The Poker Chronicles: Poker People

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March 1, 2008

Poker People

I've been spending the past few months out in Silicon Valley dealing with raising an investment round, and it has made me appreciate the honesty and directness you find among poker players. Not all, to be sure. The average poker player is probably a scumbag. But the good ones have an honor code that's simple, direct, and unwavering. That's one of those things that you don't fully appreciate until it's gone.

We're trying to do an angel round and put together a number of individual investors, to avoid the hassles of institutional ones, which means talking to a lot of different people. (If you're interested, feel free to email me for details.) Our experiences with them so far have pretty much ranged from excellent to atrocious. But even at their best, it's not like dealing with poker players, who will often make far larger agreements (in the form of stakes, etc.) in 15 minutes over just a handshake.

Of course you wouldn’t expect or want anyone to invest in a company with nothing but a handshake. But you would expect people to be direct when dealing with you. You don't expect the guy who told you three times that he just invests his own money and wants to be part of your funding round to say a couple weeks later "I'm not sure if we're going to do this, let me talk to my partners." (Partners meaning they invest other people's money too.)

People who invest in early stage companies, use all sorts of strategies to stall for time, even when they're interested, since if a company is 6 months old, stalling for 3 months gives you 50% more data on which to act. Or maybe they decide they don't want to invest, but they don't want to tell you no in case your site takes off a month or two later, so they string you along.
It's the industry equivalent of angle shooting. Luckily Paul Graham explained pretty much every tactic in his writing over the years so none of it is a surprise, though I wouldn’t have expected people to keep using the same tricks after they were so clearly defined, especially on someone they know has spent the last six months listening to the person who exposed them.

I have no problem with people who don't want to invest in my company for whatever reason. Maybe they don't like fantasy sports in general, or they don't feel they know enough to make an educated decision, or maybe they don’t like the gaming nature of our site and worry about the legal ramifications. Or hell, maybe they don't like me. I don't know how that could be, but I've heard (mostly in comments here) that some folks don't.

All of that is fine and good. I figure that when it comes to raising money, if you aren't getting passed on, you aren't talking to enough people. Everyone has their own investment criteria, so even the deals that look like the next Google to one investor look like the next Govworks to another. If you haven't found some of both in relation to your deal, you haven't explored your options sufficiently.

So I can handle getting passed on, because if I don’t, I'm not doing my job well. But I despise the angle shooters. I've pretty much just refused to deal with those people, which might limit my options, but is probably best for the company anyway, because the best investors, the ones you really want on your team, are straight shooters. Just like in poker. As one partner from Sequoia (one of the good firms) told me "you can divorce your wife but you can't get rid of your investors." If someone isn't acting admirably in the beginning you can't expect them to start after they write the check, and then you're in serious trouble, because while you can't get rid of them, they can often get rid of you.

In poker I've done a little bit of staking. (I've never done much on the other end, as I always liked to play on my own dime, but I know a lot of people who have.) I've also done a good deal of splitting, which is pretty comparable, and I've known a lot of others who have. And I've had a couple times where someone has owed me a fairly large chunk (or I've owed them) due to a big win, and there's never been a question of if or when the money was going to arrive.

In fact, a player I had only met a few days earlier once gave me $10k in cash to buy into the WSOP because I was passing through Vegas on vacation and wanted to register. I barely knew him, but we had a mutual friend, so he trusted me to transfer him the money on PokerStars, which I did 20 minutes later.

I could tell you tons of stories about someone staking someone they knew by reputation only, but not one where they ended up getting stiffed when the stakee went on to win. I'm sure it's happened, but among the good poker players, the ones any selective human being would befriend, it's virtually unheard of.

I don't know why poker players have such an unusually strong honor code. I think maybe the bluffing element satisfies that natural human predilection for dishonesty. Maybe people lie, cheat, steal, and angle shoot because they feel the rules society imposes on them are too confining, but those who spend all of their time playing a game where one is encouraged to do everything in their power to outsmart their rivals feel no need to circumvent them. Or maybe it's the other way around, and at some level being an honest person makes you more inclined to play poker, and/or makes you better at it if you do.

So maybe it's a correlation. Maybe it's causation. Or maybe I've just been lucky in that the many friends I've made through poker just happen to be a relatively unusual subset of the general population, though I doubt that given the sheer number. But whatever it is, I miss it.
Which is not to say I haven’t met a lot of great people through the startup world. I have, though almost all of them are on my side of the coin. And it's given me perspective, especially realizing that the most successful investors out here, like Sequoias or Baselines, operate more like poker players and less like average VC firms. I'm pretty sure a sufficiently bankrolled poker player could make a killing at tech investing. Maybe it's something I'll try my hand at one day in the distant future.

Posted by themaroon at March 1, 2008 6:04 PM

I'm out in Las Vegas hanging out with Richard and company (if you're here hit me up and we'll grab a drink) and I must say, it's made me a little reminiscent about the past five years. I miss the poker lifestyle. I don't miss the game that much (though I do a little at times) but I miss the travelling, the food, the company. I've been spending the past few months out in Silicon Valley dealing with raising an investment round, and it has made me appreciate the honesty and directness you find among poker players. Not all, to be sure. The average poker player is probably a scumbag. But the good ones have an honor code that's simple, direct, and unwavering. That's one of those things that you don't fully appreciate until it's gone. We're trying to do an angel round and put together a number of individual investors, to avoid the hassles of institutional ones, which means talking to a lot of different people. (If you're interested, feel free to email me for details.) Our experiences with them so far have pretty much ranged from excellent to atrocious. But even at their best, it's not like dealing with poker players, who will often make far larger agreements (in the form of stakes, etc.) in 15 minutes over just a handshake. Of course you wouldn’t expect or want anyone to invest in a company with nothing but a handshake. But you would expect people to be direct when dealing with you. You don't expect the guy who told you three times that he just invests his own money and wants to be part of your funding round to say a couple weeks later "I'm not sure if we're going to do this, let me talk to my partners." (Partners meaning they invest other people's money too.) People who invest in early stage companies, use all sorts of strategies to stall for time, even when they're interested, since if a company is 6 months old, stalling for 3 months gives you 50% more data on which to act. Or maybe they decide they don't want to invest, but they don't want to tell you no in case your site takes off a month or two later, so they string you along. It's the industry equivalent of angle shooting. Luckily Paul Graham explained pretty much every tactic in his writing over the years so none of it is a surprise, though I wouldn’t have expected people to keep using the same tricks after they were so clearly defined, especially on someone they know has spent the last six months listening to the person who exposed them. I have no problem with people who don't want to invest in my company for whatever reason. Maybe they don't like fantasy sports in general, or they don't feel they know enough to make an educated decision, or maybe they don’t like the gaming nature of our site and worry about the legal ramifications. Or hell, maybe they don't like me. I don't know how that could be, but I've heard (mostly in comments here) that some folks don't. All of that is fine and good. I figure that when it comes to raising money, if you aren't getting passed on, you aren't talking to enough people. Everyone has their own investment criteria, so even the deals that look like the next Google to one investor look like the next Govworks to another. If you haven't found some of both in relation to your deal, you haven't explored your options sufficiently. So I can handle getting passed on, because if I don’t, I'm not doing my job well. But I despise the angle shooters. I've pretty much just refused to deal with those people, which might limit my options, but is probably best for the company anyway, because the best investors, the ones you really want on your team, are straight shooters. Just like in poker. As one partner from Sequoia (one of the good firms) told me "you can divorce your wife but you can't get rid of your investors." If someone isn't acting admirably in the beginning you can't expect them to start after they write the check, and then you're in serious trouble, because while you can't get rid of them, they can often get rid of you. In poker I've done a little bit of staking. (I've never done much on the other end, as I always liked to play on my own dime, but I know a lot of people who have.) I've also done a good deal of splitting, which is pretty comparable, and I've known a lot of others who have. And I've had a couple times where someone has owed me a fairly large chunk (or I've owed them) due to a big win, and there's never been a question of if or when the money was going to arrive. In fact, a player I had only met a few days earlier once gave me $10k in cash to buy into the WSOP because I was passing through Vegas on vacation and wanted to register. I barely knew him, but we had a mutual friend, so he trusted me to transfer him the money on PokerStars, which I did 20 minutes later. I could tell you tons of stories about someone staking someone they knew by reputation only, but not one where they ended up getting stiffed when the stakee went on to win. I'm sure it's happened, but among the good poker players, the ones any selective human being would befriend, it's virtually unheard of. I don't know why poker players have such an unusually strong honor code. I think maybe the bluffing element satisfies that natural human predilection for dishonesty. Maybe people lie, cheat, steal, and angle shoot because they feel the rules society imposes on them are too confining, but those who spend all of their time playing a game where one is encouraged to do everything in their power to outsmart their rivals feel no need to circumvent them. Or maybe it's the other way around, and at some level being an honest person makes you more inclined to play poker, and/or makes you better at it if you do. So maybe it's a correlation. Maybe it's causation. Or maybe I've just been lucky in that the many friends I've made through poker just happen to be a relatively unusual subset of the general population, though I doubt that given the sheer number. But whatever it is, I miss it. Which is not to say I haven’t met a lot of great people through the startup world. I have, though almost all of them are on my side of the coin. And it's given me perspective, especially realizing that the most successful investors out here, like Sequoias or Baselines, operate more like poker players and less like average VC firms. I'm pretty sure a sufficiently bankrolled poker player could make a killing at tech investing. Maybe it's something I'll try my hand at one day in the distant future.

The Poker Chronicles

Busting Chumps and Taking Names.

March 1, 2008

Poker People