In April 2011, Martin Martinez sold out of the remaining 25% of the business he founded in 2005.
It was two years after entertainment company WIN bought a 50% stake in the Australian Poker League (APL), and things hadn’t gone well.
Shortly after the sale, WIN owner Bruce Gordon fired his CEO and CFO, who had negotiated the deal with APL. The relationship with the new managers began to deteriorate. Martinez’s partner, Frank Lucisano, quickly left the business. Martinez hung on for three more years, and then, also got out.
Martinez won’t reveal APL’s sale price. But he says he and Lucisano undersold to WIN, believing the company could bring value to the table, such as national broadcasting, that warranted a discount.
But it wasn’t to be.
“The way my story ended wasn’t the way I wanted it to end,” Martinez tells SmartCompany. “If you’d spoken to me right after I’d left, I wouldn’t have been so positive about the experience.
“Once the sale happened and my partner checked out, and my new partners fired the people we did the deal with, I felt quite isolated.”
And after the roller-coaster ride that was founding and growing the Australian Poker League, Martinez didn’t like retirement.
“I didn’t have a plan about what to do next,” he says. “I felt lost.”
Martinez was still young. He’d not even turned 30 when he founded APL.
The whole thing began when he returned from a trip overseas, $40,000 in debt. His job, working in a casino, wasn’t bringing in enough money, so he started holding poker games at home for his friends. They paid him some money and he’d keep them supplied with booze and snacks, as well as play the dealer. He had a knack for it. He paid off his debts, and stumbled on a business idea.
It’s not easy to start a business in the gaming industry. For one, the whole industry is highly, highly regulated. When Martinez approached the authorities in New South Wales to try to set up a poker business, he was repeatedly rebuffed.
But then he had an idea. What if no money changed hands? Instead, what if people played entirely for free?
“If the player doesn’t pay, there’s no risk, so there’s no gambling, so the legislation doesn’t apply,” Martinez says. “It took the authorities three months to get back to me. That was quite odd. Before, they’d quickly shut the door in my face.
“When they did get back to me, they said, reluctantly, that I’d found a loophole in the law. So I thought, great, I can host poker games for free. But how the hell was I going to make money?”
The business model was the killer. It took Martinez months to crack it, but eventually he hit upon an idea. He’d go to venues that wanted people in the door, and get them to pay him. Clubs and pubs were the start.
For them, it was a chance to bring in a young clientele with disposable incomes.
“At the time, many in the club industry were consolidating or going bankrupt. They relied on old grannies with their pension, and pokies and slot machines for the rest.
“So we came in, and we could get young 20-something guys with disposable incomes through the door. These people would eat, drink, and spend money.”
The casinos were next. But it took a long time to get them on board. Understandably, they looked at APL as competition – a free alternative to the services they offered.
“Little did they know we were actually creating customers,” Martinez says.
Poker is a skill game. People typically ‘graduate’ to betting with money once they feel comfortable in their own ability. So, Martinez says, the casino’s realised APL was developing their customers of the future. And once Crown – Australia’s leading casino company – came on board, the others fell into line.
The model worked. “Within three years from our launch, we went from 10 to 120 territories in two countries. We were hosting 4500 poker tournaments per month.” Those tournaments turned over $50 million a year in revenue.
At its height, APL dominated the Australian poker boom.
This caught the attention of regional television station WIN, who was keen to broadcast the games on its own network.
And APL was ready.
In its first year of existence, it had been approached by several different companies keen to acquire the business and take the model overseas. The team rejected these early offers, feeling there was more growth to be had. But the discussions forced APL to consider its value, and the founders their exit strategy.
“One of the first suitors, they were pushing us pretty hard. So, I thought, we had to have something good.”
In the company’s second year, it was approached by an investment bank who offered to help APL get ready for a sale. Martinez took up the offer, and that’s where the WIN deal came from.
But the heady dreams of growing the business with new owners didn’t last.
After Martinez left, WIN sold on APL to a competitor. The company, as grown by Martinez, is gone.
He was left to reflect on his successes and his mistakes.
“I went from an employee of a casino – a structured environment with little responsibility – to running a $50 million company in three years,” he says. “There’s no school for that. You’re bound to make mistakes.
“We had a good business. But in terms of where it is today, I don’t know. It was sold to a competitor, and I haven’t been involved. And the industry isn’t what it used to be – there’s been a lot of consolidation, a lot more competition and price pressure.”
Martinez went from working all the time to doing nothing, and while he says he welcomed it initially, after a while he drifted, not sure about his purpose.
And then, he began to focus on the things he hadn’t properly developed before. He lost weight. He got married. When SmartCompany spoke to him, he had recently become a father. He was enthusiastic about his future plans.
Looking back on his experiences, Martinez says he’s learnt a lot. He’s now readying to launch another business – a company that helps entrepreneurs take advantage of benefits and offers that are normally exclusively available to high-net-worth individuals. He’s also sitting on a few boards, and doing a bit of mentoring.
“Running a business is very absorbing,” he says. “It drains your energy. You’re constantly – well, not ‘on edge’, as there are a lot of enjoyable times – but you’re always worrying. I had 120 franchisers to worry for. Their livelihoods were in my hands, as were those of their employees and families. I didn’t take that lightly. And it took a toll on me. Sure you start out nimble, but in the end, you can be weighed down.”
That’s why Martinez says it’s important to have an exit plan.
“You might never sell the business. But it’s about the mindset – about optimising your business so your books and operations are ready for sale at any time. A lot of companies get approached, they’re not ready, and then people don’t want them anymore. If you prepare for sale from the moment you start, you’re always ready.
“The worst that can happen is you’re always thinking about being lean, being optimised, and not incurring costs when you don’t have to. But not enough people think like that.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
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