Getting Staked in Poker Tournaments: How it All Works

By Peter Brooks
Published on April 19, 2017
Poker Staking Feature Image

As poker continues to grow in popularity, the number of tournaments and the size of the buy-ins continue to rise. This means that if you play regularly and want to take advantage of these new and bigger tournaments, you’re going to have to shell out some more cash. For those wildly successful players or those with deep pockets, this is no big deal. However, for the rest of us that aren’t the greatest in the world or didn’t invent Cirque du Soleil, this may create issues.

You might be saying to yourself, “If you can’t afford to play in the bigger buy-in tournaments, then just don’t.” While this is correct and great advice for bankroll management, there are perks to playing in the higher buy-in tournaments. You might think that the higher the buy-in, the better the players are going to be. This actually is not true for a large percentage of tournaments. If you get into the super nosebleed levels, the players will be a lot better, but the higher stages before that seem to do a great job of attracting the rich business folk who are terrible at the game.

Though, we aren’t talking about cash games, here’s a great example. A lot of times a $2-$5 NL game is going to be significantly more difficult of a line up than a $5-$10 NL game. This is because the rich business folks are either “too cool” to play the $2-$5 NL games or are looking for something that actually gets their competitive juices flowing. This is the same with tournaments as a $100 tournament might not appeal to a wealthier individual, but a $1000 tournament will. The takeaway here is that getting the ability to play in higher buy-in tournaments can give you better opportunities to make serious cash.

Poker tournaments also have a ton of variance no matter how good you are at them. This means you could be the best player in the world and play 10 tournaments in a row and not cash in a single one. This is the ugly world of variance. This is no problem if you have the money to continue playing tournaments as you will eventually win in the long run. If you’re short on the bankroll, though, you’re going to be out of luck.

The point is that there are a lot of reasons that you might be looking to play more tournaments than you can afford or higher buy-in tournaments than you can afford. So what are your options? The most popular option and the one we’re going to talk about today is staking.

What is Staking?

Staking is the process of getting someone else or multiple people to invest in your tournament buy-in for a percentage of your winnings. Staking can be a short term one tournament deal, a medium length group or tournaments deal, or a long-term exclusive type staking deal. Each staking deal is not created equally. There are a multitude of different options and things to consider before getting involved in a deal. Don’t worry, we are going to go through everything for you today.

Terms You NEED to Know

Before we get started talking about the different types of staking deals available and how to get them, there are several terms that you need to be familiar with and understand about the process.

Makeup

Makeup is money that must be repaid to a backer before any profits can be paid out. You will usually only see makeup with longer term or package deals. Here’s an example. Let’s say I choose to back you in tournaments long term. We decide at the beginning that the profits will be split 50/50, but there will be makeup. Here are the first three tournaments you play in and the results of each.

  • Tournament 1 | Buy-in $1,000 | You lost early, $0 cash.
  • Tournament 2 | Buy-in $1,000 | You lost early, $0 cash.
  • Tournament 3 | Buy-in $1,000 | You did well and cashed for $6,500.

WITHOUT Makeup

You profited $5,500 on the third tournament ($6,500 – your buy-in of $1,000 for that tournament). You would get $2750 in profit for your efforts.

WITH Makeup

You profited $5,500 on the third tournament ($6,500 minus your buy-in of $1,000 for that tournament). However, you are required to “pay-back” the amount that you are down first before any profit split. So, $6,500 minus your buy-in for that tournament of $1,000 minus the $2,000 you lost in the first two tournaments equals $3,500 in actual profit. You would receive $1750 for your efforts

If you were to play in a fourth tournament with makeup, you would immediately get 50% of the profits because you are “out of makeup” as everything resets when you are paid out. You might be thinking to yourself that makeup is terrible and why on Earth would you want to agree to that. The reason for this is to make things fairer to your backer. If you bomb off a bunch of their money and then make a few bucks, the fact that they have to pay you does seem a bit silly. Whether you agree or not, most backers are going to agree it is silly and will require it before they give you a deal.

Markup

Markup is a premium that you charge when selling pieces/shares of your tournament action. For example, let’s say you had zero dollars but wanted to play in a $1,000 poker tournament. If you sold everything at face value, there would be zero percentage points left over for you. Basically, if you sold $500 for 50% to two people, you’d have the money to play but would owe 100% of the money if you won. This would be pointless for you to play.

The response to this is that people will sell at a markup which is giving away slightly fewer percentage points of the profit for what you put in. For example, let’s say you decide to sell at a markup of 1.25 for this tournament. If we wanted to buy 10% of your action, we would normally pay $100 for that. But with the markup, we will pay $100 times the markup of 1.25 which equals $125. So we would have to pay $125 for 10%. To get the $1000, you would have to sell 10% to only eight people now instead of 10. This would result in you only promising away 80% of your action/profits and getting to keep 20% for yourself without having to put up any money. This is the joy of markup.

Horse

A horse is someone who you have invested in. If we were to buy a piece of you in a tournament or choose to back/stake you long term, you would be one of our horses.

Swap

Swapping is where you exchange percentages of profit with other players who are in the tournament. No money is exchanged for a swap, just a promise of potential profits. For example, let’s say both of us are playing in the same tournament. We could agree to swap 5% which means that if either of us cashes, we will pay 5% of our winnings to the other player. It is important to note that you should clarify beforehand that this is 5% or whatever percentage of the total money cashed for, not just the profit. This has caused issues in the past and should be clarified first. For those wondering, yes, it is supposed to be of the total cash, not the total cash less the buy-in.

One Time Deals

One time deals are fairly popular and are usually the easiest way to get staking. They don’t require long-term agreements, and you can usually get multiple people to pitch in smaller amounts. One time deals never have makeup attached to them. They are strictly a one and done contract, and that’s the end of it. They do have markup attached to them, though. How much markup is attached usually depends on the skill level of the player and the difficulty of the tournament. If the player is really good and a great investment, the markup is going to be higher. If the tournament is a really tough field, the markup is going to be lower as it’s a slightly less great investment.

The one great thing about one time deals is that you don’t have to sell all of your action. Let’s say you are looking to play in a $1,000 tournament and have $500 you want to put towards it. You can sell the remaining $500 off at a markup and will end up having somewhere over 50% of your own action for only half the price of the tournament. You are free to sell as little or as much of your action as you want to.

Long Term Deals

Long term deals are the exact opposite of your one time deals in just about every way possible. First, the deal is ongoing and is not for one tournament or a set number of tournaments. Because of this, there are a lot of different stipulations, and things to make sure are worked out before beginning a long-term backing deal. It is not just a license to go nuts and play anything you want. You will be given rules on which tournaments you can play and most of the time will have to submit a schedule for approval before you can play anything. There is no markup with long-term deals, but the profit share percentage will need to be negotiated. It’s common for players to start with something like 70/30 in favor of the backer and then slowly work closer to 50/50, if they do well. This is following the idea that at the beginning the player really needs the deal, so it will be structured to favor the backer. As the player succeeds and needs the deal less and less, the deal will change structure to be more evenly based to continue enticing the player to stay with the deal.

Almost all long term deals are going to have makeup. This is really the only way that it can be profitable for the backer. Remember, you don’t technically ever owe the makeup money to the backer. It just must be paid before any profits can be given out. This means that if you go deep into makeup and the backer decides that they no longer want to back you, you are free and clear and owe no money.

Can you leave whenever you want from a deal? The industry standard is that anytime you are up and not in makeup, you can leave the deal. If you are in makeup, though, you need to stay and play for your investor as long as they continue to put you in events. Most backers will tell you that if they decide they don’t want to put you in a certain tournament that you can sell action to other people or play on your own dime for that one tournament and they will have no claim to your profits for it. It’s basically a first right of refusal type system. Make sure to clarify this before the deal starts, though.

Package Deals

Package deals are the happy medium between the one-time deals and the long-term deals. A package deal is a backing deal for a set amount of tournaments more than one. This could be three tournaments, or it could be a summer long WSOP package of 30 tournaments. The important part is that it has a fixed number of tournaments and a definitive start and end. Package deals will typically have makeup and markup. The makeup will only be for the life of the package. This means that once the package is completed, any makeup left is erased and the package is done. Let’s say the package is five tournaments. If you lose all five of the tournaments, that is the end of the agreement. There is no makeup going forward to future packages or anything like that. If you lose the first four tournaments and win the fifth, the first four buy-ins are subtracted from the profit numbers as makeup normally would be.

Regarding markup, it’s fairly common to have some sort of markup on a package. The guidelines for how high are what we talked about earlier. The difficulty of the tournaments and the skill of the player are the driving forces. Ultimately, the market will set the markup as if it is set too high, no one will buy, and the markup will have to be dropped. Packages are usually favored over one time deals by investors as it gives them more of a shot to overcome variance and see a profit on their investment.

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