was July 1999. Black and Wray rented a small office in Wimbledon from where Andrew Black developed the product itself, and Edward Wray put a business plan together.
They developed a prototype fairly quickly and were happy with it, especially after receiving fantastic feedback from the people they had shown it to so far.
By the end of the year, they were ready to raise investment with a view to launching. They needed £1 million, but this was during the dot com bubble where investment was pouring into internet companies almost faster than it could be spent. Their hopes were high, and they approached a number of venture capitalists expecting to have their money in a matter of days.
Every single venture capitalist turned them down, and not only that, they said the idea was nuts.
With this crash back down to reality, Black and Wray needed to find less traditional investment, so they went to friends and family members aiming to raise the £1 million.
Wray had a lot of friends in investment banking so deliberately tried to get at least one investor from each of the big banks who worked on the trading floor, because he knew they would talk about it to their friends, who would also then want to come on board. Even more ingenious, he contacted them during bonus season, just after their bonus amounts had been announced but before they had been paid – basically, he went to them when they felt richest.
On top of this, luckily the government had just introduced the EIS scheme, whereby half of the investment would be underwritten via tax relief, so people were willing to put in more knowing that only half of it was at any real risk.
It worked, and Betfair had their £1 million. Then, just two weeks after they closed their funding round, the dot com bubble burst and the economy crashed. Had they taken just a few weeks longer, they would never have raised the money they needed, and Betfair simply would not exist.
With their investment in place, they spent March – May fine tuning and preparing to launch the business to the paying public.
The Launch of Betfair
Betfair officially launched in early June 2000, just a few weeks later than planned.
It had occasional issues where it crashed, but these were ironed out; most importantly, the platform had liquidity, largely thanks to many of the investors who were as keen to see the product take off as Wray and Black were.
Things went well, with the Racing Post running articles on this new way of betting, and one of Betfair’s marketing campaigns, ‘Death to the Bookmaker’, really catching the public’s imagination.
They posed next to a coffin with a ‘bookmaker’ in it, and even led a funeral procession for the traditional bookmaker through the middle of London. This was cheaper than a big TV and print marketing campaign which they could never have afforded, but it ended up getting on the front page of some National newspapers, gaining them publicity money couldn’t buy.
By the start of 2001, just 7 or 8 months after launching, the business already had a positive cashflow and a team of around 30 people working behind the scenes to keep the platform working and the customers happy. They took several hundred thousand pounds in commissions in their first year.
One of the key things they realised early on, was that the quicker they paid a customer out, the quicker that customer could use their winnings to place another bet.
Since betting exchanges match bets from two customers with opposing views and make their money by taking a small commission from the winning bettor, increased volume means increased profits. Therefore, efficiency when it came to business processes was paramount.
They knew they were getting these things right, because in Betfair’s second year, they took around £6 million in commissions.
There was another prominent name in the exchange betting arena though, Flutter, and they were Betfair’s only real competition. Other exchanges existed too, like Betswap and Betmart, but they weren’t a cause for concern.
Flutter was a similar business but created by two Americans, Josh Hannah and Vince Monical, and they had managed to raise almost $40 million via venture capitalists and the like, so in many respects Flutter looked like a much more credible business.
However, Flutter had spent most of their money and had debts that needed paying back, and while they arguably had a more robust website, they hadn’t quite got the offering right.
With Flutter, it was not possible to take part of someone’s bet, you had to take all of it, but this was not the case with Betfair. Andrew Black’s concept allowed bets to be broken down and partially matched, which meant less restrictions on people’s betting activity and therefore greater liquidity, so punters preferred Betfair.
Some say this was starting to turn around, with Flutter finally clawing back market share, which is why Betfair stepped in and bought them out – simply to stop them gaining ground – but whatever the reason, Betfair and Flutter ‘merged’.
That’s how it was officially sold, but in reality, it was an acquisition, and Flutter was shut down in the first week of 2002.
Betfair now had the whole betting exchange market to themselves, and in their third year, takings from commissions exploded to around £35 million.
Edward Wray Heads to Australia
Business was going incredibly well, but things had progressed at such speed that it was difficult to manage for Andrew, who was CEO at the time but had never run a business before Betfair.
Black and Wray had brought in plenty of help over the first few years, with staff numbers rocketing into the hundreds, but they also had people there to advise them rather than work under them, not to mention the board.
In 2003, the board candidly told Andrew that he was no longer the right person to lead the business, and by his own admission, they were right.
However, the situation wasn’t handled particularly well which led to the first outside CEO that was hired not really working out. The company began to lose its way, but neither Andrew nor Edward were experienced enough in running a business to know how to handle it.
Luckily, Betfair had established an incredibly loyal customer base by this point, allowing them to get through the difficult patch without too much damage being done, but it was a lesson learned.
What’s more, to make room for this new CEO, Edward Wray had departed not just his role but the country.
He moved to Australia in 2004 to set up Betfair over there, and stayed until 2007. He became Betfair’s chairman in 2006, but again, readily admits that he was not perhaps best suited to that tole.
By 2007, Betfair employed 1,200 people and was starting to dabble in other products too, as well as offering in-play betting, so it was constantly developing and had become a very different beast to the company Wray and Black had started.
Floated in 2010
Things changed for Betfair in a big way in 2010, when the decision was taken to float the company on the stock market.
It was an incredibly popular IPO with shares priced at £13, giving Betfair an overall valuation of £1.4 billion at the time, but it was good for the company in other ways too.
Betfair now had to make its accounts (and business practices to a point) public, so there were many more people looking into the business and analysing it in detail.
This meant that previously unknown weaknesses were pointed out which could then be worked on, strengthening the business and making it more robust.
It was shortly after Betfair went public though, that its’ two founders, Andrew Black and Edward Wray, stepped away from the company for good.
They had both been less actively involved in the day to day running of the business as time had gone on but they were still part of the management team. Andrew Black had been on the board but resigned in 2011, while Edward Wray stepped down as Chairman of Betfair in 2012.
Both have said that the process of floating on the stock market was incredibly stressful, but it wasn’t just that. Although both men enjoyed gambling, neither had a history as a bookmaker. Andrew Black enjoyed creating software products and Edward Wray was a banker with an interest in business and markets.
They had built Betfair into a giant of a company, and they were both ready for a new challenge.
The company changed a lot at this juncture, adding a traditional sportsbook shortly after Wray left in 2012, and also offering casino amongst other verticals.
Customers still flocked to the site though, and by 2014, Betfair was processing 7 million transactions per day, which for context is more than all of the European stock markets combined.
As time went on, more and more people from all walks of life were finding ways to utilise Betfair’s technology in order to hedge or gain an edge with their betting.
This went for punters and for other gambling industry professionals. On course bookmakers were using it, high street bookies were using it – Betfair made the betting landscape much more dynamic and allowed people to be much more tactical in their approach.
They had completely revolutionised the industry, and while it wouldn’t have been possible without the internet, it was Andrew Black’s initial idea that had won the day.
It was an idea that others had come up with too, but Black’s was the most well thought through, the most complete, and it resulted in the most comprehensive and customer friendly product which is why it succeeded.
Merging with Paddy Power and Becoming Flutter
It was in 2015 that Betfair and Paddy Power announced their merger, but it took until February 2016 for the deal to be completed.
Paddy Power would own 52%of the new business while Betfair would own 48%.
The two companies had very different offerings but this was what made them a good match; they both brought something new to the table and as a joint force they would be unstoppable.
Now one of the world’s biggest gambling companies, the newly named Paddy Power Betfair Group employed 7,000 staff and took £1.2 billion in sales combined with around 80% of that coming from online, but things were about to get bigger still.
The group began acquiring other companies such as Draft and FanDuel in America, a shrewd move that gave them a foothold in the American market which was about to open up due to changes in the law at a federal level.
Other acquisitions followed and by 2019 it was decided that the group needed a new name that better represented the many companies now operating under its umbrella.
Flutter is the name that was chosen.
It embodied the fun element of gambling, but also meant something because of Betfair’s history – Flutter was the rival they bought out at the very start of their journey after all.
As Flutter, the group went on to acquire SkyBet, PokerStars, Tombola, and many other well-known gambling and sports brands, and are now the biggest gambling group in the world.
They are part of the FTSE 100 and turn over multiple billions of pounds each year. Andrew Black and Edward Wray may no longer be in the picture, but their legacy will live long in the minds of Betfair punters.
What do Andrew Black and Edward Wray do Now?
Edward and Andrew were not friends before they came together to work on Betfair, they clearly worked well together and had skill sets that complimented one another, but they were also known to have blazing rows especially during the early days when times were the most stressful.
They are not even in contact anymore and neither has anything to do with Betfair as a business other than perhaps holding a few shares in Flutter.
They came together to create something they both believed could work, they made a great success of it, they sold it, and they moved on.
Both have gone on to become investors in startups themselves, but they have also got involved in other businesses of their own.
Andrew Black is still interested in gambling and the internet. He is a horse breeder with his own stud farm amongst other things, so buys and sells horses frequently, and is heavily involved in the horse racing scene. He actually went into business with former Man Utd and Liverpool forward Michael Owen on this front.
He also a majority shareholder in an oil recycling company called Slicker, and a bio tech business that makes vaccines.
Edward Wray was already working on his new business, LMAX, while still chairman at Betfair. He is still the director of LMAX, which is a multilateral FX trading facility used by banks, asset managers, brokerages etc.; so it’s a business very much in the realms of where he started at JP Morgan.
He has also been involved in Funding Circle and Property Partner, two businesses that help find funding for businesses and property investors, as well as working as chair of the board of trustees for a mental health technology charity, and a charity that creates apprenticeships in sports coaching for young people.
So Betfair might be a distant memory to them now, but they’re both still pretty busy.