As a poker room manager I get pitched a lot of ideas. I’m sort of used to it because during the heady dotcom days I worked for AOL and then later for eToys. When I would go to industry conferences and mixers every dotcom millionaire wannbe would try to corner me and tell me the idea that was going to be the next Yahoo, Amazon, or some other rags to riches internet company.
I don’t really blame them. Most people had no clue about the internet but knew that there was money to be made and as far as they were concerned I was Steve Case or Toby Lenk and was going to introduce them to people who would put millions into their business plan which was nothing more than a five card PowerPoint presentation.
The one thing I have to give these rabid entrepreneurs dreaming of billion dollar paydays is that no matter how many holes you pointed out in their ideas or how absurd you told them you thought their premise they always asked for you to invest or refer them to someone you know who might want to invest. Nothing discourages them.
The online poker industry has a bit of that same mentality. There are so many people who have watched online poker blossom from an underground niche market to a multi-billion dollar industry that it inspires people to try to latch onto the trend and ride it to riches.
Unfortunately, most people’s ideas are neither unique nor the sure fire bets they think they are.
It’s tough. Even for those of us who are on the receiving end. Ninety-nine percent of the ideas you hear are rubbish but there might be that one gem so you try to give everyone a fair shot.
With that in mind I thought I might post some tips for people who think they’re onto an idea that is going to have them sipping cocktails on their yacht in the Mediterranean.
Tip #1: Nobody Needs a New Poker
If there’s one pitch I hear more often than any other it’s for some sort of variation on the game of poker. The idea is always patented and the owner treats his invention like he was holding US nuclear missile launch codes demanding that you sign a 400 page NDA (non-disclosure agreement) so that you can listen to him pitch you.
Unfortunately, all these patent holders forget one simple fact; nobody is asking for a new form of poker. And even if they were, there are hundreds if not thousands of publicly available variations on the game that are free.
Most poker rooms would spread 3-5-7, one-eyed jacks are wild before they would pay to license a form of poker that nobody in the world has ever heard of or ever played. If there was a need for a new form of poker or poker needed a little more luck and gamble in it there are already all sorts of existing variations of home game poker that could be adapted to the online realm. And that’s if the online poker room was too lazy to come up with their own completely original idea that they could patent.
Which brings up another flaw in most of these pitches. It’s a bit of a Catch-22 but in order to become as wildly successful as the inventor claims it will be it has to be a game that players will have broad access to playing and learning about. If it’s patented and the inventor is going to aggressively defend his patent then it becomes extremely difficult for the game to develop a grassroots following. Essentially the one online room granted exclusive rights has the full responsibility of marketing and promoting the game. That means that they’re paying to drive customers from games where they receive 100% of the rake to a game where they have to split the revenues with the game inventor. Are you starting to see the flaw in the logic here?
If you’re going to sell a poker room on a new type of poker it basically better be so blatantly superior to any other form of poker that you make it a no brainer for the poker room to want to pay a license fee. How do you do that? I have no idea as I’ve yet to see an idea that would warrant giving a third party a cut of the revenues.
Tip #2: Don’t Invest a Lot of Time and Money
The worst time to find out that nobody likes your idea is after you’ve poured hundreds or thousands of hours into it or invested significant amounts of money.
It’s easy to get all of your poker playing friends to say that something might be cool but are they willing to put their money where their mouth is? Each year millions of dollars are invested into ideas that people think are cool but when it comes time to sell the product there is little or no demand.
This really is one of the saddest pitches. You see some guy who has spent the last eight months of his life along with his entire life savings plus a few bucks from casual investors into an idea that simply has no chance of ever making it as a commercial product.
Sometimes the economics don’t make sense. Sometimes the product has already been pitched and turned down by everyone in the business. Perhaps the poker room as already had the idea in-house and decided not to move forward with it for some reason. Whatever the reason there is absolutely, positively no way this idea is going to sell.
Many times people in the industry encourage this type of behavior by giving people the brush-off that they would be very interested if there was a working demo. In the software world this is sort of like telling someone “call me” in Hollywood. It’s designed to get rid of you without insulting you.
If you have a really killer idea and there is genuine interest then you shouldn’t have any problem getting a non-binding letter of intent. It won’t guarantee that they’ll buy it but anybody who goes to the trouble of having their legal department okay the document isn’t just jerking your chain. If they won’t sign a letter of intent then you have absolutely nothing.
Tip #3: Research the Industry
I’m actually quite amazed at the number of people who go to all the effort to create some sort of product or game or other offering and they really don’t understand how the online poker world works. I’m not talking about understanding all the insider stuff but the really basic things.
What happens is people will go out and put all this energy into a completely flawed idea. If the entire goal of your product is to accomplish something I don’t want to ever happen, uh, you’ve got a problem.
I think a central theme to many of these tips is that the poker room has to be able to make money on your product. Whether it be from more customers or higher margins the goal of the poker room management is the same. If you don’t know the industry well enough to be able to guesstimate the financial benefits of your product then you don’t know the industry well enough to be investing money in it until you get a better understanding.
There are enough public gaming companies that you can get a peek into their business model. You can also use sources like Poker Site Scout to approximate market size and so on. Software like Poker Tracker can give you a general idea about what games are the most profitable for the card room.
And when you’ve guesstimated the best you can go out there and ask people in the industry. You don’t have to open your kimono to everyone but more than likely you can probe to validate various assumptions that you’ve made.
While this industry isn’t the easiest to gather information on it isn’t impossible either. You just have to put the time and effort into it. And if that upfront investment in time saves you thousands of hours and untold dollars creating something that nobody wants then it’s worth it.
Tip #4: Don’t Pitch Your Idea Using a Moneymaker Comparison
Idea + Moneymaker Reference != Kajillions of Dollars
Moneymaker helped propel the online poker industry from something friends played at home for nickels and dimes into something people play on television for millions of dollars but he was not the only driving factor and he came to the world’s attention at an incredibly opportune moment.
That’s not to discount what Moneymaker has done for the industry in any way. I pray in front of my Chris Moneymaker shrine every morning and thank him for the opportunities he created for me. But the chances that your product is going to get all of the stars to align in such a way as to cause a second Moneymaker-like boom in poker is at best a remote possibility.
The industry may never have another Moneymaker moment. Ever. Far more likely is steady growth across the globe. Now, China may open up one day and there might be a sudden influx created by a new market being introduced but your product has nothing to do with that. Likewise the US market could open back up again and all sorts of unseatings could happen in terms of market leadership but, again, your product isn’t driving that change.
Just remember that everyone on the receiving end of your pitches has heard the Moneymaker analogy or comparison many, many times. Stand out from the crowd by being the guy who doesn’t.
Tip #5: Set Realistic Expectations
I see a lot of people come into meetings with these bizarre expectations about the market value of their invention.
Normally your product needs to pay for itself and still show a profit for the cardroom. It doesn’t matter how much money you’ve already invested or how much you think it’s worth. The only criteria that matters is how much value it holds for the buyer. That’s simply Economics 101.
If you did what was suggested in Tip #3 you should have a pretty good idea what your invention is worth.
The online poker sites didn’t become rich by making ridiculous business deals so you’re much better off coming in with a reasonable offer rather than one that you think will set you up for life. Remember, in most cases you get one opportunity to pitch your idea to a poker room. Blow it and you’re done.
Also keep in mind that it’s a relatively small industry and the talent pool at the decision making level is even smaller so once you burn your bridges they tend to stay burned. Not that people are vindictive but given that time is a finite quantity and people have a limited number of ideas they can consider, if you’ve left the impression that you’re unrealistic then it doesn’t even make sense hearing your next product idea.
Tip #6: Solve a Problem the Poker Room is trying to Solve
The most challenging issues I face on a day to day basis have little to do with the products and services I typically get pitched. I want to improve my conversions. I want to better segment my player database so I’m delivering maximum value to each player in each segment. I want to lower my acquisition costs. I want to lower my retention costs. I want to increase player lifetime value. I want to lower my attrition rate. These are the sorts of problems I’m looking to solve.
Unfortunately, most product pitches tend to focus on what’s cool instead of what solves an actual problem. But most of the challenges faced by a poker room have little to do with a dry pipeline of cool ideas. I’m drowning in cool ideas. I could quadruple the size of my development team and I still have a two-year backlog of cool ideas. What I need are solutions to business problems.
Now, I know that many people will say that cool ideas do influence some of the things I’ve mentioned but they usually do so at the expense of something else.
Poker is like an ecosystem or an economy in the sense that when you impact one variable it can have all sorts of unintended consequences. Everything you touch in the ecosystem has a chain reaction. Poker is a zero sum game. If something puts money into one pocket it takes it out of another.
In other words, if your product helps the sharks too much then they’ll start killing off the fish* too quickly. And if your product helps the fish too much my sharks will migrate to another site where there are more fish.
If you don’t know where that money is coming from or who it’s going to then you should figure that out before you pitch your product because I can guarantee you that that the person you’re pitching knows and when he starts asking questions and you don’t have answers it’s going to lead to a short meeting.
* Fish is not meant to be an offensive or derogatory term. I was a fish once myself and in many games I still am.
Tip #7: Not Understanding the Scope of the Problem You’re Solving
This is a tough one to talk about in the abstract so I’ll give an example. I once had someone come in and show me a completely redesigned version of our software. The guy had gone to all the trouble to write his own client and game server with the major difference between what he was pitching and what we already had was some UI (user interface) additions and changes. The problem was that he wanted us to license both his client and server technology from him at some astronomical cost.
Perhaps this goes back to not understanding how the industry works but I already have a piece of software. Yes, it can use some improvements but your software better make monkeys fly out of my butt if you think I’m going to scrap my entire platform in order to adopt your solution. That’s like buying a new car to replace the radio.
Years have gone into developing the current software platform and while it may not be perfect it is proven and tested. Our software engineers know every nook and cranny in the code. You have to be offering one hell of a value proposition for us to abandon our current technology in favor of your product.
So we decline your offer and so does every other room you pitch to. But the problem is not that your idea isn’t any good but that you improperly scoped the problem. You would be much better off pitching me on a consulting arrangement to make improvements to the existing product than trying to get me to abandon it.
In other words, don’t pitch a $50,000 idea wrapped in a $5 million box.
Tip #8: Don’t Be Mysterious
This is a tough one to write because I’m basically telling people to open themselves up more than I would probably be comfortable with but if there’s one thing that will close the door to a meeting it’s if I have no idea what it is your product is about.
I was recently forwarded an idea that was forwarded to a friend that was forwarded to them by someone. When I read it I could not even tell you what it was that they were offering. Literally, I had no idea.
They repeatedly claimed that they would disclose more information upon the signing of an NDA but I couldn’t even tell whether they were worth responding to or not because in ten pages of sales literature they failed to articulate what it was that they were offering.
My time (believe it or not) is (somewhat) valuable. And considering the number of pitches that come my way I can’t take an hour to march through every Power Point meeting that is presented to me.
Help me, help you. Give me something to work with. I’m more inclined to decline the meeting than to take it if I have no idea what the product is so you’re only helping yourself by disclosing more.
Making money in the online poker industry isn’t easy. Good ideas are a dime a dozen. What will separate you from the pack is having a clear understanding of the challenges facing online poker rooms, realistic expectations, and the ability to articulate the benefits of your idea.
It’s a difficult thing to have an idea that you think you can sell. In part because you have so much emotionally and perhaps even financially invested in it. Every success story you’ve ever read tells you to drive on past all of the rejections so no matter what kind of feedback you get you will press ahead.
While I don’t want to stamp out your hopes (which I know I can’t) don’t forget to calibrate your message. Chances are if one online poker room didn’t like your offering then the next one won’t either. That means you need to re-think things a bit.
Change your product. Change your expectations. Change your approach. Whatever it is, change something! This is a small and often incestuous industry. You aren’t going to get many second chances.
photocred goes to rick