Questions about a potential backing deal

[citanul]

honestly, if you are a winning player at 1/2 who thinks he can jump in at the 5/10 games (or whatever the $1000 buyin games that you say you would start at are), i expect that they would have a rapid negative return on their investments.

backing deals really only make much sense if you have a player who you KNOW can make a profit at a level, but is currently underfunded for it.

that is not hte case with you apparently.

citanul

[SpeakEasy]

Go for it. Consider a deal where you sell shares of your action by contract. Each shareholder buys in for a specified amount. The shares are purchased pursuant to a contract that has the following characteristics:

-a specified duration (i.e. one year)
-required share purchase price (i.e. $5,000)
-rights of each shareholder to returns and dividends during the term of the contract (i.e. dividend of 25% of profits earned to date paid at 6 months)
-return of shareholders equity at the end of the contract (i.e. all equity remaining returned after one year -- hopefully 100% of purchase price)
-right of shareholders to cash out early (allowed or not allowed; if allowed, what cut of the profits are paid upon early cash-out, if any)
-exclusions from your play (i.e. all WPT tournaments excluded from the contract, are paid exclusively by players money, and all winnings go exclusively to player)
-right for player to purchase and hold shares (player can or cannot buy shares)
-right of extensions to the contract (i.e. player can declare one year extension; shareholders opt in or out)

Example: Player will sell 20 shares of his action. Player will buy 4 shares, and two investors will each buy 8 shares. Each share costs $5,000. This $100,000 becomes the “Bankroll.” Each share entitles shareholder to 5% of all “Profits” in all “Designated Games” for exactly one year. “Profits” are defined as the current total bankroll minus $100,000 (every dollar that you win). “Designated Games” are defined as NL and limit cash games and all tournaments, excluding all WPT tournaments. All travel and meal expenses are paid from the Bankroll. After six months, all shareholders will be paid a dividend equal to their share (5%) of 25% of all profits earned to date. Any shareholder may cash out with two weeks advance notice, upon which shareholder is returned 5% of equity plus 2.5% of profits earned to date (penalty for cashing out early is loss of half of the profits); remaining profits divided equally among remaining shares. At the end of the year, contract is complete, all shareholders are returned their share price plus 5% of all profits earned.

The concept is that you spread the risk, while achieving your goal of playing at a higher level and reaping your portion of the higher return that results from winning at the higher levels, through your shares. The more shares of yourself that you buy, the more risk and reward you bear and gain. The dividend is a showing of good faith as well as a method of locking in some profits, if any, after 6 months.

Think of other issues that might come up during the term of the contract that might cause confusion or arguments, and set the rules up front in the contract to avoid disputes:

-In addition to travel, what about meals during regular cash play at the local casino?

-What about loaning people money out of the Bankroll -- prohibited?

-How often can shareholders request information about the current status of the Bankroll?

-What kind of records is player required to maintain?

-Can additional shares be issued during the one-year contract? If so, how are the profits earned after that date divided among all outstanding shares?

-What happens if you buy into a tournament and hit the motherload $1 million 1st place jackpot -- any bonus retained by the player, or is the entire payout deposited back in the Bankroll? For example, for any single tournament win greater than $10,000, player receives 10% bonus payment and remainder allocated to the Bankroll.

Any questions?

[Shaun]

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Wow. I expected to get flamed, but not 100% flames. LOL.

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My post wasn't a flame. My point also was that IMO staking has a level of diminishing returns. Someone can make a lot of money staking someone at a low level since it is easy to get more than a 10% return (whatever the market average is) at lower levels. As you move up in levels it becomes harder and harder to beat the market. In poker, the higher the stakes the less the general return. When you invest that is not true in the same way.

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I have another question and I'm really interested in the answer- if you did have 100k bucks, what would you invest it in?

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I would get a money manager/ mutual fund/ etc to do it.

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Thanks for a good response. This is something I am also asking about, since I have no experience playing with that type of bankroll. At the games I have played, I could have a bankroll of 3 grand and triple that in two months. Of course I know that if I were playing games 10 times as large, I could not expect similar returns.

Honestly I don't know if this is a good idea or not- I don't see how they could lose money unless I went berserk- but they may lose oppurtunity cost, as they could probably make more money in real estate or something else.

[citanul]

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Honestly I don't know if this is a good idea or not- I don't see how they could lose money unless I went berserk- but they may lose oppurtunity cost, as they could probably make more money in real estate or something else.

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you could be a losing player at the higher limits that you have not played, and would intend to play with their money as your starting point.

citanul

[Shaun]

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honestly, if you are a winning player at 1/2 who thinks he can jump in at the 5/10 games (or whatever the $1000 buyin games that you say you would start at are), i expect that they would have a rapid negative return on their investments.

backing deals really only make much sense if you have a player who you KNOW can make a profit at a level, but is currently underfunded for it.

that is not hte case with you apparently.

citanul

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In all fairness, this response isn't helpful. Do you even know how the higher stakes games play? Are you saying that there are no bad players in games above the 1-2 blind level? That certainly doesn't seem to be the case in games I've seen. I have sat in games (shortstacked) where players had 2-5 grand and I found the play to be like it is at most games- some players were good but they were easily identified, and others were clearly fish who happened to be well-funded. Anyone will tell you that there are fish at all levels. In fact, many people say that the highest game in the house often has the biggest fish.

People play according to pain threshhold. Playing higher stakes does not automatically mean higher skill.

Now, I'm sure there are better players in, say, the Pokerstars 5-10 NL than what I am used to, but why would I even play there when there are softer games available at Prima and now at Party too?

[Shaun]

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Go for it. Consider a deal where you sell shares of your action by contract. Each shareholder buys in for a specified amount. The shares are purchased pursuant to a contract that has the following characteristics:

-a specified duration (i.e. one year)
-required share purchase price (i.e. $5,000)
-rights of each shareholder to returns and dividends during the term of the contract (i.e. dividend of 25% of profits earned to date paid at 6 months)
-return of shareholders equity at the end of the contract (i.e. all equity remaining returned after one year -- hopefully 100% of purchase price)
-right of shareholders to cash out early (allowed or not allowed; if allowed, what cut of the profits are paid upon early cash-out, if any)
-exclusions from your play (i.e. all WPT tournaments excluded from the contract, are paid exclusively by players money, and all winnings go exclusively to player)
-right for player to purchase and hold shares (player can or cannot buy shares)
-right of extensions to the contract (i.e. player can declare one year extension; shareholders opt in or out)

Example: Player will sell 20 shares of his action. Player will buy 4 shares, and two investors will each buy 8 shares. Each share costs $5,000. This $100,000 becomes the “Bankroll.” Each share entitles shareholder to 5% of all “Profits” in all “Designated Games” for exactly one year. “Profits” are defined as the current total bankroll minus $100,000 (every dollar that you win). “Designated Games” are defined as NL and limit cash games and all tournaments, excluding all WPT tournaments. All travel and meal expenses are paid from the Bankroll. After six months, all shareholders will be paid a dividend equal to their share (5%) of 25% of all profits earned to date. Any shareholder may cash out with two weeks advance notice, upon which shareholder is returned 5% of equity plus 2.5% of profits earned to date (penalty for cashing out early is loss of half of the profits); remaining profits divided equally among remaining shares. At the end of the year, contract is complete, all shareholders are returned their share price plus 5% of all profits earned.

The concept is that you spread the risk, while achieving your goal of playing at a higher level and reaping your portion of the higher return that results from winning at the higher levels, through your shares. The more shares of yourself that you buy, the more risk and reward you bear and gain. The dividend is a showing of good faith as well as a method of locking in some profits, if any, after 6 months.

Think of other issues that might come up during the term of the contract that might cause confusion or arguments, and set the rules up front in the contract to avoid disputes:

-In addition to travel, what about meals during regular cash play at the local casino?

-What about loaning people money out of the Bankroll -- prohibited?

-How often can shareholders request information about the current status of the Bankroll?

-What kind of records is player required to maintain?

-Can additional shares be issued during the one-year contract? If so, how are the profits earned after that date divided among all outstanding shares?

-What happens if you buy into a tournament and hit the motherload $1 million 1st place jackpot -- any bonus retained by the player, or is the entire payout deposited back in the Bankroll? For example, for any single tournament win greater than $10,000, player receives 10% bonus payment and remainder allocated to the Bankroll.

Any questions?

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Thanks for an excellent response Speak Easy. This is what I was looking for.

I would not loan people money out of the bankroll, and any tournament wins that came from the bankroll would be added to its total. This would mean the shareholders could possibly get their money back very quickly. If things went well and they decided they wanted a higher level of action, maybe every six months there could be an option to increase the total number of shares and thus the bankroll. Perhaps they reinvest their dividends and let it ride so to speak.

I would allow them full access to any internet records of my play. Live games might get tricky, since I could conceivably underreport winnings. I'd have to find some way to ensure them this wouldn't happen. I would allow them to monitor the bankroll whenevr they wanted. They'd have to know going in that there would be ups and downs and hopefully this wouldn't give them cold feet. One of the guys would probably be nervous about the swings and he will be the hardest to convince.

They would have to have access to all online accounts used, including Neteller or whatever was used to fund the accounts.

Would my take simply be representative of my shares, or if not, what kind of percentage would be reasonable as regular pay?

[JaBlue]

If this guy is really your friend, don't waste his money.

You're right, there are definitely some fish at the higher levels. However, the type of fish is a lot different. The same is true of the good players. You might think you're playing with 3 "good players" at your tables right now, but the difference in skill between them and the "good players" at 5-10 will be incredible.

Hey, maybe i'm just jealous because I don't have anybody throwing 100k at me, but if you are as good at poker as you think you are you shouldn't have trouble winning 100k in two years (at most).

I'd like to stress again that you don't really know what you're getting yourself into trying to jump into the deeper water and I think that with this knowledge, it is, at the bare minimum, unethical for you to not inform your investors about this.

Good luck.

[Shaun]

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If this guy is really your friend, don't waste his money.

You're right, there are definitely some fish at the higher levels. However, the type of fish is a lot different. The same is true of the good players. You might think you're playing with 3 "good players" at your tables right now, but the difference in skill between them and the "good players" at 5-10 will be incredible.

Hey, maybe i'm just jealous because I don't have anybody throwing 100k at me, but if you are as good at poker as you think you are you shouldn't have trouble winning 100k in two years (at most).

I'd like to stress again that you don't really know what you're getting yourself into trying to jump into the deeper water and I think that with this knowledge, it is, at the bare minimum, unethical for you to not inform your investors about this.

Good luck.

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Actually I probably won't have too much trouble winning that this year, or at least fairly close. But winning it doesn't mean I have it all as a bankroll- I have bills. That said I could probably get it on my own in 2 years as you say.

I have already explained to my friend that I would have to take it slow out of the gates. I also told him that if I didn't feel I could handle the games I'd get out and they'd get their money back. I have no problem admitting to myself when I feel I'm in over my head.

[dogmeat]

Shaun - get a grip here. You are still saying "I don't know how they could lose money." That is a joke. If you honestly have never lost any of your bankroll, what do you need them for?

I'm not saying you aren't a winning player because I have no knowledge of your play, but everybody has losing days - and sometimes those turn into weeks or even months.

If you make this deal for $100,000 and you put your $20K in and play to the whole bankroll, you can feel comfortable taking half the win during any month for playing and 1/6 of the remaining win for your "investment". If you win $10,000 in a month, that leaves 83.33% of half for your investors = $4166.

If you have a losing month, nobody gets anything until you get above $120,000 again.

Do I have any experiece? Yes. I have done several deals with players. Sometimes for a tourny buy-in as low as $200 for fun, and a few times for 10x that.

FWIW, I would never allow a player I was staking in cash games to also use the bankroll for tournys.

Good Luck.

Dogmeat [img]/images/graemlins/spade.gif[/img]

[Shaun]

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Shaun - get a grip here. You are still saying "I don't know how they could lose money." That is a joke. If you honestly have never lost any of your bankroll, what do you need them for?


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Of course I've lost some money before! I'm talking long term here, and you should know that.