The Poker Staking FAQ: Part 1

2+2 magazine is definitely worth checking out every month – they have a lot of very good strategy articles including a nice monthly column from Andrew Brokos, And as a contributor, one nice perk is that after 6 months, you get the rights back to what you’ve written. I’m going to take advantage of that by reprinting here my article series: The Poker Staking FAQ.

While I’m not currently taking new players, I have a staking application back up on this site for SpinLegends. They’re the spin stable associated with Pokerstrategy, the site I make videos for.

And they’re doing something that’s different from the approach most stables have — they’re trying to make all their players into top level guys by providing a lot of coaching and other resources. Whether or not you currently have much spin experience, if you’re looking for a stake and enjoy spins, it’s worth applying to see what they have to offer you.

SpinLegends Screenshot

 

The Poker Staking FAQ: Part 1

[Originally appearing in 2+2 Magazine]

I’ve been staking poker players for the past eight years. In this article series, I’ll give an FAQ-style guide to staking. It will cover primarily long-term staking arrangements, rather than buying pieces in the marketplace.

Q: What is a typical staking arrangement?

A: The backer provides a bankroll to a player, and optionally, additional services like coaching and access to strategy webinars. In exchange, the player pays the backer a percentage of his profits. In my early staking days, this split was almost always 50-50. Competition has resulted in more splits tending toward the player’s favor, such as 60-40 or 70-30.

Q: How much money can I make staking?

A: Returns depend on how much you have invested: the smaller the investment, the higher the possible percentage return. Before Black Friday, a well-run stable with $25,000 invested might earn around $50,000 per year.

In any business where high returns on investment are possible, these returns tend to decrease with time. In the case of staking, returns are now much lower due both to more players staking and tougher games. The same stable with $25,000 invested today might earn around $15,000.

(These earnings figures are, of course, very approximate. Some will earn much more and others will lose money.)

Q: Isn’t 60% a year still a great return?

A: In most investments, it would be an exceptional return. Staking isn’t similar to a passive investment like buying and holding a stock, however.

To illustrate the difference, let’s consider an example. Suppose you stake a single player for $2NL cash games, giving him weekly coaching, and he makes $500 per year. It’s a 50-50 split and your maximum investment in him during the year was only $50, so that your $250 profit represents a 500% return.

There are two main reasons why you may not be fist-pumping, despite a high percentage return:

Time commitment. In addition to the $50 investment, we have devoted our labor to this player. With weekly coaching, Skype conversations, and keeping track of the stake finances, our hourly would be well under $5. This is an extreme example, but the general point remains: Staking is an investment that requires time and effort.

Doesn’t Scale. We can’t simply increase our financial investment and earn a similar return. If the increased investment is in more players, then correspondingly more labor is required. If the increased investment is putting the $2nl player into $10nl, then our ROI will decrease. The general point here is that even a very successful staking operation may face many difficulties growing.

Q: Where do I find horses?

A: Buy a staking thread on 2+2. Be active in other online forums that have staking sections. Most important, tell all of your current horses and poker friends that you’re looking for good players to back. Referrals are a valuable way to find higher-quality players.

Q: What do I look for in players I stake?

A: Ideally, you want all of the following qualities in a horse:

Very winning recent results in the format and stakes for which you’ll be backing them

High recent volume

References

Good attitude

Comes across as intelligent and professional

Has at least several months of expenses saved up in case of a long downswing

Realistic about the games they’re beating and where they have an edge

Studies often and articulate about strategy

Like with most other types of investing, there are no called strikes in staking. In other words, you can sit there and wait until you have a great player who ticks every box. These days, however, it’s relatively uncommon to find a player looking for staking who meets all of these criteria. So look for as many as you can get.

As an example, from my experience, few applicants have enough money saved up in case of a downswing. So this is a rule I have bent (probably more than I should have) for the right players, in order to have a larger pool of possible horses.

At a very minimum, you want a player with solid results and a decent attitude.

Q: A great player wants an 85-15 split to continue. Should I offer it to him?

A: Probably not. You might reason: “He’s made $20,000 last year playing $11 MTTs. Sure I’d like more than 15%, but $3k is better than nothing.”

But remember that you’ll have to spend time or hire someone to look at his reports every week. The player could steal from the account. He could have been running good last year and be breakeven or losing this year. His volume could drop to nothing when he’s in $5,000 makeup and you take a large writeoff.

I’m not saying these hypotheticals are likely. But with most players, extreme deals like 85-15 are not sufficient compensation for the time and risk. You would want a player you really trusted, with very consistent results, and other positive attributes to consider this type of deal.

Q: Do I need a contract to stake players?

A: Yes. It’s unlikely you’re going to use the contract to take a player to court. Contracts are important though because they outline the exact terms to the players. If there is a dispute later, you want the contract that both parties have signed to provide an unambiguous resolution.

Q: What should the contract say?

A: The following is a partial list of topics you will likely want to include in your staking contracts:

The exact formats and buyins the horse can play. Be very specific. For example, if you write “Tournaments with a buyin of $33 and under,” the horse might reasonably think they can play $30 6max hypers, $30 spins, or $22 cubed MTTs.

The profit split. I recommend including rakeback into the deal, even if the split is very favorable to the player. If you don’t include rakeback, you risk incentivizing players in makeup to grind a large volume just to get the guaranteed rakeback.

That the player is not allowed to play any other games on the staked account. Not including this clause often leads to difficult situations where the player claims to have played certain games on or off-stake, leaving you unsure whether you’re getting freerolled.

That the horse is liable for any hack of the account. You want to encourage the player to take all necessary security precautions, as well as eliminate the possibility of them stealing money and claiming it was a hack.

Minimum volume requirement. If you say 200 games a week for 9-man SNG for example, the plan isn’t to reprimand a player who only plays 150 games one week. If a good player needs a break or wants a vacation, I would definitely let them. But if the player is in makeup and volume starts dropping a lot (a fairly common occurrence), then the contract is on your side.

Weekly report with screenshot requirement. More on this point in Part 2 of the FAQ.

Makeup. Besides how makeup works, make it explicit that the player can’t quit the stake in makeup.

Do your best to write clearly and understandably. Remember that horses may be inexperienced with contracts and have a different native language than yours.

Q: How does makeup work?

A: Let’s begin with another definition. A player’s Total Stake is your current investment in him. Makeup is then (Total Stake – Account Balance).

For example, you stake a player for MTTs up to $22 freezeout and $5.50 rebuy with a $1,000 base roll. He goes on a downswing, requiring two reloads. At this point, you have $3,000 invested in him so his total stake is $3,000. If he has $500 in his account, then at that moment he’s in $2500 of makeup.

In a standard deal, players must be clear of any makeup before they can chop profits or have the option to end the stake. Stakes that do end in makeup have a writeoff of that amount. If we decided to end the stake of the $22 MTT player, we would ask him to transfer back the $500 in his account and take a $2500 writeoff. If he had previously transferred us $3500 in profit over the life of his stake, then we would have profited $1,000 overall from the stake.

—————–

I’ll have an article in next month’s magazine that continues this staking FAQ, covering how to avoid scams, keep players happy, handle heavy makeup, and navigate other situations that commonly arise when staking.

About Collin Moshman

Collin Moshman graduated from Caltech in 2003 with a degree in theoretical math prior to becoming a professional online sit 'n go player. He is the author of best-selling poker strategy books Sit 'n Go Strategy,
Heads-Up No-Limit Hold 'em, and The Math of Hold'em. Collin is also the lead SNG coach for Cardrunners and Pokerstrategy. He lives in Mexico with his wife Katie and dog Wilbur, playing on Pokerstars as tfnc314.


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