?? Listen in as Martin Macmillan dives into lots of different options to fund UA in a recent chat with Andrew Davies CMO Paddle ??
CMO @ Paddle. Formerly @ Optimizely; Co-founder @ Idio (acquired 2019). Startup advisor & NED. Here to help you scale your software business better, faster, safer.
Most app developers fund their User Acquisition efforts via the most expensive source of capital: raising VC money at the expense of your equity. The good news is, there are at least 4 other options to fund your UA. I sat down with Martin Macmillan, founder of Mobile Finance Collective, a community for mobile app & games founders & CFOs, to walk us through some other (less expensive) options. Before you start looking at UA financing options, he suggests you go through these 3 questions: 1. Do we have a user acquisition machine that works? 2. If so, how are we going to fund that machine? 3. How much capital can we put into that machine before the unit economics just stops working? If your User Acquisition machine is working, question #2 should be all about creating a list of the cheapest sources of capital. Raising VC money usually sits at the bottom of this list, being the most expensive source of capital. Instead, you should start off by asking yourself: 1. Do I have a credit line from the ad networks? You might have a 30 or even up to 60 days credit line. That's effectively an LTV risk transfer from you onto them, which is great. The thing to keep in mind is that if you have, say, a six month break even on your ad spends and that bill needs to be paid at the end of month, that's not gonna move the needle for you. 2. Do I have a bunch of free cash just sitting in the bank? Maybe you've raised a venture round, and maybe that money is burning a hole in your pocket earning 3% in the bank. In that case, you can take some or even all of that money and deploy it into user acquisition. ----- After these 2 options, you can start looking at other models of credit facilities. Martin and his team have put out a great report breaking down all possible financing options, each with its own set of pros and cons. Some are classed as debt where there's a proper loan contract. Some of them are revenue share or future financing agreements. I’ll put a link below if you want to look at this free report. And Martin and Tripp Brockway from Paddle are both over in San Fran at GDC this week for anyone wanting to meet!