The gambler who bet on himself
As Betfair prepares for a long-anticipated flotation, Andrew Black tells how he created the revolutionary online betting exchange.
By Andrew Alderson / The Sunday Telegraph
Andrew Black's dress code is more geared to cooking the sausages at a weekend family barbecue than the high-level business meeting that he is about to attend.
A rust-coloured tee shirt is largely hidden by a grey sweatshirt, while his tight beige shorts give way to two pale, hairy legs and, eventually, a pair of green ankle socks and black plimsolls.
If, however, you have co-founded and are running one of the fastest-growing companies in Britain, visitors take you as you come. In any case, Black thrives on informality. At the glass-fronted company headquarters in Hammersmith, overlooking the River Thames, there is not a tie in sight among his workforce.
Black's company, Betfair, will be five years old next weekend. It has grown from a business venture employing 22 people with no guaranteed revenue to one employing 530 people and which last year generated a revenue of £66.7m and pre-tax profits of almost £12m.
Betfair has revolutionised the gambling industry by using the internet to allow two punters to "match" bets at agreed odds with one placing the wager and the other accepting it.
The company's profit comes from a commission of between 2 and 5 per cent that it takes from the winnings for arranging the bet - which could be on anything from a football match to the outcome of the General Election or by how much the FTSE 100 will rise or fall in a day. Next weekend Betfair's 350,000 registered customers all over the world are expected to bet more than £3m on the Epsom Derby alone.
Its business model, like many of the best, is simple. Because Betfair customers are usually able to obtain better odds than at a High Street bookmaker, the concept has become an overnight success.
Within the next year the company is expected to float. Provided it is valued at the £700m or so that analysts are predicting, Black will be worth more than £100m, as will his co-founder Edward Wray. Wray and Black each own 15 per cent of the company.
Black, 42 and known as "Bert" to his friends after a teacher for some unknown reason called him that at school, is a rebel who was always confident of career success even when others doubted him.
He is the grandson of a Conservative MP (Sir Cyril Black) who was a deeply religious, anti-gambling, pro-censorship, disciplinarian temperance campaigner. But Black rebelled against his antecedents by making a fortune from betting, first as a professional gambler and then as a businessman.
He was born and brought up in south London and his own father was a non-gambling property developer with a softer, more kindly edge, who took Black to the races when he was just eight.
"At school I was only good at maths but I was always in trouble for not doing my homework and that sort of thing," Black remembers.
He took a degree in computer sciences at Exeter University, where he spent more time in the local bookies than on his studies. It showed in his exam results. After twice taking and failing his first year, he was thrown out of college and forced to embark on a series of part-time jobs, including working as a shelf-stacker at B&Q and as a builder's labourer.
"I wanted to achieve something in business," he says. "I was unshakable in my belief that something would work out, but I didn't know what it would be."
In his early 20s, as well as being a committed gambler, he also made money playing bridge, a game which led to to a meeting Jeremy Wray, a kindred spirit who became his best friend.
It was when Black was going nowhere fast that he suffered the first of two family tragedies that he is convinced shaped his career, initially for the worse and, eventually, through strengthening his character, for the better.
Kevin, his younger brother by five years, contracted a brain infection when he was 19. It left him a paraplegic and Black gave up work to look after his brother and spend more time with him. At 21, Kevin died leaving his elder brother heartbroken.
"It wasn't a great time waiting for Kevin to die because, despite the age gap, we were incredibly close," Black says.
After some more casual work, including a job as a golf caddie, Black decided, at 26, that he needed to get a "proper" job. He went into the City, where he worked for Track Data, a US derivatives company. He stayed for four years, as head of customer support and in research and development.
When his job began to lack challenge, he turned to gambling again, this time with incredible success. His colleagues started following his tips and soon the racing results became more important than their work, much to the concern of the company bosses.
In 1992, he won more than £25,000 for £20 after backing the winners of the Grand National and the Lincoln, the so-called "spring double". With their winnings, he and his friends bought a horse, which won Black £30,000 in bets with two other winning fancies. His job, which was earning him less than £30,000 a year, was becoming a distraction and Black left the company.
He worked as a professional gambler, first successfully and then less successfully, before going back into full-time employment. He became a City trader at Boxall, where he worked for a year before he was sacked after falling out with his boss.
Newly married to Jane, a lawyer, he needed a job and so set up a computer software company that won contracts with various organisations, including GCHQ in Cheltenham. It was while working in Cheltenham that he experimented with gambling programmes and eventually came up with his idea for Betfair. "I knew it was a peach of an idea straight away and I got very excited about it," Black says.
The idea had been put on the backburner because of other commitments when he suffered a second personal tragedy. His father, Tony, became seriously ill with pancreatitis, then contracted the MRSA bug. He died at 65 in 1999. "It was a massive blow and I was devastated," Black says.
His father's death was a watershed and Black decided to switch career again. He wanted to try to make his idea - then called the Sporting Exchange - work, using his savings of more than £50,000. Edward Wray, an investment banker and the brother of his best friend Jeremy, decided to come in with him.
When they could get no interest from venture capitalists in the project, despite it being the peak of the dot.com boom, they scraped together £1m from family and friends and launched the company on Oaks Day 2000 with the theme that it would lead to the "death" of bookmakers.
"I was confident we would do well because our product was so sweet," Black says. "When we launched, I felt very emotional and proud because we had all delivered a special product." Initially they attracted 20 big punters and a handful of smaller gamblers. Betfair "matched" £35,000 in its first week whereas this year it "matched" £4.25m of bets on the Grand National alone.
When Black, an imposing figure well over six feet tall, talks it is impossible not to admire his commitment to his job. He rarely smiles, speaks with passion and intensity about his company and admits that, at times, the stress levels have been uncomfortably high.
He launched the company three months after the first of his three (and soon to be four) children was born, rushing out before and after the birth to discuss a crucial appointment with Wray at a time when both were working seven-day weeks.
He is reluctant to talk about the prospect of floating Betfair and says that, for the moment, he is content with building the company. His new wealth has had little effect on his life. There is a bigger 300-year-old house in the country, two newer cars but, other than a share in three racehorses and a debenture at Wimbledon, there are few conspicuous luxuries. "I don't want to live my life around money," he says.
There have been difficult times. A troubled merger with a rival company at the end of 2001 led to technology problems and opposition from high street bookmakers at home and abroad are just two of them.
However, the good times have far outweighed the bad. "It's been unbelievable," he says. "It's hard to imagine a more exciting ride. Although it's been very stressful, it has also been incredibly rewarding, a real adventure."
This article is a reprint from The Sunday Telegraph. To view the original article, click here.
Bookmakers Reviews - 2005-06-02 10:58:12