Over the years I have tried almost every way of financing my poker career. For the first seven or eight years that I played poker for a living, I played entirely with my own money and never accepted backing or sold action. I highly recommend doing the same thing for your entire poker career if you can. Splitting your winnings with someone else just cuts down on your income and doesn’t make sense if you have a comfortable bankroll to play on your own.
While playing exclusively on your own bankroll is preferable, it’s not always easy to do. When Black Friday caused around 90% of my net worth and a similar percentage of my income stream, I was left in a tough spot financially and the small $1/2 no-limit games that I would have used to rebuild my bankroll just weren’t available in my home state of Minnesota.
Full Backing with Makeup
I took on a backer for awhile, with a standard makeup deal. After my backer got all the buy-ins back from previous losses, then we split winnings 50/50. Not only does this clearly cost me half my income, but it is also very frustrating. If you didn’t have a big score in your last tournament, you are in makeup, and even a very good player can be in makeup for months at a time.
There are very few players who play the same size tournaments all the time, which leaves you in a tough spot in makeup. If you bust a few $10k events and are $30,000 in makeup, it can be tough to give it your best effort in a $1,000 event with a small field where first place won’t even get you out of makeup. Imagine playing for two days, spending your own money getting to the venue and eating, only to bust in 3rd place for $10,000 and walking away with nothing, still $20,000 in makeup. Demoralizing to say the least.
Standard makeup deals do work for some players, and they can be profitable if they get you to a place where you can play much higher than you could play on your own money. Just be careful to include which events (or cash games) are included in the deal ahead of time. You don’t want to find out that you have to play $100 events at your local card room for your backer when they are your source of rent money.
I found that selling action was the best solution for me, but only once I was established as a proven winner and could charge a markup. A markup is basically a fee that you charge your investors. You are doing the work, and they are getting a profitable investment opportunity, so you charge them a percentage much like a hedge fund.
I sold a package of tournaments totaling around $50,000 last year for the World Series of Poker, with a markup of 1.2. This was a bargain, a lot of people knew it, and the action sold out quickly. I sold a little more than half my action and put up the rest of the money myself. For each 1% of my future winnings in this package of tournaments, my investors paid $600. That is $500 * 1.2 = $600. This is how markup works.
You will have trouble charging markup if you are not an established winning player. The very best players, or those who have lots of investors interested because they are famous or have large followings, can charge as much as 1.4 and still sell out. While players who have $100,000 in tracked winnings and no real reputation beyond this will probably have to sell at 1.1 to 1 or charge no markup at all. This can still be valuable, helping to make up the difference so that you can play all the tournaments you would like to play and start building that reputation so that you can charge a higher markup later.
Remember to always, no, let me restate that, ALWAYS, get money ahead of time when you are selling action. If you can’t get the money together, don’t play the tournament, but do not extend credit and then try to collect from people who owe you money after you have already busted the tournaments. It is not worth the hassle and it leaves a bad taste in the mouth of your investors.