Exploring a backing proposal for WPT tournaments

[sirio11]

As maybe some of you already know, I have a plan to play most of the WPT this season, but the cost of playing all the events is astronomical, my poker bankroll is ok now to cover all the buy ins for this tournaments, but I want to reduce the variance, just in case. So I was thinking about the posibility of selling some of my action, and want to ask you guys, what do you think of the following plan?

I'm planing to play the following events:

Legends / Sat Aug 27 / $5,150.00
Borgata / Mon Sep 19 / $10,000.00
Doyle Bellagio / Sun Oct 23 / $10,200.00
Foxwoods / Sun Nov 13 / $10,200.00
Five Diamond / Tue Dec 13 / $15,300.00
Poker Stars / Wed Jan 4 / $8,000.00
WPO / Sun Jan 22 / $10,200.00
LA Poker Classic / Fri Feb 17 / $10,100.00
Bay Shooting Star / Mon Feb 27 / $10,000.00
Party Poker / Sat Mar 11 / $10,200.00
Reno / Sun Mar 27 / $5,100.00

The total is $104,450

And this is without taking in account any travel expenses, hotel, airplane tickets, etc.

My ROI in internet tournaments is around 100% (factor=2), I have not played too many WSOP events (about 21), but I have right now about a 50% ROI (factor =1.5), with 6 cashes. So I'm using a 1.5 factor to calculate my possible ROI.

$104,450 * 1.5 = 156,675

So in the long run I think I expect to win about 50,000; of course there is a problem with the long run (it's very long !!), but I need to assume averages to make sense of the possible profits.

Now my plan is the following, in order to reduce the variance I need to sacrifice some of the profits to my investors, so my plan is to sell my action for 1.2, this is:

1.2*$104,450 = 125,340

this will be the value of the 100% of the shares; from the investors point of view, they need to invest 1.2 to make 1.5 (in average), thats about a 125% return in their money, this is your initial investment + 25%, (really don't know which number 125 or 25 is better to describe the situation, but hopefully is clear enough)

Of course the range for return could be between 0% (never in the money) and 3000% or something like that.

So basically for every $1 used to play the tourneys; of the possible 0.50 profit, I'm getting 0.20 for the time and effort and my investors 0.30.
And the money invested is going to be used only to pay for the tournaments; I'm assuming all the travel expenses generated in order to play this schedule.

Now, in order to generate more interest in the deal and to reduce the variance of my investors, I decided to include all the WCOOP tourneys I'm playing in the package, here my factor is 2, but still selling the pieces at 1.2;

WCOOP events:

1. September 4 (Sun) $530.00 No-Limit Hold 'em
4. September 7 (Wed) $215.00 Pot-Limit Short-Handed 6/Table
6. September 9 (Fri) $215.00 Limit Hold 'em
7. September 10 (Sat) $530.00 Pot-Limit Hold 'em
8. September 11 (Sun) $1,050.00 No-Limit Hold 'em
9. September 12 (Mon) $320.00 Seven Card Stud
11. September 14 (Wed) $530.00 Limit Omaha High/Low
13. September 16 (Fri) $530.00 Pot Limit Omaha
15. September 18 (Sun) $2,600.00 No-Limit Hold 'em

This is $6520 more, then:

Total cost of the tournaments: 104450+6520 = 110970

Total value of the 100% shares = $110970*1.2 = $133,164

Now, how many shares? Well, whatever the number, I plan to sell at most 30%.

For example:

If 100 shares, each one is $1331.64 and I sell at most 30.
If 200 shares, each one is $665.82 and I sell at most 60.
If 300 shares, each one is $443.88 and I sell at most 90.

I really don't have experience about backing deals, never have backed anyone, never have been backed; never have been broke !!; the closest was when a friend put half of the bankroll, so I could play a 10-20 Pot_Limit Omaha game in Moscow, Russia.
I do read the posts by Greg Raymer and Gavin Griffin about their backing deals and some other random internet literature in the subject.

So, I appreciate all the feedback you can give me.

What do you think of the deal? Is it fair? too ambitious? too naive? too generous ? What problems do you think I should be aware of, taxes, lawsuits, etc? Is it worth the hustle to deal with 90 people, compared to deal with 30? (My wife thinks I should deal with 0)

And of course, if you are interested or know somebody who could be interested, feel free to ask me any questions here or send me a PM.

Thanks for reading.

David Cossio

[Moonsugar]

On the surface it seems generous.

Lets say you you enter a $10,000 buy in event then your expected profit is $5,000. If you sold all your action under the terms of this deal and you made your expected profit then you would get $2,000 less your expenses. What are your expenses for a $10,000 event? If you bust the first day maybe $300 or $400 and if you go all the way maybe $1000. So lets say $500 average. If these numbers are accurate then is the reduction in variance worth you making 30% of your winrate? ALso, the margin is even worse for lower buyin tournies as your living expenses are relatively constant but the EV goes down.

Now, what is not included in these numbers is the backend. If you are successful and marketable then there is a pot of gold at the end of the rainbow that you won't share with your shareholders. Depending how high you value this and what you rate the chances of being to achieve it almost any backing deal could be worth it.

Whatever happens good luck [img]/images/graemlins/smile.gif[/img]

Edit: WHat struck me while reading this was how hard a life a tourney pro must have had before this boom. The best player must not have an EV of more than 2x buyin and then he has to pay the backers and still fade the variance and the lifestyle problems.

[Moonsugar]

LOL I just found the thread on the MTT board. I guess I was right on the generous part...

[DesD]

I'd want to avoid dealing with 30 backers.

You've got some form now so an option might be to approach a poker mogul who might like some spread action - like Chip Reese or Poka's Nice.

DesD

ps...or maybe if you play your cards right (pun, didcha see the PUN) you can attract somebody with real commercial muscle like ZeeJustin [img]/images/graemlins/smile.gif[/img]