I Wish I Knew Then What I Know Now: Backing

I’ve written many checks to many people as returns on an investment in my poker game. I’ve been handed large sums of cash for backing people. I’ve won and lost over a million dollars for others. All of my biggest scores would have been impossible without backing, and many times I’ve wished that I was never backed at all.

Backing deals come in either long or short-term packages. Short-term agreements include taking action in a game or a tournament as a one time deal. Hero wants to play in a juicy $2-$5 no-limit (NL) game but is only rolled for $1-$2 NL. Hero may then want to sell half of his action, so he is still playing bigger, learning the next limits, and not overextending his own bankroll. Similar spots exist in tournaments. If hero wants to play bigger but is only bankrolled for $500 buy-in tournaments, then hero should sell action so that his average buy-in is $500. Often times in this situation, hero can charge a markup, selling pieces at greater than face value. Markup compensates for hero’s talent, time, trustworthiness, and average expected return on investment (ROI) in a given event. For most of the WSOP events this summer, I charged a markup of 1.3-1, meaning that I sold $1,000 worth of tournament buy-ins for $1,300 to investors.
Long-term backing deals generally revolve around the concept of makeup. Makeup is the money lost by a horse under a backer prior to a winning score. Makeup must be cleared (paid back through profits) by the horse before any take home profit can be taken by the horse. A horse may not quit the backer while in makeup. The backer may drop the horse at any time. If the backer drops the horse while in makeup, then no makeup is owed by the horse. Horses may be sold amongst backers, usually purchased for some percentage of the makeup, although this has not been a recent practice.

Long-term deals vary from extended periods of time or games to indefinitely. One of my first deals was for the WSOP only. It had makeup for the summer and I had a smaller piece of myself but, if at the end of the WSOP I was in makeup, then it would be forgiven. I’ve also been so deep in indefinite long term deals that I have had a cash of about $120,000 that went directly to makeup — I couldn’t put one penny of those six digits in the bank. Sometimes makeup rolls over, in which case the player gets a higher percentage of the net. Other times the makeup is contained within the set, in which case the backer gets a bigger cut since the he is taking greater risk.

The motivation for backing is simple — acquiring something you otherwise would not be able to. As a backer, making bets or investments that yield a positive return on investment is profitable. If poker player X is profitable and that action can be acquired for less than the expected return, then the backer will be making money. The player wants to play tournaments with greater prestige and prizepools while minimizing risk of going broke. Win/win, right?

Back in the day this was great from both a player and a backer’s perspective. People with money could get a piece of the poker pie that was hot and ready. Players with the talent to compete at the highest level due to the unsolved mystery that was the game of poker back then were afforded great opportunities to be put into action, like a talented racecar driver who can’t afford his own car or team. Players can receive exposure and chances to compete for endorsement deals, a sign of validation and a source of passive income for a professional poker player.

Then UIGEA happened, then Black Friday happened, and now things are much tougher than they used to be. Profits are still there to be had, but they are not nearly as easily obtained as they used to be. Incentives like endorsements and exposure are not worth nearly what they used to be. With things like they are right now, I have no interest in taking long-term backing nor offering it for anything like high buy-in tournaments. I would rather use my own bankroll and play in smaller stakes games until things get juicy again with the renewal of online poker in the States.

The most important part in any backing arrangement is trust. The backer must explicitly trust the horse, knowing that he is going to be a good steward of money and not going to disappear after a big score. If a backer does not trust a horse, then the backer has no business backing that person. The player must trust that the backer will stick with them through the rough times before diving into a deal that often leaves players broke with no bankroll and massive makeup with no way to get out.

As a player, it is important to secure backing for bigger tournaments and games to manage bankrolls. However, you should only be taking backing if you will make more money playing the bigger tournament or game than you would by playing the easier game on your own money. If you’re there for fun then play within your means, and if you’re there for profit then you should apply your time and money most profitably with the least risk. That’s the whole point, and without endorsements and other ancillary benefits, incentive to be a known player is greatly reduced.

Backing is a good thing when handled well, but can lead to disastrous outcomes for both parties and should be handled carefully. Trust first, game selection second, and avoid getting (or letting your horse get) buried and things will be fine. ♠

Bryan Devonshire has been a professional poker player for nearly a decade. With over $2m in tournament earnings, he also plays high stakes mixed games against the best players in the world. Follow him on Twitter @devopoker.