Waterhouse VC is a fund that specialises in global publicly listed and private businesses related to wagering and gaming sectors. The fund is only available to wholesale investors.

Since inception in August 2019, Waterhouse VC has achieved a gross total return of +3,344% (annualised at 93%), as at 31 December 2024, assuming the reinvestment of all distributions.

Dual Strategy Delivers

Over the 12 months to 31 December 2024, the Waterhouse VC Fund produced a gross return of 28%. While this was an exceptional year for our portfolio, the real story lies not in what happened, but in what didn't happen. Our core portfolio of options in early-stage wagering technology businesses saw no exits in 2024 - historically the source of our substantial outperformance. Yet the fund still produced an outstanding return, thanks to our equities portfolio, validating our multi-strategy approach.

The growth of an investment in the Waterhouse VC Fund since 19/08/2019. Performance as at 31/12/2024, shown before all fees and expenses and assumes the reinvestment of all distributions on July 1. We make every endeavour to ensure results are accurate. The results are indicative only and subject to subsequent year end external financial review. Past performance is not a reliable indicator of future performance.

Investors learning about Waterhouse VC for the first time are often intrigued to hear we run an equities portfolio within the fund. This structure emerged from our unique approach to venture capital: we negotiate options in early-stage businesses, for the right to invest at a predetermined valuation in the future. Rather than committing cash for equity upfront, ours is a capital-light approach (the total value of all options held in the fund is worth less than 1% of the net asset value). When we’re not deploying cash to purchase or exercise these options, we ensure our investors' capital remains productive through a defensive equities strategy. We’ll discuss both the implementation of the equities strategy, as well as the benefits of this approach to venture capital, later in this newsletter.

Performance Summary

*Inception date 19/08/2019. Performance as at 31/12/2024, shown before all fees and expenses and assumes the reinvestment of all distributions on July 1. We make every endeavour to ensure results are accurate. The results are indicative only and subject to subsequent year end external financial review. Past performance is not a reliable indicator of future performance.

The fund's 28% return in 2024 came from three primary sources: approximately 0.5% from interest income on cash holdings, 2.5% from dividends from our equities portfolio, and 25% from unrealised capital gains on the equities (Note: These figures are subject to year-end audit). In our options portfolio, 2024 was effectively neutral, with the mark-to-market decline in our RAS Technology Holdings stake (the listed equity held in connection with our option agreement) being roughly offset by distributions from our investments in betting syndicates.

Structure Matters

Waterhouse VC invests in listed global equities according to a strict methodology. We monitor a select group of the world's top investment managers - the likes of Bridgewater and Pershing Square. When these investors take meaningful positions, allocating more than 1% of their portfolios, we pay attention. Not every investment they make meets our criteria - we focus on businesses trading below 20x earnings, with strong growth, that maintain conservative balance sheets.

Academic research validates this approach - many studies have shown that following the disclosed positions of top investors in systematic strategies can outperform the S&P 500 index over time. Further, screening for manager conviction and value factors in their holdings improves performance.

This structure creates a portfolio where downside risk is essentially capped at the performance of our defensive equities portfolio - a diversified collection of value stocks held by the world's top investment managers, currently trading at sizable discount to the index.

This approach has proven particularly valuable in today's market environment. The S&P 500, often considered a default "market portfolio," has evolved into something far different from its original purpose, with extreme concentration in the technology sector. By contrast, our systematic strategy achieves better diversification while maintaining strong fundamentals, providing returns while we wait for our options to mature.

Where we do have an edge is in wagering technology, and here's where our structure becomes powerful. Through options that represent less than 1% of our portfolio at cost, we access the upside potential of venture capital without taking on the same level of risk. We only deploy meaningful capital once opportunities are de-risked and clearly in-the-money. In essence, our investors gain the downside protection of a defensive value portfolio alongside the upside potential when our options mature favourably.

Portfolio Progress

During 2024, we saw encouraging progress from stakes in two professional betting syndicates. Project Tennis, led by data scientist and sports analyst Tom Dry, has developed proprietary models for tennis betting with an industry-leading win rate of over 5% on turnover. Since our initial investment in early 2023, the venture has scaled considerably. In 2024, Project Tennis returned an approximate 15% distribution yield against our $2 million carrying value.

This success has encouraged us to evaluate similar opportunities such as Project Marston, a professional betting syndicate focused on live dealer online blackjack. The backdrop for this investment is compelling: the live casino industry is one of the fastest-growing segments of online gambling with 24% annual growth. Since finalising our option deal in April 2024, we have exercised our option, with Project Marston profitable and expected to pay its first dividend in 2025.

In August, we made an equity investment in connection with an option deal with RAS Technology Holdings (ASX:RTH). Known in the industry as "Racing and Sports" through its B2C brand, the company's primary focus is as a B2B provider of racing data and technology solutions. Their comprehensive racing database spans 33 jurisdictions globally, and they've demonstrated consistent revenue growth since listing in 2021. While our equity stake has seen some mark-to-market decline, we remain confident in the long-term potential of both the business and our option agreement.

2024 marked a transformative year in our deal sourcing capabilities. Deal flow increased substantially across all channels - inbound enquiries, outbound sourcing, and referrals - driven by the compounding effect of our growing network. As our portfolio companies succeed and our investor base expands, we're seeing an acceleration in opportunities. More importantly, the quality of these opportunities has risen, with a fivefold increase in deals progressing to technical due diligence. As a fund, we strive to be the partner of choice for founders in the wagering sector seeking capital and strategic support.

The investment team delivered a record year of seven deals added to the portfolio, setting us up for future potential outperformance.

This deal flow momentum is self-reinforcing. As we add stronger companies to our portfolio, we attract more sophisticated industry investors. As our technical team evaluates more businesses, we develop better insights into emerging trends. With each successful case study, we receive more inbound from entrepreneurs seeking partnership with Waterhouse VC. Each new portfolio company expands our network and strengthens our ability to add value, making us an increasingly attractive partner for the next generation of wagering technology companies.

The Next Frontier

Among our most exciting opportunities is our work to identify the "Shopify for crypto gambling." To understand this opportunity, consider some historical context: before the TAB era in New South Wales (just one jurisdiction in the global wagering market), there were 6,000 SP bookies and 400 bookmakers at Randwick Racecourse every Saturday. Today's Australian market has consolidated to around 150 online bookmakers, constrained by high taxes and regulatory friction. We believe the crypto space, with minimal taxation, friction, or barriers to entry, could see a proliferation of operators provided they have the right platform provider.

The success of crypto operators like Shuffle and Stake have created a blueprint. While building such businesses requires enormous engineering talent and time investment, we see a massive opportunity in serving the long tail of entrepreneurs looking to enter this space. By offering a true "Shopify experience" - where operators can rapidly launch a branded platform with integrated payment rails and data feeds - the leading platform provider in this emerging market can capture significant value.

We discussed this investment opportunity, as well as the broader crypto casino industry, in a recent webinar with Ishan Haque from Shuffle.

*Waterhouse VC Webinar: Online Gambling's New Frontier, recorded in December 2024.*

Looking Ahead

Given our growing opportunity set and the inherent capacity constraints of our strategy, we have made the decision to close the fund to new external investors at A$200 million in assets under management. This ensures we can maintain our selective approach to opportunities while delivering the returns our investors have come to expect.

As we enter 2025, our position has never been stronger. Our strategy provides stability through our equities portfolio and upside potential through our options. Our deal flow has never been better, our ability to evaluate opportunities never sharper, and our network never more valuable. The wagering industry continues to evolve, naturally creating new opportunities for innovative products and value realisation in our portfolio companies.

We wish to thank you all for your ongoing support. We remain grateful for your partnership and look forward to compounding your capital for many years to come.

Media

Watch Tom discuss his journey from on-course bookmaker to online bookmaker to venture capital investor. Hear more about the process behind some of the fund’s investments.

For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) or through our website at WaterhouseVC.com.

All the best,

Tom

DISCLAIMER AND IMPORTANT NOTES

Please note the above information in relation to RAS Technology Holdings, Project Tennis, Project Marston, Shuffle, Stake, Tabcorp Holdings, and Betmakers Technology Group is based on publicly available information and should not be considered nor construed as financial product advice. The Fund currently has positions in RAS Technology Holdings, Project Tennis, and Project Marston. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

Not for Release or Distribution in the United States of America

This material may not be released or distributed in the United States. This material does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or any other jurisdiction in which such an offer would be illegal. The units in the Fund have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the units in the Fund may not be offered or sold in the United States unless they are offered and sold, directly or indirectly, in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable United States state securities laws.

General Information Only

This material is for general information only and is not an offer for the purchase or sale of any financial product or service. The material has been prepared for investors who qualify as wholesale clients under sections 761G of the Corporations Act or to any other person who is not required to be given a regulated disclosure document under the Corporations Act. The material is not intended to provide you with financial or tax advice and does not take into account your objectives, financial situation or needs. Although we believe that the material is correct, no warranty of accuracy, reliability or completeness is given, except for liability under statute which cannot be excluded. Please note that past performance may not be indicative of future performance and that no guarantee of performance, the return of capital or a particular rate of return is given by Sandford Capital, Waterhouse VC or any other person. To the maximum extent possible, Sandford Capital, Waterhouse VC or any other person do not accept any liability for any statement in this material.

Financial Regulatory Oversight and Administration

Waterhouse VC is an Australian Unit Trust denominated in AUD and available to wholesale institutional investors worldwide with a minimum of AUD 500,000 or USD / EUR / GBP / JPY / CHF equivalent. This material has been prepared by Waterhouse VC Pty Ltd (ABN 48 635 494 861) (‘Waterhouse VC’, ‘Trustee’, ‘us’ or ‘we’) as the Trustee of the Waterhouse VC Fund (the ‘Fund’). The Trustee is a corporate authorised representative (CAR 1278656) of Sandford Capital Pty Limited (ABN 82 600 590 887) (AFSL 461981) (Sandford Capital) and appoints Sandford Capital as its AFS licensed intermediary under s911A(2)(b) of the Corporations Act 2001 (Cth) to arrange for the offer to issue, vary or dispose of units in the Fund.

Performance

Past performance of Waterhouse VC is not a reliable indicator of future performance. We make every endeavour to ensure results are accurate. Waterhouse VC Pty Ltd does not guarantee the performance of any strategy or the return of an investor’s capital or any specific rate of return. No allowance has been made for taxation, where applicable. We encourage you to think of investing as a long-term pursuit. Waterhouse VC’s results are indicative only and subject to subsequent year end external financial review.

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Governing Law

These Terms and Conditions of use are governed by and are to be construed in accordance with the laws of New South Wales. By accepting these Terms and Conditions of use, you agree to the non-exclusive jurisdiction of the courts of New South Wales, Australia in respect of any proceedings concerning these Terms and Conditions of use.