Gaming industry veteran looks to carve a new niche in €183bn market

In the middle of November last year, Dermot Smurfit jnr, the former chief executive of gaming technology company GAN, found he had a decision to make.

It had been a tough few months since he had left the business, and there had been even a tougher few years before that. GAN had struggled to generate profits, had seen its share price fall from more than $30 to barely over a dollar and had been forced to write down the value of its biggest acquisition, Coolbet, to nearly zero, a move that fairly walloped its balance sheet.

It left the company a sitting duck for a takeover, and an offer came from the giant Japanese computer game maker Sega Sammy Holdings – albeit at a much diminished valuation, given GAN’s share price collapse.

[ David Duffy eyes up to €19.8m payday in Virgin Money takeover ]

Smurfit, who had negotiated the deal with Sega and then stepped down as chief executive, had to decide: stick or twist?

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“From an emotional standpoint, to go from a million miles per hour to a crashing halt – when you go to zero emails – that’s a real shock to the system,” he says. So part of him was thinking of an immediate return to the company.

“I very seriously considered announcing a rival bid for GAN, very seriously.”

He had, after all, spent 20 years building the company, had floated it twice – once in London and once in New York – and had dragged the business out of a perilous debt situation. He was reluctant to see the work of nearly two decades slip away from him.

But, eventually, over Thanksgiving dinner – he now lives in California – and discussions with friends, he decided against such an approach.

“When you’re 48 years of age, as I was in September last year, you think: ‘I’m not 28 any more where you can say, ‘right, I’ll spend five years trying to make this work.’ No, I’ve got other things to be doing.”

A few days later he sold his remaining shares in GAN – breaking his final link with the company after 21 years – and moved on to the next thing.

The fruits of that decision have begun to become apparent in recent weeks at Paydirt Games, the new business that Smurfit has established with a number of former GAN employees, including chief technology officer Martin Smith and head of HR James Rossetto.

Perhaps unsurprisingly, for three GAN alumni, it is based around the notion of online gaming for money.

Smurfit says there are a lot of bored people out there looking to be entertained, and a lot of money to be made from them. The video game market is worth $200 billion (€183 billion) a year, he says. Just last November Fortnite, one of the best known games, hit a record with more than 44 million people playing it on a single day.

The universe of gamers is large and diverse, Smurfit says, “whether it’s my 79-year-old dad playing word puzzles online, a bored housewife playing Candy Crush or a 14-year-old teenager hiding from the sunlight who just wants to play Call of Duty for as many hours as God and his parents will give him”.

As far as Smurfit is concerned, the opportunity for Paydirt lies in creating a game for “an older, more serious video gaming cohort that wants more visceral, authentic, realistic experiences” – with, of course, an opportunity to make in-app purchases, compete with their fellow players and earn money.

“We’re convinced that there is a way of crossing the chasm between regulated online gambling and the video game universe in order to create a persistent world where you can own digital assets,” he says. By assets he doesn’t mean crypto currencies but buying items within the game which the player can then “put up for sale, sell to other players, trade them in, whatever you want”, he says.

“I expect a significant minority of the players to play and spend real money buying virtual items and other things.”

He doesn’t quite like the description of the money as winnings, since it’s not gambling, per se. “It’s more deciding whether or not you want to own digital assets,” he says.

But will people be able to cash out of the game and spend the gains on, say, a beer in the real world? Yes, he says, and in fact it might be a good bit more than just a beer. To hear Smurfit tell it, the sums might be more than just the equivalent of a windfall from a flutter on the horses; it might be enough to be viewed as an income.

“How many people have a side hustle? How many people are always looking for an opportunity to do something that isn’t particularly time consuming, but where there’s potential for money,” he says. “And who isn’t interested in money?”

In that sense it’s not dissimilar to the online Texas Hold ‘Em poker boom in the early 2000s, which swept a whole generation of young men up in the idea that they could play hands of cards online against the machine or against each other. Some made piles of money from it: others lost similar sums.

The difference here, as Smurfit describes it, is that instead of round after round of poker, and round after round of bets, the player will be playing a much more complex game. They will be playing against each other but not betting against each other.

But that will only work if the game is compelling enough to keep players coming back. So unlike Texas Hold ‘Em, which is fairly simple, the success of Paydirt Games rests on the quality of the game Smurfit and his team can produce.

“The challenge is a creative challenge, which can be like capturing lightning in a bottle,” he concedes, more like creating a hit record or movie than striking a deal to provide technology to a casino, as he did for years with GAN.

He’s guarded on just what his game will be about, though it has been in development since November and has been tested out by a number of people, including some of his new investors.

“I have one investor and his initial feedback was, ‘You’ve gone crazy. You’ve spent too much time in California, what do you think you’re doing?’ And then he came back to me a week later and said he’d played the game. He said, ‘I get it, and I can’t believe someone hasn’t done this before’.”

He’s tight-lipped on what the game will involve, however, saying only that it is “a persistent online multiplayer world” based on “exploration, survival, competition, resource management [and] strategy”.

I’ve been bootstrapping this with my own capital, which thankfully I’ve been able to accumulate over the years with GAN

—  Dermot Smurfit

He offers a hypothetical example of a pirate-based game, involving plundering and finding buried treasure, but in recent weeks there have been a few more clues.

Paydirt’s website has posted a number of pieces of art and featured videos based around the American gold rush of the late 19th century, with videos about panning for gold, surviving in hostile terrain, fighting other players and buying the kind of equipment a prospector might need, like weapons, food, or a shovel – which just happens to be Paydirt’s logo.

Building a game is not cheap; Smurfit has spent millions of dollars of his own money to do so.

“I’ve been bootstrapping this with my own capital, which thankfully I’ve been able to accumulate over the years with GAN,” he says. He won’t say how much, describing it as “low seven figures”, “more than a million and less than 10”.

“I always knew that if I went down this path, I would have to commit a substantial amount, my own personal capital, to getting off the ground and getting to the point where we would have a first playable to demonstrate,” he says.

He has a good deal of support from what he calls “Wall Street guys and value investors, and small to medium sized institutional investors who have made a ton of money out of me by investing in GAN when it was UK listed”, he says.

Among that number are some well-known names who backed GAN the first time around, many of whom were Smurfits or Smurfit family friends. Early investors in GAN included his uncle Michael Smurfit (former chief executive of Smurfit Kappa), his cousin Tony Smurfit (current chief executive of Smurfit Kappa), his father Dermot snr, his uncle Alan Smurfit, and billionaire Dermot Desmond, all of whom chucked in cash at various points to support GAN – and, more pertinently, took a profit when the share price was riding high.

He’s coy about investment by Smurfits in Paydirt Games thus far – just one family member so far, he says, but refuses to be drawn on the Phoenix magazine’s recent confident assertion that Dermot Desmond will “return to the fray”.

Investors shouldn’t expect another big stock market flotation pay-day on Paydirt, however, Smurfit says.

“If this is successful, I definitely don’t foresee taking it public,” he says. “If Paydirt ends up being a private company forever, so what? And if it ever does go public, I don’t think I will be the one making it public,” he says.

Perhaps that’s unsurprising given his experience with GAN towards the end.

“I always tell people who ask me what it’s like to be CEO of a publicly traded company that it’s a brilliant nightmare – it’s fantastic and a nightmare all at once. And until you’ve been a CEO of a company, you can’t really understand what it’s like.”

He says he loved every step and enjoyed the learning and the misses, “the intensity of human interactions with people I genuinely loved and respected”. but, he notes, “we survived a very, very difficult period where the floating interest rate component on our $30 million of debt was seriously threatening the company, and I pulled a $42 million rabbit out of what looked like a very small hat”, referring to its debt refinancing deal with Sega Sammy in 2023.

We’ve acquired 17 different studios in games. We let you guys innovate. And then we come in and we write the cheque and we buy you guys

—  Meta

He describes 14 days of negotiations, start to finish. “I didn’t sleep any one of those single nights to get that deal across the line.”

Having been through all of that he “still managed to walk out of the burning house” and is comfortable that GAN is “transitioning to a very safe pair of hands”. He seems in no rush to go back into any burning houses again.

But even if a stock market flotation is off the cards, he is not ruling out the possibility of some other kind of exit. He had a meeting with senior executives in Meta – the parent company of Facebook – in January, during which he asked them why they hadn’t done something similar to this in the past.

Their answer, he says, was very clear: “We don’t do that. We’ve acquired 17 different studios in games. We let you guys innovate. And then we come in and we write the cheque and we buy you guys.

“The largest companies don’t pursue innovation, they reward innovation by acquiring companies. So I want to try and innovate enough to attract the attention of the big guys, who might take the whole thing very seriously.”

Such an outcome will all hinge on just how well Smurfit has analysed the video games market and how well he executes his gold-rush game. He knows that is as much a gamble as anything else.

“Look, I think this is potentially a billion dollar idea,” he says, “but it could also be a zero.”

CV

Name

Dermot S. Smurfit

Job

President & CEO, Paydirt Games Inc.

Age

49

Lives

Orange County, California

Family

Three children, Maximus, Blake and Darcey

Hobbies

Spearfishing, boating, swimming and breeding Japanese koi carp

Something we might expect

His new venture is based around online gaming

Something that might surprise

He almost mounted a rival bid for GAN after the deal with Sammy Sega was announced

Leadership style

“Democratic (but always first off the boat to storm the beach)”

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