Lotteries Go Online: Former 'Shark Tank' Star Kevin Harrington Talks About LottoGopher

Last year, roughly 50 percent of all adults in the U.S. played a state lottery, a recent Gallup poll revealed. While some of these people were just feeling lucky one day and decided to drop by a Rite Aid Corporation RAD to place a bet, others are regulars who spend not only hundreds or thousands of dollars per year on tickets, but also countless hours traveling to retailers and waiting in line to get their dreams on paper.

Mostly aimed at the latter group is LottoGopher Holding COM NPV LTTGF LOTO.

LottoGopher is a service that allows California residents to buy their MEGA Millions, SuperLotto Plus and POWERBALL tickets online, avoiding lines that, on occasion, are longer than those at banks. Users register, pay a subscription fee and are then able to buy their tickets for the same price they would pay at a brick-and-mortar retailer from the comfort of their homes, offices, a park or wherever they are — no commissions or hidden fees.

“It’s a simple, convenient way to play the lottery,” founder and CEO James Morel told Benzinga. “The business model follows all the rules and regulations, and the service answers a huge convenience issue for millions of lottery players. You can even use your debit or credit card on the site, and soon you will see bitcoin and Ethereum accepted as well. Something had to change in the process of playing the lottery, and that’s where we come in."

Kevin Harrington, original shark on ABC’s “Shark Tank,” recently joined the board of LottoGopher with the idea of helping the company drive customer acquisition.

Billions

Even though U.S. lotteries are losing some traction among millennials, the industry managed to generate $80 billion in revenue over 2016, marking a 9-percent surge when compared to 2015.

“Lotteries have their tight control of the business and that’s for good reason. The states use this revenue stream for many good purposes,” Harrington told Benzinga. LottoGopher’s idea is not to compete with state government agencies or retailers, who get a commission for every ticket sold; they're not seeking to get a piece of that $80 billion pie, but to offer an ancillary service instead, to save people time and (potentially) money.

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“We are operating a service to help people get tickets. I call it the ‘Uber Eats’ of lotteries,” the entrepreneur added. “We do a similar thing: You want a lottery ticket, you go online and order it, we go and handle getting it printed for you and put it in your account ... It’s like an on-demand courier service.”

While the service is certainly comfortable, changing people’s habits isn't easy. This is where Harrington comes in, leveraging his years of experience in the infomercials space — he's often regarded as the creator of this genre.

“This plays into my background, which is finding customers,” he explained. “This is what we are working on right now. We have dozens of things happening as we speak, and over the next 60 days, that are pretty groundbreaking.

“We’ll be taking a 360 degrees approach to getting customers at a number that is less than the lifetime value of the customer, so that we can get a profit in the process,” he added. “LottoGopher will be using TV, radio, digital media, celebrity endorsements ... all the resources that are available ... Each particular medium will focus on a particular demographic.”

Moving Forward

LottoGopher is only available in California; however, the company has identified 22 more states it could enter in the not so distant future. “Once we get the system tweaked and working in California, we’ll be able to ramp it into the other 20+ states accordingly,” Harrington said.

Along this line, Morel added, “We’re conducting our due diligence in a handful of potential markets, preparing for an expansion phase. California is a big market with over $6 billion in lottery sales annually, so we’re building a strong community there first. Our vision is to become the leading lottery messenger service in the United States.”

As per its latest quarterly financial report, over the three months ended June 30, 2017, the company generated very little revenue and still operated at a loss. However, cash reserves surpassed C$2.4 million at the time. Harrington assures results will become evident soon enough, once the management team finishes identifying the models that work best and launch their 360-degree customer acquisition strategy. “I think it will probably be another quarter required before we have any kind of results to talk about,” he said.

Keep an eye open for attractive entry points to the stock, Harrington suggested.

“We are well funded so far but, at some point, we will need more capital to grow the business ... I’m an optimistic investor and I like to get involved at the right time. That’s the only way to get 5x, 10x or 20x returns; you can buy the Facebook’s of the world, but you are not going to get 10x on that one now."

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Image Credit: By Lieutenant Ramathorn (Own work) [CC0], via Wikimedia Commons