The American founders of Flutter.com believe they have pioneered an ingenious concept that avoids the pitfalls of cutthroat retailing on the net. Josh Hannah, Vince Monical and Mark Peters are not trying to sell anything, but they plan to make pots of money from lots of punters placing small bets against each other on their site.
Flutter.com will not be for hardcore gamblers. There is a limit of £100, bets are likely to be around £5 and £10, and can be made only between two people. Flutter.com is keen to emphasise that it is not in the online gaming business, an area occupied by the likes of Littlewoods, Freeserve and Sports Internet. This American trio offers something else - the fun and games of individuals betting against each other. The idea came from Mr Hannah and Mr Monical who used to bet with each other, when they worked as consultants at Bain & Company, one of the world's leading consultancies.
"When we worked together in Silicon Valley, we'd love to bet with each other. It was very personal, I'd wind Josh up, and end up taking a lot of his money. Then we'd make bets by email and from there it was a natural jump to the internet," said Monical. Scheduled for a late April launch, Flutter.com seeks to recreate that spirit of dare and spontaneity, spiced with a financial frisson, but on a scale only the internet can make possible.
Two friends or acquaintances can make a bet in the office or in the pub. Flutter.com takes that idea further. You can go to the site, pick a field of your choice, say football, and place a bet on who will win a game, how many goals will be scored and so on. Participants are encouraged to banter, engage in one-upmanship and put their money where their mouth is. Politics, pop music, movies are some of the areas in which people can take on each other in bets that have already been set up on the site by Flutter.com's editorial team. Eventually people will be able to post their own bets.
"We want to create areas that people feel passionate about, get a discussion going between Arsenal fans and Chelsea fans with their vast amount of knowledge," said Hannah in the company's Clerkenwell office. "The limit on the size of the bets is to keep the focus on entertainment. It's a lot more fun taking money off a person while engaging in social chit chat."
Flutter.com is not a sweepstakes site, where people put money into a pot and stand to win the lot. It aims to attract casual punters - the flutterers in pubs and offices and the 34% of the population who bet once a year on a few key national events, such as the Grand National. This is the company's target audience rather than the 3% of the population who bet regularly at a bookmaker. Ironically, Flutter.com is next door to a William Hill betting shop.
"We are the first company of its kind. There are no others attacking this space," said Hannah. "This is something very new in entertainment, we are creating a virtual marketplace."
Britain was the ideal location for Flutter.com although it meant leaving the charms of San Francisco. The US posed too many regulatory hurdles with each state having its own gaming laws and some states prohibiting gambling altogether, even on Flutter.com's modest scale. The UK, Mr Hannah said, had the best regulatory framework and was far ahead of America in its rules and regulations.
Flutter.com was not worried about the high internet access costs because it was clear that these would fall - and companies such as AltaVista, BT and NTL have been rushing out offers of unlimited access for a modest upfront fee.
The company will make money by taking 5% from each bet, 2.5% from either end. The site holds the money and makes sure it ends up with the winning party, acting like the bartender who is entrusted with the money. The model for Flutter.com is eBay, the auction site that makes money from thousands of transactions between buyers and sellers on no items too inexpensive and culling a small percentage from each one.
Flutter.com has won the endorsement of investors such as Bernard Arnault, the French head of LVMH, the world's biggest luxury goods empire. Last October, his Europ@web venture fund invested $5.2m in Flutter.com in the first round of financing and the second round is already oversubscribed.
"This is probably one of the most compelling opportunities we've come across," says Alex Nigg, of Europ@web. "It is truly innovative, unlike so many me-too plays on the net. It fundamentally changes betting. People are not betting against an institution like Ladbrokes or William Hill, but against each other, Flutter.com restores social activity and entertainment to wagers."
Nick Denton, co-founder of the First Tuesday networking group, believes Flutter.com will make Lastminute.com, Britain's most high-profile net startup, look like "a first generation venture". Mr Denton particularly likes the fact that Flutter.com in effect sits on a stash of cash by holding people's bets. There is a certain elegant simplicity about the concept behind Flutter.com and one of its biggest advantages is that it avoids the overcrowded net retail sector, where profit margins are razor-thin as everybody is trying to sell something cheaper than anyone else.
Hannah and Monical have grand designs for Flutter.com. "We have a shot at being one of the cornerstones of the new internet economy of the UK," said Hannah. "Over time, we will take it international and expand into other products."
But these high ambitions will be realised only if Flutter. com wins its bet that Britain's punters will flock to the site.
