But how does backing work? And what additional services does a backer provide? This guide will answer these questions and more.
In poker, backing refers to an arrangement between an investor (commonly known as a backer) and a poker player (commonly known as a horse) wherein the investor puts up funds on behalf of the player in exchange for a percentage of their profits. Backing is similar to staking, although backing implies a higher degree of involvement from the investor than merely fronting a stake.
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See above for backing, backer and horse.
- Profit – money made (on stake).
- Shares – a percentage of the potential profits that is owned by an investor. Otherwise known as action, or selling/buying a piece.
- Makeup – the amount that a player owes their backer after losing on stake. To take an example, consider a newly backed player that loses $1,000 in their first week. While the backer reloads the funds, the player is now said to be $1,000 in makeup, meaning that they must subsequently repay their losses before any profit is split. If the player goes on to win $2,000 in their second week, they are first obligated to repay the $1,000 makeup before splitting the remaining profits ($1,000/2 = $500 profit each).
- Markup – an additional fee associated with buying shares from a player. The player decides what markup they feel is appropriate based on their skill and experience. To take an example, consider a strong player that is selling 10% of their action in a $1,000 tournament. The player has sustained a 10% Return On Investment (ROI) over a significant sample in similar tournaments; the player is, therefore, a better investment than the average player, and can charge a premium (markup) for investments. Where the face value of a 10% piece is $100 (10% of $1,000 = $100), the player charges $110 for the same share, since this price better reflects his Expected Value (EV).
- Stable – a group of players that are staked and often coached by a specific investor. Coaching for profits (CFP) is a common type of stable, wherein a backer or backers stake and coach a group of players over a period of time in return for a cut of their profits.
How Does Backing Work?
Both the backer and horse must negotiate and agree upon the terms and conditions of their arrangement. These terms and conditions should clarify all of the necessary details to each party, such as what the horse can play, volume requirements, coaching requirements (if applicable), what percentage of profits each party is entitled to, etc.
What Is the Difference Between Backing and Staking?
As mentioned earlier, the terms ‘backing’ and ‘staking’ are often incorrectly used interchangeably. While the two are similar, a backer will also render additional non-staking services. These services may include:
- Training materials.
- Access to a community of like-minded individuals (often known as a CFP team).
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Should You Consider Backing?
- Diminished financial risk. Variance in poker can be severe; by getting staked as part of a backing deal, you can alleviate some of the associated financial pressure by not risking your own money.
- Coaching and support. Coaching, support, and other benefits that you can expect from a backing agreement can be hugely valuable
- Opportunities to play in bigger games. Staking is commonplace when it comes to playing high-stakes tournaments and cash games. By getting backed (staked) you give yourself a better chance to play in bigger games.
- Networking and community. Mostly associated with poker stables, networking and a sense of community can be invaluable in a game as independent and often isolating as poker.
- Reduced profit share. The main downside to staking as part of backing is, inevitably, that you’re no longer entitled to your profits in their entirety.
- Contractual obligations. From volume requirements to game and format selection, contractual obligations mean you’ll have someone (your backer) to answer to.
- Makeup. While your financial exposure is significantly diminished, the idea of makeup (being indebted to your backer) can be daunting to some.
To summarize, backing can provide a much-needed financial safety net, along with a myriad of other benefits such as regular coaching and a sense of community. That said, it’s also important to consider the potential downsides of backing, like a reduced profit share and various contractual obligations. Ultimately, it’s up to you to decide whether backing makes sense as part of your unique poker journey.