Investments are no longer tied to traditional fixed assets and stocks and bonds. Investors are now looking for creative and novel avenues to invest in. Though Bitcoins, vintage cars, fine wine or a piece of art offer potential investment opportunities, they are unfortunately weak on the return. What’s interestingly sprouted as an investment opportunity is the world of poker backing and staking.
The investment at its very root is basic, an investor agrees to pay a percentage of a poker player’s buy-in to a tournament in exchange for an agreed percentage of the winnings. There are sufficient cases to prove the potential value of these investments. A case in point would be poker professional, Daniel Negreanu, who sold 13% of his action for the 2014 Big one for One Drop. Negreanu bagged $8.29 million on this one and paid back investors of $5,000 a lucrative sum of $41,440.
Investing in poker players is picking up like wildfire, it is estimated that around half of the players at the 2019 WSOP were staked by family, friends or serious investors. Why does it work so well? Simple, the big money tournaments usually have expensive buy-ins which most players may not want to put up themselves or they might simply think that rather than putting up their own money they would rather swap some of their potential winnings in exchange for not having that responsibility. A typical arrangement will see a backer putting up half of the buy-in amount on the agreement that they will receive 50% of the winnings.
The investment completely comes down to the player you’re investing on. Investors look at players’ win rates, or past experiences if they’ve faced them on the same table (considering the investor plays poker). Furthermore, it’s important for investors to understand a player’s attitude and motivation before they make an investment.
Players who have exceptionally high win rates are able to impose what’s known as mark-up in the staking world. This means that they will charge a premium over and above the buy-in in order to enter into an agreement. The player retains the premium amount in such agreements.
How does one go about this kind of investment? There are a number of online platforms that aggregate investors and players or that now work on a well-established crowd-funding model. YouStake and Two Plus Two are among the most widely used. The platforms also ensure contractual agreements are signed since the sector operated informally in its early days.
The right poker player, a gentleman’s agreement and you are a handshake away from doubling your investments!