Poker players buying and selling percentages of tournaments is commonplace these days. Every player has had a chance to invest in a friend at least once - heck, anyone on Twitter could have purchased a share of Daniel Negreanu in this year’s World Series of Poker. It’s exciting for the investor to follow along, gambling vicariously through the player. A wise investor also has an opportunity to turn a profit, without the effort of playing cards all day. The player benefits as well, effectively lowering the tournament buyin to a level more suitable for his bankroll.

It sounds like a win-win situation, but the relationship between investor and player is complicated. How does an investor make sure they are not being taken advantage of? How does the player ensure they are sufficiently compensated for their time and effort? What is the right price for a percentage of a given tournament? In this post I will lay out the framework I use to think about the relationship between player and investor, which I have developed over the last seven years investing in poker players.

How It Works - Buying A Piece

Skip this section if you are familiar with the poker investing ecosystem.

Sometimes, a player wants to enter a tournament, but they don’t want to put up the whole buyin themselves. So, they will offer to sell a certain percentage of the tournament to investors. Generally this is done through private communication channels, over Twitter, or through a public post on one of the many poker investment marketplaces. This is called selling a piece of a tournament, or selling action.

The player will provide two important pieces of information. The percentage of action available, and the markup. Markup is a premium over the base cost of the tournament that a player charges.

Here’s an example:

Player A wants to sell 30% of a $10,000 tournament at 1.2 markup.

30% of this tournament will cost an investor:

$10,000 x 1.2 x 0.30 = $3600

Buyin * Markup * percentage = Cost

1% of this tournament costs:

$10,000 x 1.2 x 0.01 = $120

If an investor buys a percentage of this tournament from the player, they are entitled to a corresponding amount of the winnings. Using our previous example, let's say an investor buys the whole 30% for $3600. Player A then goes on to place in the money, and cash that tournament for $50,000. Player A will receive 70%, or $35,000, and the investor will receive $15,000 for 30%. After that, the deal is over, and the player and investor go their separate ways.

The other important term to understand is ROI, or return on investment. This is the return a player receives on average for entering a given tournament. If a player has an ROI of 40% in a specific $1000 tournament, they will expect to be returned $1400 for each $1000 entry. Every time the player enters that tournament, they profit $400 on average. The only way to know this number accurately is to take the ratio of the sum of cashes to buyins over a large sample (thousands) of tournaments.

Why Do Players Sell Action?

Poker players gamble with money from their bankroll. This is money set aside from savings, living expenses, investments, and so on. It’s a tool every gambler needs in order to generate more money. When a player sells action, it’s usually because of either a bankroll consideration, or a dollar amount limit.

If a player has a $60,000 bankroll, it would be foolish of them to play a $10,000 tournament. Busting six of those in a row would wipe out their bankroll. That is akin to becoming unemployed as a gambler. If this player wants to use a smart strategy that grows their bankroll over time, while minimizing the chance of losing their whole bankroll, they must sell action to this tournament.

Another player may have a $700,000 bankroll. They can lose $10,000 in a single day and not put their livelihood at risk. Often, this player would still like to sell action though. Even though their bankroll is large, losing $10,000 can still hurt. Lowering the buyin to a number that is easier to stomach is an attractive option, especially if they can charge markup, which is effectively variance-free profit.

Guaranteed Profit

Using our example from the beginning of the post, the player received $3600 from the investor in exchange for 30% of the winnings of a $10,000 tournament. They will now effectively pay $6400 to enter, and receive 70% of the winnings, a $7000 value. In effect they have profited $600 already.

This markup of 1.2, or 20%, is a normal price for someone with an ROI around 50%. If the player did not sell that 30% of action but instead kept it for themselves, in the long run they would expect to make a profit of $1500 on it.

($10,000 * 0.30) * 0.50 = $1500

Buyin * Percentage * ROI = Expected Profit

The player forgoes this opportunity, opting to take the guaranteed $600 in markup instead. In the game of tournament poker, where over 80% of the time you leave with nothing, this variance free profit is attractive. By selling action at markup, the player reduces the buyin of a tournament, and receives a guaranteed profit, instead of a higher average profit distributed erratically over time.

Coming To An Agreement:

So you’ve found a player you want to invest in - that’s great. But how do you know what markup to pay them? That depends on the uncertainty of the player’s edge.

Edge Uncertainty

Coming to an agreement is a process, because knowing a player’s ROI with accuracy is very difficult. Players tend to sell to high stakes tournaments that only come around a few times a year at most. WSOP, WPT, EPT, SCOOP or WCOOP online. Sometimes you have to compare apples to oranges, when a player whose normal game is cash or online tournaments wants to play a live tournament.

In this information poor environment, where a player’s edge is not known, each side must make an estimate. The player and investor each have access to very different sets of information. As such, they rarely come to the same estimation, and negotiation is necessary. The negotiation is a discussion, but it can be looked at as a game between two players.

The Game Of Negotiation

Action buying is a positive sum game between two parties: the Player, and the Investor.

If everything in the deal goes according to plan, both sides benefit. The player reduces their buyin to a level suitable for their bankroll, while collecting profit through markup. The investor gets to put capital to work with a small time cost, and earn a return. But these two parties are at odds with each other.

The Player wants to charge the highest markup possible - it’s extra dollars in their pocket.

The Investor wants to pay the lowest acceptable markup - it cuts into their profit margin.

So the two sides discuss. Sometimes they arrive at terms both parties are happy with, and a deal is made. Other times, there is no markup that leaves both sides satisfied, and they go their separate ways. This process is complicated - there are many tactics each side can use. I won’t go into detail on that subject here, but there is one thing every negotiator must be aware of.

The Golden Rule Of Negotiation

You must be willing to walk away from the deal.

Every request in a negotiation has a corresponding or else. Usually it’s not said aloud, but implied. If you don’t pay the markup I ask for, I’ll advertise the action on Twitter and find a few investors there. I’ll play a smaller buyin tournament on my own, or I’ll play a cash game instead. A negotiator who is unwilling to walk away from a deal is completely at the mercy of the other party. Your strategy is defeated by a single “no”. Have high standards, and hold onto them. Remember you are playing an iterated game as well. A concession today weakens your position on each future deal.

How To Approach Buying Action As An Investor

So you’re ready to negotiate, and you have your eye on a few potential players. How do you decide which ones to pursue? Well, you buy the profitable ones, and pass on the others. Player valuation is a big topic, that’s a whole other post. With that said, here are some things to keep in mind when buying action.

Disclaimer: This post is written from the perspective of an investor whose sole motivation is to turn a profit. While this is the most logical reason to be involved with investing in poker tournaments, it isn’t always the case in the real world.

Circle Of Competence

As an investor, it’s important to have guidelines in place to keep yourself in check. The poker world is big, and the investment offerings are many. Most tournaments have the same game type - no limit hold’em; but other forms of the game are offered as well. Pot limit Omaha is rising in popularity, and at the World Series of Poker you can find everything from HORSE or Dealers Choice, to Razz, Stud, or 2-7 Lowball Draw. The list goes on.

This brings us to our first investing strategy:

If you don’t understand it - don’t invest in it.

Before figuring out which deals are right to invest in, we should clearly define the deals to avoid. Each investor should carve out their own niche - a circle of competence - where they have enough knowledge and experience to make good decisions.

Personally, my circle of competence is no limit hold’em tournaments in the United States with a buyin of $10,000 or less. I’ve played all over the US, and I’ve played NL hold’em professionally for ten years. However, if I try to evaluate a piece of action in another style of poker, or even a tournament being played in another country, I’m out of my element. The strength of players in a tournament field varies widely with geographic location. I may jump at the opportunity to buy from a player if the tournament is in St. Louis, but pass on the same player in Las Vegas. I may be happy to invest in a player in $10,000 WPT Main Events, but pass if he wants to play a $25,000 high roller in a country I’ve never been to.

Make your life easier, and set up filters that automatically disqualify investments that you can’t evaluate accurately.

Everything Is Negotiable

Poker investments aren’t set in stone, they aren’t yes/no decisions. They are a discussion.

When I first started buying action, I sourced deals from an online marketplace. Players would post to the forum with an offer - “Selling 50% to the WSOP Main Event at 1.3 markup”. They would describe their level of poker skill, listing their past accomplishments. I would consider the tournament, the markup, the player’s skill - and decide. If I thought it was profitable, I would buy. If I thought it was a losing proposition, I would move on. This was a big mistake. If you approach investing this way, you will leave a lot of money on the table.

My mistake was thinking that each offer was set in stone, like a stock price at an online brokerage - take it or leave it. In reality, each offering is the start of a discussion. If I think an investment is unfavorable at 1.3 markup, I can message the player and offer a lower price, maybe 1.1. This might be the best offer the player receives. Now they are enabled to play the tournament, collect some markup, and I can put my money to work instead of leaving it on the sidelines. Here, negotiation has turned a non-starter into a win-win situation.

Maybe the player listed a tournament for sale that you don’t like, but there is a different good value tournament nearby. Reach out and ask the player to play that one instead. Read into the bigger picture. Say you are presented with this opportunity - “I want to play the $1500 No Limit Hold’em 6max event at the WSOP. I’m selling 50% at 1.2 markup.” What they are actually saying is, “I will be in Las Vegas around June 5th. I want to play a NLHE event around the $1500 price point, and ideally I would sell 50% of it.” Using these looser conditions, I would suggest that the player consider the $1100 MSPT at the Venetian. I can pay them a higher markup, and we can each make a better return on our money. Both sides win. Make your own deals proactively, don’t merely react to the requests that cross your path.

Don’t Be An Asshole

Negotiation is necessary in the absence of good information.

Sometimes, as an investor, you will have all the power. The player will have nobody else to invest in them, there will be no smaller side events to enter that day, and there will be time pressure because the tournament starts in an hour. That doesn’t mean you should lowball them. If you have enough knowledge of the player’s game to know they have an edge, pay them some markup and split some of that edge. We negotiate because of the absence of good information, but sometimes we do have information. Send the player into the tournament feeling confident, not taken advantage of. There will be other tournaments, and next time, market conditions may not all line up in your favor.

In order to make profitable decisions, you can reduce the player to an object, and view the poker investment landscape as a model, which follows the laws of market forces. But at the end of that, you need to come back to reality, where there are human beings on each side of this transaction. Don’t be short sighted; maximize your returns over the long term of your relationship with this player. This means cooperating.

Using these three ideas as the framework when approaching a deal should start you off in the right direction as an investor. But the player also has unique challenges, how should they approach the negotiation process?

The Player’s Side

Once a deal is made between player and investor, their incentives are aligned. They both want to do everything in their power to produce a good result from the tournament - they are a team. But there is one fundamental difference between the two parties. The player’s journey is just beginning, while the investor is at the end.

The fundamental difference between player and investor, is that this tournament is the player’s life - at least for a few days. By selling action, the player implies that they value not just the theoretical profit they make from this tournament, but the entire experience. They might be traveling to a new country to play. They might have a dream of playing on a televised final table. Maybe playing this tournament is an important part of their social life - they will surely have some poker friends around. Professional poker player. The tournament is part of what they do and who they are.

To the investor, the tournament is an entry in a spreadsheet. After the deal is made, they go back to their day job until it’s time to collect winnings. All investors enjoy a good final table sweat, but watching the player do well is more of a perk than a reason to invest. This difference in experience is important to keep in mind, and is one way in which the investor has an advantage in negotiation.

Negotiating can be emotional. If a player’s self worth is wrapped up in their poker ability, a low offer from an investor can be a painful blow to the ego. It’s important for the player to keep in mind the barriers that keep the investor from seeing things their way. They must also remain humble and accept that they can never know all of the investor’s motivations.

Don’t Take Negotiations Personally

The poker world is small. Some of the players I invest in are close friends. Almost all of them are at least acquaintances. This can make negotiating tricky. How do you argue for your side, while remaining honest and respectful?

I got a DM request on Twitter a few days before the WSOP started this year. It was from a player I knew of, but I wasn’t familiar with his game. He offered to sell me some action in a few soft tournaments, at no markup. I did what I always do in these situations - I asked to see his results from the last 1-2 years, including cashes and buyins, so I can see if he is profitable. I got a reply that looked like the one below:

My due diligence was disrespectful; we wouldn’t be making a deal anytime soon. I’m sure I have offended many other players like this over the years. Making sure I get a good deal, while also showing respect to the player is a constant struggle.

Here are some things to keep in mind when negotiating with an investor, they might help you see some humanity in the person on the other side of the trade. Part of my job as an investor is communicating these ideas to players during a negotiation, I want to be as transparent as possible. I can offer a player a lower markup while also showing them I’m confident in their game by pointing to these factors.

You don’t know the investor’s risk appetite
- Investing in poker tournaments is a volatile way to earn a return on your money. Investors have many opportunities competing for their idle capital: stocks, bonds, private business, real estate, or Bitcoin. The investor may be offering you a markup perceived as low because they need a particularly high ROI on each tournament to justify the risk.
The investor needs to make a profit (investing is a job)
- You don’t get upset when another poker player tries to win a pot off you - it’s part of the game. Don’t be upset when an investor tries to ensure the bet they are placing is profitable.
Information asymmetry
- The investor only has the information made available, while the player has complete knowledge of his game. A player is only as good as the results he can show.
First person bias
- Luck plays tricks on us all. We remember the painful losses from things that are out of our control, but conveniently gloss over the times when luck works in our favor. Every poker player thinks they are better than they actually are.
You don’t have access to the investor’s bank statements
- I have gone through multiple year long, 6 figure losing streaks investing in poker tournaments, usually investing around $1000 at a time. During these downswings, it’s necessary to make strategic adjustments. Maybe the investor doesn’t think you suck at poker, but is being extra cautious in your deal because of his recent poor results.

What’s Next

In order to make money with poker tournaments, an investor needs to know two things: how to evaluate a player’s poker ability, and how to negotiate. Whether you’re a player or an investor, I hope this post has provided you with a framework in which you can apply those two skills, and given you a glimpse of some big picture strategies.

Player evaluation and negotiation tactics are both complex, nuanced subjects. I intend to write an in depth post on each topic. If you have any questions or feedback, you can find me on Twitter.