Make-Up Deals as an Income Strategy for Pros

Often times in poker, your preparation and decisions away from the table can play as big a role in long-term profitability as your strategy on the felt. Unlike other strategy articles that focus on one particular hand or tournament, this article is intended to be an overview of full-time/make-up backing deals, drawing upon my own experiences as both a horse and a staker, as well as the experiences shared by many of my friends from the MTT community. In my role as a poker coach and team professional at Tournament Poker Edge, I’m sometimes approached by students or otherwise aspiring professional tournament players about the pros and cons of different staking arrangements. I think my story is very similar to that of many other players and as such I think it can be very useful for readers considering a backing deal for the first time.

Make-Up Deals as an Income Strategy for ProsWe all know poker is getting tougher. Even compared to just a few short years ago, the poker ecosystem is comprised of relatively far more sharks and relatively far fewer fish. Even for people once considered top professionals, win-rates are leveling off at accelerating rates. As average ROIs decrease across the board, full-time tournament professionals will also experience an increase in overall variance. Win-rates are decreasing and variance is increasing as a result of a two-fold effect: first, the average skill gap is decreasing with time; and second, rake is increasing in both absolute and relative terms. More so than ever, professionals can ill afford to lose portions of their edge over the field. As such, make-up backing deals are becoming less appealing as a long-term income strategy for full-time tournament poker players. I should know — I’m still in one.

Like some online professionals, I first began seeking a full-time stake after Black Friday and the World Series of Poker crippled my finances in 2011. My story was pretty much the same as everyone’s — I had 98 percent of my net worth spread evenly between Poker Stars and Full Tilt on April 15. I took a very large percentage of myself at my first WSOP in 2011, and did not cash a single bracelet event. When I returned home after the summer, it was clear that I needed to find backing in order to continue playing the stakes I was accustomed to at that point in my career.

 At first, our arrangement proved fruitful. Although I was playing way too high on the U.S. sites (playing every $109-$530 event with small fields, and rarely smaller tournaments for balance), I won pretty consistently at local $5/$10+ cash games, and did relatively well at circuit stops on the road. But after four or five short months, I started a really large downswing in big cash games and in live MTTs. I felt I was playing as well as possible at the tables, but away from the felt I was really feeling the stress of losing, which was exacerbated by being away from home for months at a time, relocating to Canada, and going through a very difficult breakup. By the end of the 2012 WSOP, my make-up was so large I wondered if I’d ever see the light of the day again. I had to be running historically bad to be downswinging so hard and to be in this position, I thought.

Not necessarily so. In 2011, “Noah’s Awesome Blog” creator Noah Stephens-Davidowitz wrote a post on MTT variance, which demonstrated that my plight was not all that uncommon. Using fairly sophisticated statistical method, he showed that even really big MTT crushers will show a loss over a fairly big sample, sometimes after as many as 5,000 tournaments. Despite what one estimated my ROI to be, with how few of tournaments I played that year (mostly live tournaments), I could have expected to be in my predicament anywhere from 25 to 40 percent of the time. What’s worse, if average ROIs continue to shrink, losing years like mine will become much more commonplace, even for long-run winning players.

Your profitability in poker is a direct result of your average skill edge over the player pool. As training tools such as membership sites, strategy forums, statistical software (and well-written magazine articles) become more and more prevalent, the average skill gap that professionals hold over recreational players continues to shrink, thus negatively affecting the game’s potential for sustainable profitability. If this trend were to continue infinitely, win-rates across the board would shrink, so much so that even today’s best professionals would no longer be able to make a living playing the game. Professionals are already experiencing a strain on their ROI as the game grows more competitive each day, but poker — especially tournament poker — is also becoming increasingly expensive.

The existence of rake and tournament fees increases the win-rate necessary to realize profitability. As multi-entry and re-entry tournaments (where the same rake is charged on each successive re-buy) continue to grow in popularity, total and average rake per tournament increases, and so too does the necessary break-even win rate. Coupled with travel and all other expenses necessary to pursue poker post-Black Friday, the “effective rake” for some pros can creep up to anywhere from 25 to 50 percent. Fewer and fewer players these days are winning at this kind of pace, and even fewer still are capable of making a comfortable living with these margins and a backer.

Real-world trends and supporting evidence abound. Take an eyeball test to just about any professional MTTer’s SharkScope graph, and you’ll see the slope of their profit trend is decreasing with time. Look in any direction in any room at the WSOP this year and you’re bound to find several professionals stuck in what is known as “infinite make-up” (a break-even number so large, it is unlikely the player will ever realize a profit again). Average markup for action in the 2+2 marketplace is shrinking as buyer demand decreases. Every day, former beasts of the tournament poker community willfully exit the industry in favor of other professions (I’ll leave specific examples unnamed). Still others are dropped by backers who can no longer afford the investment. These are not isolated observations — the game is getting harder and harder to beat professionally, so much so that fewer and fewer aspiring professionals can justify paying 50 percent with make-up to a backer.

Aside from the game’s increasing difficulty level, taking full-time backing deals is ill-advised because it can lead to some sloppy mistakes, both on and off the felt. The first, most-common mistake players of all kinds make in backing deals is tournament selection — guys who weeks ago didn’t want to play $1K tournaments will get a backing deal today and suddenly start playing live circuit main events and high-buy in WCOOPs. When it’s not “their money” used to buy in, it can become easy to gamble it up more than usual (and usually get sunk in make-up incredibly fast). On the felt, backed players can sometimes make unconscious changes to their normal style. This depends on the type of player — some will begin to avoid plays they think their backer would disapprove of, while others may play wilder and looser because they’re using somebody else’s money. In short, novice backed players often forget to treat that money as if it was their own, both on and off the felt. Unfortunately, most don’t notice until they’re tens of thousands of dollars in make-up.

Another negative qualitative effect of backing deals: being in makeup sucks — and in most MTT backing deals, you’re in make-up 99 percent of the time. Whether one knows it or not, constantly being down for a stake has a negative mental strain on your game. You go months at a time, always down, always losing — but then you hit a big score! In one big tournament, you erase all your make-up, chop up your profit and get to feel rich again! But then tomorrow you lose $3K and you’re right back in the hole. Repeated over time, this process can take away the fun of poker and even subtly change your perception of yourself as a winning player (because, how can you think you are a winner when you’re “always” losing?).

In conclusion, aspiring tournament professionals would be advised to seek alternative income strategies to traditional backing deals with make-up. Many big staking groups are experimenting with other forms of deals (for many of the same reasons listed in this article). Alternatively, selling percentages without make-up at a slight mark up is becoming more popular and may be preferable. If your circumstances do not allow for the ideal situation of fully funding your buy ins, I would strongly advise more appealing arrangements other than a makeup backing deal — do as I say, not as I do.

This article could not have been possible without references to articles such as “Life as an Online MTT Pro II” by Noah Stephens-Davidowitz and “Your Edge is Smaller Than You Think” by the Tournament Poker Edge Staff. I’d also like to thank friends within the online MTT community, specifically Dylan Thomassie, Gabe Paul, and Manny Davidian (among countless others) for contributions to the article as a whole.

April 2014