Prize-linked savings accounts or “PLSA” originated in the United Kingdom as a way to encourage people to save money by adding prize incentives to the savings process. In the mid-2000s, the United States decided to offer this savings model and credit unions launched “Save to Win” by offering prizes on a monthly and quarterly basis. Layup is taking this a step further with its FDIC-insured savings account app geared towards sports fans that lets users not only save money but also win cash prizes and products from brands based on the outcomes of sports games. The app gamifies savings by offering opportunities for entries into different games and competitions based on how much one saves. This encourages building positive savings habits while potentially detracting people from gambling, using the prizes from Layup games as a substitute for “action” on sporting events without ever having to worry about losses. Layup earns a small spread on saving interest as well as through interchange fees with plans to broaden the revenue model in the future.
AlleyWatch caught up with Layup Cofounder and CTO Oisin Tiernan to learn more about the business, the company’s strategic plans, recent round of funding, and much, much more…
Who were your investors and how much did you raise?
$2.3M Seed from Continental Investment Partners (CIP) led the round. Chicago Venture, Entrepreneurs Roundtable Accelerator, and multiple Angels also joined the round.
Tell us about the product or service that Layup offers.
Layup is a neobank that offers gamified savings accounts for sports fans. Depositors earn the chance to win exciting prizes based on the results of sports games. Traditional sports products like fantasy and betting require massive commitment or are designed to make fans poorer. Layup’s gamification layer is a new alternative built for casual fans. It takes seconds to play, and there’s no skill or expertise required. Some win big, but everyone saves money.
What inspired the start of Layup?
Growing up in Ireland, Owen (cofounder) and I grew up with a unique savings mechanism known as Prize Bonds. This approach, also referred to as prize-linked saving, allows savers to earn tickets to a lottery instead of earning an interest rate on their savings. The excitement of potentially winning a prize encourages people to save more. In fact, more than a third of the population of Britain uses this type of savings method.
After completing our university education, we created a fantasy premier league football application called FPL-Plugin, which organically grew to 20,000 users. During this time, we learned that prize-linked saving had been federally enacted in the USA under the American Savings Promotion Act. What’s even more exciting is that, unlike Ireland, where the government is responsible for prize bonds, the American implementation was privatized.
Even as diehard fantasy players — seriously, we built our fantasy app because we were so obsessed — it’s too big of a timesink to manage a team for all of the sports and games we watch, and we saw how this drove our friends to betting as a way to quickly engage with their favorite sports.
It was a combination of these two factors that was our light bulb moment: Why don’t we use prize-linked savings gamification to offer fans a quick, easy, and positive way to engage with the sports they love?
How is Layup different?
We’re really the only sports product that’s trying to put money back into the pockets of fans. Instead of asking them to spend it or bet it, we ask them to save it. It’s impossible to lose money with us. In fact, if we’re doing our job right, you’ll be having so much fun playing you won’t even realize that you are saving money.
What market does Layup target and how big is it?
Layup is competing for the attention of sports fans. Vice industries like alcohol and cigarettes both have responsible alternative industries which are approx. 8% of the size of their respective vice industry (e.g. alcohol-free beer). Applying this logic to our problem space, responsible sports gaming alternatives would have a market size of $10B. This estimation also ignores the fact that equal chance games attract wider demographics than conventional sports games – simply put, conventional sports games cost a lot of time, a lot of money and demand domain expertise. Layup’s equal chance sports games are simple, easy and give casual gamers and fans the chance to have a stake in their favorite game without the downsides of conventional sports gaming. This leads us to believe that the category of sports game like Layup will create could far exceed a market size of $10B.
What’s your business model?
We make money as a neo-bank, which means we take a margin on savings account interest and card transaction interchange. We have additional plans to generate revenue similar to video games, like in-game cosmetics and in-app advertising.
How are you preparing for a potential economic slowdown?
Interestingly, we believe that our product is particularly well-suited for an economic slowdown. We’re competing against sports entertainment and games; this is usually luxury spending. Layup gives fans a way to engage with sports without the risk of losing their money, and when money is less abundant, at Layup you can have fun without the risk.
What was the funding process like?
We are extremely happy with our investors and our raise and even more proud that we raised the round in May, which was one of the slowest early-stage fundraising environments in years.
What are the biggest challenges that you faced while raising capital?
The blessing and curse of our company is that most Americans have never heard of prize-linked savings. This meant that we had to spend time educating investors before pitching our business. The art of communicating new concepts and our variation to investors as quickly and effectively as possible was challenging.
What factors about your business led your investors to write the check?
Well, in particular, it comes down to the overnight shift from sports betting being an underground product that was frowned upon to having every halftime show featuring segments about betting lines. It’s all of the signs of a perception bubble, our positioning just makes sense. Regulators and fans will change their opinion on betting as the horror stories come to light, and that’s where we come in. Layup is the only sports entertainment company that is actually trying to help fans, instead of taking from them.
What are the milestones you plan to achieve in the next six months?
Our Northern Star is transitioning from a closed beta app to a publicly accessible product. Join our waitlist at trylayup.com, and we will let new users join in batches.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
If you are thinking about raising capital, then start trying to put yourself in the shoes of an investor. It’s a hard time for everyone; VCs have to raise capital, and they deal with the same difficulties of pitching and rejection. If you can treat investors as your peers instead of gatekeepers, and look to be genuinely helpful, good things tend to happen.
Where do you see the company going now over the near term?
We’re trying to speak with as many leagues, teams, and professional athletes as possible. We are looking for strategic advisors and partners.
What’s your favorite fall destination in and around the city?
It’s always the same answer for me, no matter the time of year. Riding the ferry in NYC is the best way to relax.