So back in college, I was a broke student trying to find a high paying job that didn’t require many hours. In this way, poker, eventually with a ton of work, made sense for this. I start with a $50 bankroll (you can think of this as cash on hand in a balance sheet), and built it to $3000. At around $2k -> $3k I started taking money out, and then replenishing the role through playing.
The stakes I played started at $2 buy in tables ($0.01/$0.02 blinds), and I stopped progressing at $100NL. I was relatively good at $100NL, and figured my skill advantage would rapidly decrease as I went higher (likely true). I also had no reason to believe I could compete with the best out there.
In summary: The situation occurred when I was playing $100 tables, with a $3000 “float” or “bankroll”, and I was averaging ~$1400/month in winnings playing 40 hours per month.
My friend knew I was making money, so he offered to invest in my poker playing, or in other words stake me. From my point of view, this stake didn’t make any sense from my current economics. If he invested say the maximum I could imagine using ($3000), how could I possibly give him a reasonable return? At the time, staking arrangements were usually at 50/50 profit split (for reasons I discuss later). So I thought, what if I play higher, he invests say $3000, and I use the money to gamble at higher stakes ($200 buying), potentially with a payoff of making up to 2x as much money.
How much could I have offered my friend as a return for the $3000? I guess the deal could have worked something like - I’ll play $200 tables on our combined $6k. We’ll split losses 50%, and if at any point we feel this is a losing idea, he can withdraw, and I’ll drop down stakes to where they respect my raises. Here’s the tricky part, how do I split the winnings? Maybe after the first 3-6 months, we split total winnings 50/50. Then we make decreasing returns arrangements (I need him less and less as I convince myself I can actually beat $200 tables).
So maybe at 1 months we split winnings 60/40, the next 1 months we split winnings 80/20, and the following 1 months its 80/20. At that point I pay him out. From his $3000 investment he stands to make $1400x2=$2800 * 40% = $1120. The next period will be $2800 x 20% = $560, and the last 6 months will be another $560.So his total earnings would be $1120 + $1120 = $2240 (be sure to check my math). His original stake of $3000 has been reasonable returned for $2240. He makes half of the money in the first 1 months (the highest risk period), and trailing returns in the proceeding 2 months which are relatively low risk. Returning the investment at that point is easy as I still have all of his original deposit, so I would just return it.
Editors note: realized I forgot to multiply by months in my math. I’ve just (extremely lazily) reduced timelines to 1 month to make the math work.
I can also speak from the point of view of staking people. I believe I’ve staked 2 people in my life. One for $500 or $1000. In that case I made something like $1000. That poker player also attempted to run away with the money, claiming “What kind of investment has 2x returns in a few months”. The other guy I staked for $400 and he just flat took the cash and ran. So yes, that’s why I should make 2x my money. Giving strangers money on the internet to gamble is EXTREMELY risky; it should have very high returns.
So from my friends point of view, he wants a ROI of probably 50%, if he understands the risks involved. At the time there was no deal, as I really didn’t want to risk my friends money, and probably our friendship, playing 200NL where I thought it was unlikely I would beat the limit for a reasonable profit.
I’ll summarize the above with I played some poker and ran it like a business. I had a cash float of $3000 that I built throughout time. Through superior strategy in comparison to my competition I could eek out profits, which I made to myself every 1-2 months in the form of $1400->$3000. About one losing month per year was my expectation/reality.
This is similar to buying a company stock. You offer them money (you are my friend in this scenario), for the potential to make money off their ventures. I think what I like about this story is I can put myself in the companies shoes easier. My companies stock holders give us cash, with the expectation (maybe on our end) that we find new ways to deploy this cash to potentially make more money, and thus give our investors the returns their looking for, while increasing our own incomes.