No.49: Laurence Escalante, Virtual Gaming Worlds
Tech ‘unicorn’ Laurence Escalante, who got his first job at Hungry Jacks, is now a billionaire at just 39 thanks to the stunning success of his online game business.
The head of the latest Australian tech “unicorn” sensation is a quietly spoken 39 year old who used to work at Hungry Jack’s and The Reject Shop, and grew up playing car-racing games for hours in arcades. Laurence Escalante would later take inspiration from reading the stories of successful entrepreneurs such as Jeff Bezos, Lindsay Fox and Jack Welch, and then start his own company.
He hit upon his big idea when playing multiplayer online role-playing games such as World of Warcraft with mates who had moved interstate, and wishing they could play for the chance to win prizes. A decade on, Escalante has been catapulted into the billionaire ranks on The List this year thanks to the stunning success of his Virtual Gaming Worlds online game and sweepstakes business, which is conservatively valued at more than $3 billion.
Read the full 2021 edition of The List: Australia’s Richest 250
While it is headquartered in Perth, VGW has many employees based around the world and makes all of its revenue outside Australia. And after only a decade, it is already more profitable than better-known local tech success stories such as Atlassian, Canva, Envato and Afterpay. VGW made a net profit of more than $200 million in the 2020 calendar year. So quickly is it growing that Escalante’s majority stake in the business is estimated to be worth more than $2 billion – making him one of the 122 billionaires on The List for the first time this year.
“The Australian technology sector is changing the world,” Escalante tells The List in a rare interview. “The industry is growing, and we have access to some of the best and brightest minds. VGW is part of that emerging success story and I am committed to it.”
Almost all of VGW’s customers are in North America, playing virtual games such as its Chumba Casino suite of online poker machines, poker and blackjack table games, and Luckyland Slots. Customers, which the company claims number in the millions, pay real money to buy virtual “gold coins” to play, and while there is no value outside of the online games, VGW operates under a sweepstakes model that allows users living in countries where online casinos are banned the chance to win promotional sweepstakes prizes that can be redeemed for cash.
COVID-19 has proved to be a huge opportunity for Escalante’s company. Its revenue surged to $945 million in the last six months of 2020, as lockdowns across North America left many people stuck at home and with the opportunity to play more games online. The revenue result was almost four times higher than the corresponding period in 2019. Profit for the second half of 2020 alone was $115 million, up from about $77 million in the first half of the calendar year. It is a trend that Escalante believes will continue, even if the pandemic eventually subsides.
“We are all still adjusting to the challenges and preparing, fingers-crossed, for a post-COVID-19 world, “ he says. “We expect the broader trend towards online commerce accelerated by the pandemic will continue and consolidate.”
‘A key turning point was dramatically ramping up our social media presence. That supercharged our ability to reach and entertain millions of people’
All of which is a far cry from only five years ago, when Escalante contemplated and later abandoned a back-door listing on the ASX as part of a $3.5 million capital raising.
In the 2015 financial year, VGW made a $2.7 million loss from only $3.7 million revenue. By 2019 the company’s revenue was $351 million, and it achieved a net profit of about $28 million. That figure was more than trebled in the last half of 2020.
The relentless rise of social media and VGW’s significant investment in interacting with its customers on platforms such as Facebook has driven much of the growth.
“A key turning point was dramatically ramping up our social media presence,” Escalante says. “That supercharged our ability to reach and entertain millions of people. Online social games thrive on social networks. They help us engage with customers in a two-sided conversation and help players to connect with each other.”
Escalante says he has always been interested in computer games and was a keen racing enthusiast too. “My love of computer games and racing came together at an early age,” he says. “I would sit playing NASCAR and Need for Speed Games for hours in local arcades.” He was born in Port Hedland in Western Australia and his father worked for 20 years for BHP setting up IT infrastructure, so he says he was always around computers.
His first job at Hungry Jacks at the age of 15 paid $5.65 per hour and Escalante would later work at The Reject Shop near Sydney’s Macquarie University, where he undertook economics and actuarial studies. He worked in investment advisory, taxation and financial planning jobs. But he always wanted to run his own business and, while still working full-time, started dabbling with online game ventures, including one in which players searched for biblical letters.
VGW was born in 2010, developed from a Spacecubed co-working office desk in the Perth CBD. Chumba Casino was launched two years later and, after Escalante worked with sweepstakes and gaming lawyers to ensure it was compliant with local laws, in the US, where it was reportedly operating by 2017.
Escalante is also a keen racing car enthusiast and classic car collector, and has invested in car modification and racing businesses. The first car he ever owned was a Mitsubishi Lancer GLI in 2001, and he modified it with chrome rims, a three-inch exhaust and a stereo system. He has since bought a stake in the Perth car modification business Beyond Custom as well as in Arise Racing, a car-racing business that conducts training and coaching and operates a fleet of race cars built by British race car maker Radical.
“I could have only dreamed then of building an online games business and investing some of that success into motor racing,” Escalante says. “There is beauty and elegance in software, similar to automotive design. I’ve always been attracted to both.”
He recently sponsored an Arise Racing day, where more than 60 VGW employees raced Radical cars around WA’s Wanneroo race track for 20 laps with professional racing coaches.
Escalante says he is an admirer of another Australian billionaire car collector. “The high-water mark is definitely with Lindsay Fox and [his] Fox Classic Car Collection [housed in its own Melbourne museum building]. He is an Australian business legend.”
Like Fox and many of his ilk, Escalante had a dabble in taking VGW public, but he says there are no current plans for listing on the ASX or on any other bourses around the world, and that he wants to keep the company private.
VGW has previously raised money in private funding rounds and its shareholders have the ability to trade its shares on the Primary Markets platform, an independent marketplace for unlisted companies that effectively means VWG shares can be traded in an “over-the-counter” market.
Otherwise, Escalante wants to keep building VGW across North America and is developing a range of casual non-casino themed social games.
“The online social games industry is in many ways still in its infancy,” he says. “We are well placed to be a major part of the sector’s future. I have a multi-decade vision for VGW and online social games. This is my forever business and I am totally committed to realising its full potential.”
Read the full 2021 edition of The List: Australia’s Richest 250
